The execution of this program in detail will throw on the Reparation Commission a peculiar task, as it will become possessor of a great number of rights and interests over a vast territory owing dubious obedience, disordered by war, disruption, and Bolshevism. The division of the spoils between the victors will also provide employment for a powerful office, whose doorsteps the greedy adventurers and jealous concession-hunters of twenty or thirty nations will crowd and defile.

Lest the Reparation Commission fail by ignorance to exercise its rights to the full, it is further provided that the German Government shall communicate to it within six months of the Treaty's coming into force a list of all the rights and interests in question, "whether already granted, contingent or not yet exercised," and any which are not so communicated within this period will automatically lapse in favor of the Allied Governments.[27] How far an edict of this character can be made binding on a German national, whose person and property lie outside the jurisdiction of his own Government, is an unsettled question; but all the countries specified in the above list are open to pressure by the Allied authorities, whether by the imposition of an appropriate Treaty clause or otherwise.

(c) There remains a third provision more sweeping than either of the above, neither of which affects German interests in neutral countries. The Reparation Commission is empowered up to May 1, 1921, to demand payment up to $5,000,000,000 in such manner as they may fix, "whether in gold, commodities, ships, securities or otherwise."[28] This provision has the effect of intrusting to the Reparation Commission for the period in question dictatorial powers over all German property of every description whatever. They can, under this Article, point to any specific business, enterprise, or property, whether within or outside Germany, and demand its surrender; and their authority would appear to extend not only to property existing at the date of the Peace, but also to any which may be created or acquired at any time in the course of the next eighteen months. For example, they could pick out—as presumably they will as soon as they are established—the fine and powerful German enterprise in South America known as the Deutsche Ueberseeische Elektrizitaetsgesellschaft (the D.U.E.G.), and dispose of it to Allied interests. The clause is unequivocal and all-embracing. It is worth while to note in passing that it introduces a quite novel principle in the collection of indemnities. Hitherto, a sum has been fixed, and the nation mulcted has been left free to devise and select for itself the means of payment. But in this case the payees can (for a certain period) not only demand a certain sum but specify the particular kind of property in which payment is to be effected. Thus the powers of the Reparation Commission, with which I deal more particularly in the next chapter, can be employed to destroy Germany's commercial and economic organization as well as to exact payment.

The cumulative effect of (a), (b), and (c) (as well as of certain other minor provisions on which I have not thought it necessary to enlarge) is to deprive Germany (or rather to empower the Allies so to deprive her at their will—it is not yet accomplished) of everything she possesses outside her own frontiers as laid down in the Treaty. Not only are her oversea investments taken and her connections destroyed, but the same process of extirpation is applied in the territories of her former allies and of her immediate neighbors by land.

(5) Lest by some oversight the above provisions should overlook any possible contingencies, certain other Articles appear in the Treaty, which probably do not add very much in practical effect to those already described, but which deserve brief mention as showing the spirit of completeness in which the victorious Powers entered upon the economic subjection of their defeated enemy.

First of all there is a general clause of barrer and renunciation: "In territory outside her European frontiers as fixed by the present Treaty, Germany renounces all rights, titles and privileges whatever in or over territory which belonged to her or to her allies, and all rights, titles and privileges whatever their origin which she held as against the Allied and Associated Powers...."[29]

There follow certain more particular provisions. Germany renounces all rights and privileges she may have acquired in China.[30] There are similar provisions for Siam,[31] for Liberia,[32] for Morocco,[33] and for Egypt.[34] In the case of Egypt not only are special privileges renounced, but by Article 150 ordinary liberties are withdrawn, the Egyptian Government being accorded "complete liberty of action in regulating the status of German nationals and the conditions under which they may establish themselves in Egypt."

By Article 258 Germany renounces her right to any participation in any financial or economic organizations of an international character "operating in any of the Allied or Associated States, or in Austria, Hungary, Bulgaria or Turkey, or in the dependencies of these States, or in the former Russian Empire."

Generally speaking, only those pre-war treaties and conventions are revived which it suits the Allied Governments to revive, and those in Germany's favor may be allowed to lapse.[35]

It is evident, however, that none of these provisions are of any real importance, as compared with those described previously. They represent the logical completion of Germany's outlawry and economic subjection to the convenience of the Allies; but they do not add substantially to her effective disabilities.

II

The provisions relating to coal and iron are more important in respect of their ultimate consequences on Germany's internal industrial economy than for the money value immediately involved. The German Empire has been built more truly on coal and iron than on blood and iron. The skilled exploitation of the great coalfields of the Ruhr, Upper Silesia, and the Saar, alone made possible the development of the steel, chemical, and electrical industries which established her as the first industrial nation of continental Europe. One-third of Germany's population lives in towns of more than 20,000 inhabitants, an industrial concentration which is only possible on a foundation of coal and iron. In striking, therefore, at her coal supply, the French politicians were not mistaking their target. It is only the extreme immoderation, and indeed technical impossibility, of the Treaty's demands which may save the situation in the long-run.

(1) The Treaty strikes at Germany's coal supply in four ways:—

(i.) "As compensation for the destruction of the coal-mines in the north of France, and as part payment towards the total reparation due from Germany for the damage resulting from the war, Germany cedes to France in full and absolute possession, with exclusive rights of exploitation, unencumbered, and free from all debts and charges of any kind, the coal-mines situated in the Saar Basin."[36] While the administration of this district is vested for fifteen years in the League of Nations, it is to be observed that the mines are ceded to France absolutely. Fifteen years hence the population of the district will be called upon to indicate by plebiscite their desires as to the future sovereignty of the territory; and, in the event of their electing for union with Germany, Germany is to be entitled to repurchase the mines at a price payable in gold.[37]

The judgment of the world has already recognized the transaction of the Saar as an act of spoliation and insincerity. So far as compensation for the destruction of French coal-mines is concerned, this is provided for, as we shall see in a moment, elsewhere in the Treaty. "There is no industrial region in Germany," the German representatives have said without contradiction, "the population of which is so permanent, so homogeneous, and so little complex as that of the Saar district. Among more than 650,000 inhabitants, there were in 1918 less than 100 French. The Saar district has been German for more than 1,000 years. Temporary occupation as a result of warlike operations on the part of the French always terminated in a short time in the restoration of the country upon the conclusion of peace. During a period of 1048 years France has possessed the country for not quite 68 years in all. When, on the occasion of the first Treaty of Paris in 1814, a small portion of the territory now coveted was retained for France, the population raised the most energetic opposition and demanded 'reunion with their German fatherland,' to which they were 'related by language, customs, and religion.' After an occupation of one year and a quarter, this desire was taken into account in the second Treaty of Paris in 1815. Since then the country has remained uninterruptedly attached to Germany, and owes its economic development to that connection."

The French wanted the coal for the purpose of working the ironfields of Lorraine, and in the spirit of Bismarck they have taken it. Not precedent, but the verbal professions of the Allies, have rendered it indefensible.[38]

(ii.) Upper Silesia, a district without large towns, in which, however, lies one of the major coalfields of Germany with a production of about 23 per cent of the total German output of hard coal, is, subject to a plebiscite,[39] to be ceded to Poland. Upper Silesia was never part of historic Poland; but its population is mixed Polish, German, and Czecho-Slovakian, the precise proportions of which are disputed.[40] Economically it is intensely German; the industries of Eastern Germany depend upon it for their coal; and its loss would be a destructive blow at the economic structure of the German State.[41]

With the loss of the fields of Upper Silesia and the Saar, the coal supplies of Germany are diminished by not far short of one-third.

(iii.) Out of the coal that remains to her, Germany is obliged to make good year by year the estimated loss which France has incurred by the destruction and damage of war in the coalfields of her northern Provinces. In para. 2 of Annex V. to the Reparation Chapter, "Germany undertakes to deliver to France annually, for a period not exceeding ten years, an amount of coal equal to the difference between the annual production before the war of the coal-mines of the Nord and Pas de Calais, destroyed as a result of the war, and the production of the mines of the same area during the year in question: such delivery not to exceed 20,000,000 tons in any one year of the first five years, and 8,000,000 tons in any one year of the succeeding five years."

This is a reasonable provision if it stood by itself, and one which Germany should be able to fulfil if she were left her other resources to do it with.

(iv.) The final provision relating to coal is part of the general scheme of the Reparation Chapter by which the sums due for Reparation are to be partly paid in kind instead of in cash. As a part of the payment due for Reparation, Germany is to make the following deliveries of coal or equivalent in coke (the deliveries to France being wholly additional to the amounts available by the cession of the Saar or in compensation for destruction in Northern France):—

(i.) To France 7,000,000 tons annually for ten years;[42]

(ii.) To Belgium 8,000,000 tons annually for ten years;

(iii.) To Italy an annual quantity, rising by annual increments from 4,500,000 tons in 1919-1920 to 8,500,000 tons in each of the six years, 1923-1924 to 1928-1929;

(iv.) To Luxemburg, if required, a quantity of coal equal to the pre-war annual consumption of German coal in Luxemburg.

This amounts in all to an annual average of about 25,000,000 tons.

* * * * *

These figures have to be examined in relation to Germany's probable output. The maximum pre-war figure was reached in 1913 with a total of 191,500,000 tons. Of this, 19,000,000 tons were consumed at the mines, and on balance (i.e. exports less imports) 33,500,000 tons were exported, leaving 139,000,000 tons for domestic consumption. It is estimated that this total was employed as follows:—

Railways 18,000,000 tons. Gas, water, and electricity 12,500,000 " Bunkers 6,500,000 " House-fuel, small industry and agriculture 24,000,000 " Industry 78,000,000 " —————- 139,000,000 "

The diminution of production due to loss of territory is:—

Alsace-Lorraine 3,800,000 tons. Saar Basin 13,200,000 " Upper Silesia 43,800,000 " —————- 60,800,000 "

There would remain, therefore, on the basis of the 1913 output, 130,700,000 tons, or, deducting consumption at the mines themselves, (say) 118,000,000 tons. For some years there must be sent out of this supply upwards of 20,000,000 tons to France as compensation for damage done to French mines, and 25,000,000 tons to France, Belgium, Italy, and Luxemburg;[43] as the former figure is a maximum, and the latter figure is to be slightly less in the earliest years, we may take the total export to Allied countries which Germany has undertaken to provide as 40,000,000 tons, leaving, on the above basis, 78,000,000 tons for her own use as against a pre-war consumption of 139,000,000 tons.

This comparison, however, requires substantial modification to make it accurate. On the one hand, it is certain that the figures of pre-war output cannot be relied on as a basis of present output. During 1918 the production was 161,500,000 tons as compared with 191,500,000 tons in 1913; and during the first half of 1919 it was less than 50,000,000 tons, exclusive of Alsace-Lorraine and the Saar but including Upper Silesia, corresponding to an annual production of about 100,000,000 tons.[44] The causes of so low an output were in part temporary and exceptional but the German authorities agree, and have not been confuted, that some of them are bound to persist for some time to come. In part they are the same as elsewhere; the daily shift has been shortened from 8-1/2 to 7 hours, and it is improbable that the powers of the Central Government will be adequate to restore them to their former figure. But in addition, the mining plant is in bad condition (due to the lack of certain essential materials during the blockade), the physical efficiency of the men is greatly impaired by malnutrition (which cannot be cured if a tithe of the reparation demands are to be satisfied,—the standard of life will have rather to be lowered), and the casualties of the war have diminished the numbers of efficient miners. The analogy of English conditions is sufficient by itself to tell us that a pre-war level of output cannot be expected in Germany. German authorities put the loss of output at somewhat above 30 per cent, divided about equally between the shortening of the shift and the other economic influences. This figure appears on general grounds to be plausible, but I have not the knowledge to endorse or to criticize it.

The pre-war figure of 118,000,000 tons net (i.e. after allowing for loss of territory and consumption at the mines) is likely to fall, therefore, at least as low as to 100,000,000[45] tons, having regard to the above factors. If 40,000,000 tons of this are to be exported to the Allies, there remain 60,000,000 tons for Germany herself to meet her own domestic consumption. Demand as well as supply will be diminished by loss of territory, but at the most extravagant estimate this could not be put above 29,000,000 tons.[46] Our hypothetical calculations, therefore, leave us with post-war German domestic requirements, on the basis of a pre-war efficiency of railways and industry, of 110,000,000 tons against an output rot exceeding 100,000,000 tons, of which 40,000,000 tons are mortgaged to the Allies.

The importance of the subject has led me into a somewhat lengthy statistical analysis. It is evident that too much significance must not be attached to the precise figures arrived at, which are hypothetical and dubious.[47] But the general character of the facts presents itself irresistibly. Allowing for the loss of territory and the loss of efficiency, Germany cannot export coal in the near future (and will even be dependent on her Treaty rights to purchase in Upper Silesia), if she is to continue as an industrial nation. Every million tons she is forced to export must be at the expense of closing down an industry. With results to be considered later this within certain limits is possible. But it is evident that Germany cannot and will not furnish the Allies with a contribution of 40,000,000 tons annually. Those Allied Ministers, who have told their peoples that she can, have certainly deceived them for the sake of allaying for the moment the misgivings of the European peoples as to the path along which they are being led.

The presence of these illusory provisions (amongst others) in the clauses of the Treaty of Peace is especially charged with danger for the future. The more extravagant expectations as to Reparation receipts, by which Finance Ministers have deceived their publics, will be heard of no more when they have served their immediate purpose of postponing the hour of taxation and retrenchment. But the coal clauses will not be lost sight of so easily,—for the reason that it will be absolutely vital in the interests of France and Italy that these countries should do everything in their power to exact their bond. As a result of the diminished output due to German destruction in France, of the diminished output of mines in the United Kingdom and elsewhere, and of many secondary causes, such as the breakdown of transport and of organization and the inefficiency of new governments, the coal position of all Europe is nearly desperate;[48] and France and Italy, entering the scramble with certain Treaty rights, will not lightly surrender them.

As is generally the case in real dilemmas, the French and Italian case will possess great force, indeed unanswerable force from a certain point of view. The position will be truly represented as a question between German industry on the one hand and French and Italian industry on the other. It may be admitted that the surrender of the coal will destroy German industry, but it may be equally true that its non-surrender will jeopardize French and Italian industry. In such a case must not the victors with their Treaty rights prevail, especially when much of the damage has been ultimately due to the wicked acts of those who are now defeated? Yet if these feelings and these rights are allowed to prevail beyond what wisdom would recommend, the reactions on the social and economic life of Central Europe will be far too strong to be confined within their original limits.

But this is not yet the whole problem. If France and Italy are to make good their own deficiencies in coal from the output of Germany, then Northern Europe, Switzerland, and Austria, which previously drew their coal in large part from Germany's exportable surplus, must be starved of their supplies. Before the war 13,600,000 tons of Germany's coal exports went to Austria-Hungary. Inasmuch as nearly all the coalfields of the former Empire lie outside what is now German-Austria, the industrial ruin of this latter state, if she cannot obtain coal from Germany, will be complete. The case of Germany's neutral neighbors, who were formerly supplied in part from Great Britain but in large part from Germany, will be hardly less serious. They will go to great lengths in the direction of making their own supplies to Germany of materials which are essential to her, conditional on these being paid for in coal. Indeed they are already doing so.[49] With the breakdown of money economy the practice of international barter is becoming prevalent. Nowadays money in Central and South-Eastern Europe is seldom a true measure of value in exchange, and will not necessarily buy anything, with the consequence that one country, possessing a commodity essential to the needs of another, sells it not for cash but only against a reciprocal engagement on the part of the latter country to furnish in return some article not less necessary to the former. This is an extraordinary complication as compared with the former almost perfect simplicity of international trade. But in the no less extraordinary conditions of to-day's industry it is not without advantages as a means of stimulating production. The butter-shifts of the Ruhr[50] show how far modern Europe has retrograded in the direction of barter, and afford a picturesque illustration of the low economic organization to which the breakdown of currency and free exchange between individuals and nations is quickly leading us. But they may produce the coal where other devices would fail.[51]

Yet if Germany can find coal for the neighboring neutrals, France and Italy may loudly claim that in this case she can and must keep her treaty obligations. In this there will be a great show of justice, and it will be difficult to weigh against such claims the possible facts that, while German miners will work for butter, there is no available means of compelling them to get coal, the sale of which will bring in nothing, and that if Germany has no coal to send to her neighbors she may fail to secure imports essential to her economic existence.

If the distribution of the European coal supplies is to be a scramble in which France is satisfied first, Italy next, and every one else takes their chance, the industrial future of Europe is black and the prospects of revolution very good. It is a case where particular interests and particular claims, however well founded in sentiment or in justice, must yield to sovereign expediency. If there is any approximate truth in Mr. Hoover's calculation that the coal output of Europe has fallen by one-third, a situation confronts us where distribution must be effected with even-handed impartiality in accordance with need, and no incentive can be neglected towards increased production and economical methods of transport. The establishment by the Supreme Council of the Allies in August, 1919, of a European Coal Commission, consisting of delegates from Great Britain, France, Italy, Belgium, Poland, and Czecho-Slovakia was a wise measure which, properly employed and extended, may prove of great assistance. But I reserve constructive proposals for Chapter VII. Here I am only concerned with tracing the consequences, per impossibile, of carrying out the Treaty au pied de lettre.[52]

(2) The provisions relating to iron-ore require less detailed attention, though their effects are destructive. They require less attention, because they are in large measure inevitable. Almost exactly 75 per cent of the iron-ore raised in Germany in 1913 came from Alsace-Lorraine.[53] In this the chief importance of the stolen provinces lay.

There is no question but that Germany must lose these ore-fields. The only question is how far she is to be allowed facilities for purchasing their produce. The German Delegation made strong efforts to secure the inclusion of a provision by which coal and coke to be furnished by them to France should be given in exchange for minette from Lorraine. But they secured no such stipulation, and the matter remains at France's option.

The motives which will govern France's eventual policy are not entirely concordant. While Lorraine comprised 75 per cent of Germany's iron-ore, only 25 per cent of the blast furnaces lay within Lorraine and the Saar basin together, a large proportion of the ore being carried into Germany proper. Approximately the same proportion of Germany's iron and steel foundries, namely 25 per cent, were situated in Alsace-Lorraine. For the moment, therefore, the most economical and profitable course would certainly be to export to Germany, as hitherto, a considerable part of the output of the mines.

On the other hand, France, having recovered the deposits of Lorraine, may be expected to aim at replacing as far as possible the industries, which Germany had based on them, by industries situated within her own frontiers. Much time must elapse before the plant and the skilled labor could be developed within France, and even so she could hardly deal with the ore unless she could rely on receiving the coal from Germany. The uncertainty, too, as to the ultimate fate of the Saar will be disturbing to the calculations of capitalists who contemplate the establishment of new industries in France.

In fact, here, as elsewhere, political considerations cut disastrously across economic. In a regime of Free Trade and free economic intercourse it would be of little consequence that iron lay on one side of a political frontier, and labor, coal, and blast furnaces on the other. But as it is, men have devised ways to impoverish themselves and one another; and prefer collective animosities to individual happiness. It seems certain, calculating on the present passions and impulses of European capitalistic society, that the effective iron output of Europe will be diminished by a new political frontier (which sentiment and historic justice require), because nationalism and private interest are thus allowed to impose a new economic frontier along the same lines. These latter considerations are allowed, in the present governance of Europe, to prevail over the intense need of the Continent for the most sustained and efficient production to repair the destructions of war, and to satisfy the insistence of labor for a larger reward.[54]

The same influences are likely to be seen, though on a lesser scale, in the event of the transference of Upper Silesia to Poland. While Upper Silesia contains but little iron, the presence of coal has led to the establishment of numerous blast furnaces. What is to be the fate of these? If Germany is cut off from her supplies of ore on the west, will she export beyond her frontiers on the east any part of the little which remains to her? The efficiency and output of the industry seem certain to diminish.

Thus the Treaty strikes at organization, and by the destruction of organization impairs yet further the reduced wealth of the whole community. The economic frontiers which are to be established between the coal and the iron, upon which modern industrialism is founded, will not only diminish the production of useful commodities, but may possibly occupy an immense quantity of human labor in dragging iron or coal, as the case may he, over many useless miles to satisfy the dictates of a political treaty or because obstructions have been established to the proper localization of industry.

III

There remain those Treaty provisions which relate to the transport and the tariff systems of Germany. These parts of the Treaty have not nearly the importance and the significance of those discussed hitherto. They are pin-pricks, interferences and vexations, not so much objectionable for their solid consequences, as dishonorable to the Allies in the light of their professions. Let the reader consider what follows in the light of the assurances already quoted, in reliance on which Germany laid down her arms.

(i.) The miscellaneous Economic Clauses commence with a number of provisions which would be in accordance with the spirit of the third of the Fourteen Points,—if they were reciprocal. Both for imports and exports, and as regards tariffs, regulations, and prohibitions, Germany binds herself for five years to accord most-favored-nation treatment to the Allied and Associated States.[55] But she is not entitled herself to receive such treatment.

For five years Alsace-Lorraine shall be free to export into Germany, without payment of customs duty, up to the average amount sent annually into Germany from 1911 to 1913.[56] But there is no similar provision for German exports into Alsace-Lorraine.

For three years Polish exports to Germany, and for five years Luxemburg's exports to Germany, are to have a similar privilege,[57]— but not German exports to Poland or to Luxemburg. Luxemburg also, which for many years has enjoyed the benefits of inclusion within the German Customs Union, is permanently excluded from it henceforward.[58]

For six months after the Treaty has come into force Germany may not impose duties on imports from the Allied and Associated States higher than the most favorable duties prevalent before the war and for a further two years and a half (making three years in all) this prohibition continues to apply to certain commodities, notably to some of those as to which special agreements existed before the war, and also to wine, to vegetable oils, to artificial silk, and to washed or scoured wool.[59] This is a ridiculous and injurious provision, by which Germany is prevented from taking those steps necessary to conserve her limited resources for the purchase of necessaries and the discharge of Reparation. As a result of the existing distribution of wealth in Germany, and of financial wantonness amongst individuals, the offspring of uncertainty, Germany is threatened with a deluge of luxuries and semi-luxuries from abroad, of which she has been starved for years, which would exhaust or diminish her small supplies of foreign exchange. These provisions strike at the authority of the German Government to ensure economy in such consumption, or to raise taxation during a critical period. What an example of senseless greed overreaching itself, to introduce, after taking from Germany what liquid wealth she has and demanding impossible payments for the future, a special and particularized injunction that she must allow as readily as in the days of her prosperity the import of champagne and of silk!

One other Article affects the Customs Regime of Germany which, if it was applied, would be serious and extensive in its consequences. The Allies have reserved the right to apply a special customs regime to the occupied area on the bank of the Rhine, "in the event of such a measure being necessary in their opinion in order to safeguard the economic interests of the population of these territories."[60] This provision was probably introduced as a possibly useful adjunct to the French policy of somehow detaching the left bank provinces from Germany during the years of their occupation. The project of establishing an independent Republic under French clerical auspices, which would act as a buffer state and realize the French ambition of driving Germany proper beyond the Rhine, has not yet been abandoned. Some believe that much may be accomplished by a regime of threats, bribes, and cajolery extended over a period of fifteen years or longer.[61] If this Article is acted upon, and the economic system of the left bank of the Rhine is effectively severed from the rest of Germany, the effect would be far-reaching. But the dreams of designing diplomats do not always prosper, and we must trust the future.

(ii.) The clauses relating to Railways, as originally presented to Germany, were substantially modified in the final Treaty, and are now limited to a provision by which goods, coming from Allied territory to Germany, or in transit through Germany, shall receive the most favored treatment as regards rail freight rates, etc., applied to goods of the same kind carried on any German lines "under similar conditions of transport, for example, as regards length of route."[62] As a non-reciprocal provision this is an act of interference in internal arrangements which it is difficult to justify, but the practical effect of this,[63] and of an analogous provision relating to passenger traffic,[64] will much depend on the interpretation of the phrase, "similar conditions of transport."[65]

For the time being Germany's transport system will be much more seriously disordered by the provisions relating to the cession of rolling-stock. Under paragraph 7 of the Armistice conditions Germany was called on to surrender 5000 locomotives and 150,000 wagons, "in good working order, with all necessary spare parts and fittings." Under the Treaty Germany is required to confirm this surrender and to recognize the title of the Allies to the material.[66] She is further required, in the case of railway systems in ceded territory, to hand over these systems complete with their full complement of rolling-stock "in a normal state of upkeep" as shown in the last inventory before November 11, 1918.[67] That is to say, ceded railway systems are not to bear any share in the general depletion and deterioration of the German rolling-stock as a whole.

This is a loss which in course of time can doubtless be made good. But lack of lubricating oils and the prodigious wear and tear of the war, not compensated by normal repairs, had already reduced the German railway system to a low state of efficiency. The further heavy losses under the Treaty will confirm this state of affairs for some time to come, and are a substantial aggravation of the difficulties of the coal problem and of export industry generally.

(iii.) There remain the clauses relating to the river system of Germany. These are largely unnecessary and are so little related to the supposed aims of the Allies that their purport is generally unknown. Yet they constitute an unprecedented interference with a country's domestic arrangements and are capable of being so operated as to take from Germany all effective control over her own transport system. In their present form they are incapable of justification; but some simple changes might transform them into a reasonable instrument.

Most of the principal rivers of Germany have their source or their outlet in non-German territory. The Rhine, rising in Switzerland, is now a frontier river for a part of its course, and finds the sea in Holland; the Danube rises in Germany but flows over its greater length elsewhere; the Elbe rises in the mountains of Bohemia, now called Czecho-Slovakia; the Oder traverses Lower Silesia; and the Niemen now bounds the frontier of East Prussia and has its source in Russia. Of these, the Rhine and the Niemen are frontier rivers, the Elbe is primarily German but in its upper reaches has much importance for Bohemia, the Danube in its German parts appears to have little concern for any country but Germany, and the Oder is an almost purely German river unless the result of the plebiscite is to detach all Upper Silesia.

Rivers which, in the words of the Treaty, "naturally provide more than one State with access to the sea," properly require some measure of international regulation and adequate guarantees against discrimination. This principle has long been recognized in the International Commissions which regulate the Rhine and the Danube. But on such Commissions the States concerned should be represented more or less in proportion to their interests. The Treaty, however, has made the international character of these rivers a pretext for taking the river system of Germany out of German control.

After certain Articles which provide suitably against discrimination and interference with freedom of transit,[68] the Treaty proceeds to hand over the administration of the Elbe, the Oder, the Danube, and the Rhine to International Commissions.[69] The ultimate powers of these Commissions are to be determined by "a General Convention drawn up by the Allied and Associated Powers, and approved by the League of Nations."[70] In the meantime the Commissions are to draw up their own constitutions and are apparently to enjoy powers of the most extensive description, "particularly in regard to the execution of works of maintenance, control, and improvement on the river system, the financial regime, the fixing and collection of charges, and regulations for navigation."[71]

So far there is much to be said for the Treaty. Freedom of through transit is a not unimportant part of good international practice and should be established everywhere. The objectionable feature of the Commissions lies in their membership. In each case the voting is so weighted as to place Germany in a clear minority. On the Elbe Commission Germany has four votes out of ten; on the Oder Commission three out of nine; on the Rhine Commission four out of nineteen; on the Danube Commission, which is not yet definitely constituted, she will be apparently in a small minority. On the government of all these rivers France and Great Britain are represented; and on the Elbe for some undiscoverable reason there are also representatives of Italy and Belgium.

Thus the great waterways of Germany are handed over to foreign bodies with the widest powers; and much of the local and domestic business of Hamburg, Magdeburg, Dresden, Stettin, Frankfurt, Breslan, and Ulm will be subject to a foreign jurisdiction. It is almost as though the Powers of Continental Europe were to be placed in a majority on the Thames Conservancy or the Port of London.

Certain minor provisions follow lines which in our survey of the Treaty are now familiar. Under Annex III. of the Reparation Chapter Germany is to cede up to 20 per cent of her inland navigation tonnage. Over and above this she must cede such proportion of her river craft upon the Elbe, the Oder, the Niemen, and the Danube as an American arbitrator may determine, "due regard being had to the legitimate needs of the parties concerned, and particularly to the shipping traffic during the five years preceding the war," the craft so ceded to be selected from those most recently built.[72] The same course is to be followed with German vessels and tugs on the Rhine and with German property in the port of Rotterdam.[73] Where the Rhine flows between France and Germany, France is to have all the rights of utilizing the water for irrigation or for power and Germany is to have none;[74] and all the bridges are to be French property as to their whole length.[75] Finally the administration of the purely German Rhine port of Kehl lying on the eastern bank of the river is to be united to that of Strassburg for seven years and managed by a Frenchman to be nominated by the new Rhine Commission.

Thus the Economic Clauses of the Treaty are comprehensive, and little has been overlooked which might impoverish Germany now or obstruct her development in future. So situated, Germany is to make payments of money, on a scale and in a manner to be examined in the next chapter.

FOOTNOTES:

[7] The precise force of this reservation is discussed in detail in Chapter V.

[8] I also omit those which have no special relevance to the German Settlement. The second of the Fourteen Points, which relates to the Freedom of the Seas, is omitted because the Allies did not accept it. Any italics are mine.

[9] Part VIII. Annex III. (1).

[10] Part VIII. Annex III. (3).

[11] In the years before the war the average shipbuilding output of Germany was about 350,000 tons annually, exclusive of warships.

[12] Part VIII. Annex III. (5).

[13] Art. 119.

[14] Arts. 120 and 257.

[15] Art. 122.

[16] Arts. 121 and 297(b). The exercise or non-exercise of this option of expropriation appears to lie, not with the Reparation Commission, but with the particular Power in whose territory the property has become situated by cession or mandation.

[17] Art. 297 (h) and para. 4 of Annex to Part X. Section IV.

[18] Arts. 53 and 74.

[19] In 1871 Germany granted France credit for the railways of Alsace-Lorraine but not for State property. At that time, however, the railways were private property. As they afterwards became the property of the German Government, the French Government have held, in spite of the large additional capital which Germany has sunk in them, that their treatment must follow the precedent of State property generally.

[20] Arts. 55 and 255. This follows the precedent of 1871.

[21] Art. 297 (b).

[22] Part X. Sections III. and IV. and Art. 243.

[23] The interpretation of the words between inverted commas is a little dubious. The phrase is so wide as to seem to include private debts. But in the final draft of the Treaty private debts are not explicitly referred to.

[24] This provision is mitigated in the case of German property in Poland and the other new States, the proceeds of liquidation in these areas being payable direct to the owner (Art. 92.)

[25] Part X. Section IV. Annex, para. 10: "Germany will, within six months from the coming into force of the present Treaty, deliver to each Allied or Associated Power all securities, certificates, deeds, or other documents of title held by its nationals and relating to property, rights, or interests situated in the territory of that Allied or Associated Power.... Germany will at any time on demand of any Allied or Associated Power furnish such information as may be required with regard to the territory, rights, and interests of German nationals within the territory of such Allied or Associated Power, or with regard to any transactions concerning such property, rights, or interests effected since July 1, 1914."

[26] "Any public utility undertaking or concession" is a vague phrase, the precise interpretation of which is not provided for.

[27] Art. 260.

[28] Art. 235.

[29] Art. 118.

[30] Arts. 129 and 132.

[31] Arts. 135-137.

[32] Arts. 135-140.

[33] Art. 141: "Germany renounces all rights, titles and privileges conferred on her by the General Act of Algeciras of April 7, 1906, and by the Franco-German Agreements, of Feb. 9, 1909, and Nov. 4, 1911...."

[34] Art. 148: "All treaties, agreements, arrangements and contracts concluded by Germany with Egypt are regarded as abrogated from Aug. 4, 1914." Art. 153: "All property and possessions in Egypt of the German Empire and the German States pass to the Egyptian Government without payment."

[35] Art. 289.

[36] Art. 45.

[37] Part IV. Section IV. Annex, Chap. III.

[38] "We take over the ownership of the Sarre mines, and in order not to be inconvenienced in the exploitation of these coal deposits, we constitute a distinct little estate for the 600,000 Germans who inhabit this coal basin, and in fifteen years we shall endeavor by a plebiscite to bring them to declare that they want to be French. We know what that means. During fifteen years we are going to work on them, to attack them from every point, till we obtain from them a declaration of love. It is evidently a less brutal proceeding than the coup de force which detached from us our Alsatians and Lorrainers. But if less brutal, it is more hypocritical. We know quite well between ourselves that it is an attempt to annex these 600,000 Germans. One can understand very well the reasons of an economic nature which have led Clemenceau to wish to give us these Sarre coal deposits, but in order to acquire them must we give ourselves the appearance of wanting to juggle with 600,000 Germans in order to make Frenchmen of them in fifteen years?" (M. Herve in La Victorie, May 31, 1919).

[39] This plebiscite is the most important of the concessions accorded to Germany in the Allies' Final Note, and one for which Mr. Lloyd George, who never approved the Allies' policy on the Eastern frontiers of Germany, can claim the chief credit. The vote cannot take place before the spring of 1920, and may be postponed until 1921. In the meantime the province will be governed by an Allied Commission. The vote will be taken by communes, and the final frontiers will be determined by the Allies, who shall have regard, partly to the results of the vote in each commune, and partly "to the geographical and economic conditions of the locality." It would require great local knowledge to predict the result. By voting Polish, a locality can escape liability for the indemnity, and for the crushing taxation consequent on voting German, a factor not to be neglected. On the other hand, the bankruptcy and incompetence of the new Polish State might deter those who were disposed to vote on economic rather than on racial grounds. It has also been stated that the conditions of life in such matters as sanitation and social legislation are incomparably better in Upper Silesia than in the adjacent districts of Poland, where similar legislation is in its infancy. The argument in the text assumes that Upper Silesia will cease to be German. But much may happen in a year, and the assumption is not certain. To the extent that it proves erroneous the conclusions must be modified.

[40] German authorities claim, not without contradiction, that to judge from the votes cast at elections, one-third of the population would elect in the Polish interest, and two-thirds in the German.

[41] It must not be overlooked, however, that, amongst the other concessions relating to Silesia accorded in the Allies' Final Note, there has been included Article 90, by which "Poland undertakes to permit for a period of fifteen years the exportation to Germany of the products of the mines in any part of Upper Silesia transferred to Poland in accordance with the present Treaty. Such products shall be free from all export duties or other charges or restrictions on exportation. Poland agrees to take such steps as may be necessary to secure that any such products shall be available for sale to purchasers in Germany on terms as favorable as are applicable to like products sold under similar conditions to purchasers in Poland or in any other country." This does not apparently amount to a right of preemption, and it is not easy to estimate its effective practical consequences. It is evident, however, that in so far as the mines are maintained at their former efficiency, and in so far as Germany is in a position to purchase substantially her former supplies from that source, the loss is limited to the effect on her balance of trade, and is without the more serious repercussions on her economic life which are contemplated in the text. Here is an opportunity for the Allies to render more tolerable the actual operation of the settlement. The Germans, it should be added, have pointed out that the same economic argument which adds the Saar fields to France allots Upper Silesia to Germany. For whereas the Silesian mines are essential to the economic life of Germany, Poland does not need them. Of Poland's pre-war annual demand of 10,500,000 tons, 6,800,000 tons were supplied by the indisputably Polish districts adjacent to Upper Silesia. 1,500,000 tons from Upper Silesia (out of a total Upper Silesian output of 43,500,000 tons), and the balance from what is now Czecho-Slovakia. Even without any supply from Upper Silesia and Czecho-Slovakia, Poland could probably meet her requirements by the fuller exploitation of her own coalfields which are not yet scientifically developed, or from the deposits of Western Galicia which are now to be annexed to her.

[42] France is also to receive annually for three years 35,000 tons of benzol, 60,000 tons of coal tar, and 30,000 tons of sulphate of ammonia.

[43] The Reparation Commission is authorized under the Treaty (Part VIII Annex V. para. 10) "to postpone or to cancel deliveries" if they consider "that the full exercise of the foregoing options would interfere unduly with the industrial requirements of Germany." In the event of such postponements or cancellations "the coal to replace coal from destroyed mines shall receive priority over other deliveries." This concluding clause is of the greatest importance, if, as will be seen, it is physically impossible for Germany to furnish the full 45,000,000; for it means that France will receive 20,000,000 tons before Italy receives anything. The Reparation Commission has no discretion to modify this. The Italian Press has not failed to notice the significance of the provision, and alleges that this clause was inserted during the absence of the Italian representatives from Paris (Corriere della Sera, July 19, 1919).

[44] It follows that the current rate of production in Germany has sunk to about 60 per cent of that of 1913. The effect on reserves has naturally been disastrous, and the prospects for the coming winter are dangerous.

[45] This assumes a loss of output of 15 per cent as compared with the estimate of 30 per cent quoted above.

[46] This supposes a loss of 23 per cent of Germany's industrial undertaking and a diminution of 13 per cent in her other requirements.

[47] The reader must he reminded in particular that the above calculations take no account of the German production of lignite, which yielded in 1913 13,000,000 tons of rough lignite in addition to an amount converted into 21,000,000 tons of briquette. This amount of lignite, however, was required in Germany before the war in addition to the quantities of coal assumed above. I am not competent to speak on the extent to which the loss of coal can be made good by the extended use of lignite or by economies in its present employment; but some authorities believe that Germany may obtain substantial compensation for her loss of coal by paying more attention to her deposits of lignite.

[48] Mr. Hoover, in July, 1919, estimated that the coal output of Europe, excluding Russia and the Balkans, had dropped from 679,500,000 tons to 443,000,000 tons,—as a result in a minor degree of loss of material and labor, but owing chiefly to a relaxation of physical effort after the privations and sufferings of the war, a lack of rolling-stock and transport, and the unsettled political fate of some of the mining districts.

[49] Numerous commercial agreements during the war ware arranged on these lines. But in the month of June, 1919, alone, minor agreements providing for payment in coal were made by Germany with Denmark, Norway, and Switzerland. The amounts involved were not large, but without them Germany could not have obtained butter from Denmark, fats and herrings from Norway, or milk and cattle from Switzerland.

[50] "Some 60,000 Ruhr miners have agreed to work extra shifts—so-called butter-shifts—for the purpose of furnishing coal for export to Denmark hence butter will be exported in return. The butter will benefit the miners in the first place, as they have worked specially to obtain it" (Koelnische Zeitung, June 11, 1919).

[51] What of the prospects of whisky-shifts in England?

[52] As early as September, 1919, the Coal Commission had to face the physical impracticability of enforcing the demands of the Treaty, and agreed to modify them as follows:—"Germany shall in the next six months make deliveries corresponding to an annual delivery of 20 million tons as compared with 43 millions as provided in the Peace Treaty. If Germany's total production exceeds the present level of about 108 millions a year, 60 per cent of extra production, up to 128 millions, shall be delivered to the Entente and 50 per cent of any extra beyond that, until the figure provided in the Peace Treaty is reached. If the total production falls below 108 millions the Entente will examine the situation, after hearing Germany, and take account of it."

[53] 21,136,265 tons out of a total of 28,607,903 tons. The loss of iron-ore in respect of Upper Silesia is insignificant. The exclusion of the iron and steel of Luxemburg from the German Customs Union is, however, important, especially when this loss is added to that of Alsace-Lorraine. It may be added in passing that Upper Silesia includes 75 per cent of the zinc production of Germany.

[54] In April, 1919, the British Ministry of Munitions despatched an expert Commission to examine the conditions of the iron and steel works in Lorraine and the occupied areas of Germany. The Report states that the iron and steel works in Lorraine, and to a lesser extent in the Saar Valley, are dependent on supplies of coal and coke from Westphalia. It is necessary to mix Westphalian coal with Saar coal to obtain a good furnace coke. The entire dependence of all the Lorraine iron and steel works upon Germany for fuel supplies "places them," says the Report, "in a very unenviable position."

[55] Arts. 264, 265, 266, and 267. These provisions can only be extended beyond five years by the Council of the League of Nations.

[56] Art. 268 (a).

[57] Art. 268 (b) and (c).

[58] The Grand Duchy is also deneutralized and Germany binds herself to "accept in advance all international arrangements which may be concluded by the Allied and Associated Powers relating to the Grand Duchy" (Art. 40). At the end of September, 1919, a plebiscite was held to determine whether Luxemburg should join the French or the Belgian Customs Union, which decided by a substantial majority in favour of the former. The third alternative of the maintenance of the union with Germany was not left open to the electorate.

[59] Art. 269.

[60] Art. 270.

[61] The occupation provisions may be conveniently summarized at this point. German territory situated west of the Rhine, together with the bridge-heads, is subject to occupation for a period of fifteen years (Art. 428). If, however, "the conditions of the present Treaty are faithfully carried out by Germany," the Cologne district will be evacuated after five years, and the Coblenz district after ten years (Art. 429). It is, however, further provided that if at the expiration of fifteen years "the guarantees against unprovoked aggression by Germany are not considered sufficient by the Allied and Associated Governments, the evacuation of the occupying troops may be delayed to the extent regarded as necessary for the purpose of obtaining the required guarantees" (Art. 429); and also that "in case either during the occupation or after the expiration of the fifteen years, the Reparation Commission finds that Germany refuses to observe the whole or part of her obligations under the present Treaty with regard to Reparation, the whole or part of the areas specified in Article 429 will be re-occupied immediately by the Allied and Associated Powers" (Art. 430). Since it will be impossible for Germany to fulfil the whole of her Reparation obligations, the effect of the above provisions will be in practice that the Allies will occupy the left bank of the Rhine just so long as they choose. They will also govern it in such manner as they may determine (e.g. not only as regards customs, but such matters as the respective authority of the local German representatives and the Allied Governing Commission), since "all matters relating to the occupation and not provided for by the present Treaty shall be regulated by subsequent agreements, which Germany hereby undertakes to observe" (Art. 432). The actual Agreement under which the occupied areas are to be administered for the present has been published as a White Paper [Cd. 222]. The supreme authority is to be in the hands of an Inter-Allied Rhineland Commission, consisting of a Belgian, a French, a British, and an American member. The articles of this Agreement are very fairly and reasonably drawn.

[62] Art. 365. After five years this Article is subject to revision by the Council of the League of Nations.

[63] The German Government withdrew, as from September 1, 1919, all preferential railway tariffs for the export of iron and steel goods, on the ground that these privileges would have been more than counterbalanced by the corresponding privileges which, under this Article of the Treaty, they would have been forced to give to Allied traders.

[64] Art. 367.

[65] Questions of interpretation and application are to be referred to the League of Nations (Art. 376).

[66] Art. 250.

[67] Art 371. This provision is even applied "to the lines of former Russian Poland converted by Germany to the German gage, such lines being regarded as detached from the Prussian State System."

[68] Arts. 332-337. Exception may be taken, however, to the second paragraph of Art. 332, which allows the vessels of other nations to trade between German towns but forbids German vessels to trade between non-German towns except with special permission; and Art. 333, which prohibits Germany from making use of her river system as a source of revenue, may be injudicious.

[69] The Niemen and the Moselle are to be similarly treated at a later date if required.

[70] Art. 338.

[71] Art. 344. This is with particular reference to the Elbe and the Oder; the Danube and the Rhine are dealt with in relation to the existing Commissions.

[72] Art. 339.

[73] Art. 357.

[74] Art. 358. Germany is, however, to be allowed some payment or credit in respect of power so taken by France.

[75] Art. 66.



CHAPTER V

REPARATION

I. Undertakings given prior to the Peace Negotiations

The categories of damage in respect of which the Allies were entitled to ask for Reparation are governed by the relevant passages in President Wilson's Fourteen Points of January 8, 1918, as modified by the Allied Governments in their qualifying Note, the text of which the President formally communicated to the German Government as the basis of peace on November 5, 1918. These passages have been quoted in full at the beginning of Chapter IV. That is to say, "compensation will be made by Germany for all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from the air." The limiting quality of this sentence is reinforced by the passage in the President's speech before Congress on February 11, 1918 (the terms of this speech being an express part of the contract with the enemy), that there shall be "no contributions" and "no punitive damages."

It has sometimes been argued that the preamble to paragraph 19[76] of the Armistice Terms, to the effect "that any future claims and demands of the Allies and the United States of America remain unaffected," wiped out all precedent conditions, and left the Allies free to make whatever demands they chose. But it is not possible to maintain that this casual protective phrase, to which no one at the time attached any particular importance, did away with all the formal communications which passed between the President and the German Government as to the basis of the Terms of Peace during the days preceding the Armistice, abolished the Fourteen Points, and converted the German acceptance of the Armistice Terms into unconditional surrender, so far as it affects the Financial Clauses. It is merely the usual phrase of the draftsman, who, about to rehearse a list of certain claims, wishes to guard himself from the implication that such list is exhaustive. In any case, this contention is disposed of by the Allied reply to the German observations on the first draft of the Treaty, where it is admitted that the terms of the Reparation Chapter must be governed by the President's Note of November 5.

Assuming then that the terms of this Note are binding, we are left to elucidate the precise force of the phrase—"all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from the air." Few sentences in history have given so much work to the sophists and the lawyers, as we shall see in the next section of this chapter, as this apparently simple and unambiguous statement. Some have not scrupled to argue that it covers the entire cost of the war; for, they point out, the entire cost of the war has to be met by taxation, and such taxation is "damaging to the civilian population." They admit that the phrase is cumbrous, and that it would have been simpler to have said "all loss and expenditure of whatever description"; and they allow that the apparent emphasis of damage to the persons and property of civilians is unfortunate; but errors of draftsmanship should not, in their opinion, shut off the Allies from the rights inherent in victors.

But there are not only the limitations of the phrase in its natural meaning and the emphasis on civilian damages as distinct from military expenditure generally; it must also be remembered that the context of the term is in elucidation of the meaning of the term "restoration" in the President's Fourteen Points. The Fourteen Points provide for damage in invaded territory—Belgium, France, Roumania, Serbia, and Montenegro (Italy being unaccountably omitted)—but they do not cover losses at sea by submarine, bombardments from the sea (as at Scarborough), or damage done by air raids. It was to repair these omissions, which involved losses to the life and property of civilians not really distinguishable in kind from those effected in occupied territory, that the Supreme Council of the Allies in Paris proposed to President Wilson their qualifications. At that time—the last days of October, 1918—I do not believe that any responsible statesman had in mind the exaction from Germany of an indemnity for the general costs of the war. They sought only to make it clear (a point of considerable importance to Great Britain) that reparation for damage done to non-combatants and their property was not limited to invaded territory (as it would have been by the Fourteen Points unqualified), but applied equally to all such damage, whether "by land, by sea, or from the air" It was only at a later stage that a general popular demand for an indemnity, covering the full costs of the war, made it politically desirable to practise dishonesty and to try to discover in the written word what was not there.

What damages, then, can be claimed from the enemy on a strict interpretation of our engagements?[77] In the case of the United Kingdom the bill would cover the following items:—

(a) Damage to civilian life and property by the acts of an enemy Government including damage by air raids, naval bombardments, submarine warfare, and mines.

(b) Compensation for improper treatment of interned civilians.

It would not include the general costs of the war, or (e.g.) indirect damage due to loss of trade.

The French claim would include, as well as items corresponding to the above:—

(c) Damage done to the property and persons of civilians in the war area, and by aerial warfare behind the enemy lines.

(d) Compensation for loot of food, raw materials, live-stock, machinery, household effects, timber, and the like by the enemy Governments or their nationals in territory occupied by them.

(e) Repayment of fines and requisitions levied by the enemy Governments or their officers on French municipalities or nationals.

(f) Compensation to French nationals deported or compelled to do forced labor.

In addition to the above there is a further item of more doubtful character, namely—

(g) The expenses of the Relief Commission in providing necessary food and clothing to maintain the civilian French population in the enemy-occupied districts.

The Belgian claim would include similar items.[78] If it were argued that in the case of Belgium something more nearly resembling an indemnity for general war costs can be justified, this could only be on the ground of the breach of International Law involved in the invasion of Belgium, whereas, as we have seen, the Fourteen Points include no special demands on this ground.[79] As the cost of Belgian Belief under (g), as well as her general war costs, has been met already by advances from the British, French, and United States Governments, Belgium would presumably employ any repayment of them by Germany in part discharge of her debt to these Governments, so that any such demands are, in effect, an addition to the claims of the three lending Governments.

The claims of the other Allies would be compiled on similar lines. But in their case the question arises more acutely how far Germany can be made contingently liable for damage done, not by herself, but by her co-belligerents, Austria-Hungary, Bulgaria, and Turkey. This is one of the many questions to which the Fourteen Points give no clear answer; on the one hand, they cover explicitly in Point 11 damage done to Roumania, Serbia, and Montenegro, without qualification as to the nationality of the troops inflicting the damage; on the other hand, the Note of the Allies speaks of "German" aggression when it might have spoken of the aggression of "Germany and her allies." On a strict and literal interpretation, I doubt if claims lie against Germany for damage done,—e.g. by the Turks to the Suez Canal, or by Austrian submarines in the Adriatic. But it is a case where, if the Allies wished to strain a point, they could impose contingent liability on Germany without running seriously contrary to the general intention of their engagements.

As between the Allies themselves the case is quite different. It would be an act of gross unfairness and infidelity if France and Great Britain were to take what Germany could pay and leave Italy and Serbia to get what they could out of the remains of Austria-Hungary. As amongst the Allies themselves it is clear that assets should be pooled and shared out in proportion to aggregate claims.

In this event, and if my estimate is accepted, as given below, that Germany's capacity to pay will be exhausted by the direct and legitimate claims which the Allies hold against her, the question of her contingent liability for her allies becomes academic. Prudent and honorable statesmanship would therefore have given her the benefit of the doubt, and claimed against her nothing but the damage she had herself caused.

What, on the above basis of claims, would the aggregate demand amount to? No figures exist on which to base any scientific or exact estimate, and I give my own guess for what it is worth, prefacing it with the following observations.

The amount of the material damage done in the invaded districts has been the subject of enormous, if natural, exaggeration A journey through the devastated areas of France is impressive to the eye and the imagination beyond description. During the winter of 1918-19, before Nature had cast over the scene her ameliorating mantle, the horror and desolation of war was made visible to sight on an extraordinary scale of blasted grandeur. The completeness of the destruction was evident. For mile after mile nothing was left. No building was habitable and no field fit for the plow. The sameness was also striking. One devastated area was exactly like another—a heap of rubble, a morass of shell-holes, and a tangle of wire.[80] The amount of human labor which would be required to restore such a countryside seemed incalculable; and to the returned traveler any number of milliards of dollars was inadequate to express in matter the destruction thus impressed upon his spirit. Some Governments for a variety of intelligible reasons have not been ashamed to exploit these feelings a little.

Popular sentiment is most at fault, I think, in the case of Belgium. In any event Belgium is a small country, and in its case the actual area of devastation is a small proportion of the whole. The first onrush of the Germans in 1914 did some damage locally; after that the battle-line in Belgium did not sway backwards and forwards, as in France, over a deep belt of country. It was practically stationary, and hostilities were confined to a small corner of the country, much of which in recent times was backward, poor, and sleepy, and did not include the active industry of the country. There remains some injury in the small flooded area, the deliberate damage done by the retreating Germans to buildings, plant, and transport, and the loot of machinery, cattle, and other movable property. But Brussels, Antwerp, and even Ostend are substantially intact, and the great bulk of the land, which is Belgium's chief wealth, is nearly as well cultivated as before. The traveler by motor can pass through and from end to end of the devastated area of Belgium almost before he knows it; whereas the destruction in France is on a different kind of scale altogether. Industrially, the loot has been serious and for the moment paralyzing; but the actual money cost of replacing machinery mounts up slowly, and a few tens of millions would have covered the value of every machine of every possible description that Belgium ever possessed. Besides, the cold statistician must not overlook the fact that the Belgian people possess the instinct of individual self-protection unusually well developed; and the great mass of German bank-notes[81] held in the country at the date of the Armistice, shows that certain classes of them at least found a way, in spite of all the severities and barbarities of German rule, to profit at the expense of the invader. Belgian claims against Germany such as I have seen, amounting to a sum in excess of the total estimated pre-war wealth of the whole country, are simply irresponsible.[82]

It will help to guide our ideas to quote the official survey of Belgian wealth, published in 1913 by the Finance Ministry of Belgium, which was as follows:

Land $1,320,000,000 Buildings 1,175,000,000 Personal wealth 2,725,000,000 Cash 85,000,000 Furniture, etc 600,000,000 ——————— $5,905,000,000

This total yields an average of $780 per inhabitant, which Dr. Stamp, the highest authority on the subject, is disposed to consider as prima facie too low (though he does not accept certain much higher estimates lately current), the corresponding wealth per head (to take Belgium's immediate neighbors) being $835 for Holland, $1,220 for Germany, and $1,515 for France.[83] A total of $7,500,000,000, giving an average of about $1,000 per head, would, however, be fairly liberal. The official estimate of land and buildings is likely to be more accurate than the rest. On the other hand, allowance has to be made for the increased costs of construction.

Having regard to all these considerations, I do not put the money value of the actual physical loss of Belgian property by destruction and loot above $750,000,000 as a maximum, and while I hesitate to put yet lower an estimate which differs so widely from those generally current, I shall be surprised if it proves possible to substantiate claims even to this amount. Claims in respect of levies, fines, requisitions, and so forth might possibly amount to a further $500,000,000. If the sums advanced to Belgium by her allies for the general costs of the war are to be included, a sum of about $1,250,000,000 has to be added (which includes the cost of relief), bringing the total to $2,500,000,000.

The destruction in France was on an altogether more significant scale, not only as regards the length of the battle line, but also on account of the immensely deeper area of country over which the battle swayed from time to time. It is a popular delusion to think of Belgium as the principal victim of the war; it will turn out, I believe, that taking account of casualties, loss of property and burden of future debt, Belgium has made the least relative sacrifice of all the belligerents except the United States. Of the Allies, Serbia's sufferings and loss have been proportionately the greatest, and after Serbia, France. France in all essentials was just as much the victim of German ambition as was Belgium, and France's entry into the war was just as unavoidable. France, in my judgment, in spite of her policy at the Peace Conference, a policy largely traceable to her sufferings, has the greatest claims on our generosity.

The special position occupied by Belgium in the popular mind is due, of course, to the fact that in 1914 her sacrifice was by far the greatest of any of the Allies. But after 1914 she played a minor role. Consequently, by the end of 1918, her relative sacrifices, apart from those sufferings from invasion which cannot be measured in money, had fallen behind, and in some respects they were not even as great, for example, as Australia's. I say this with no wish to evade the obligations towards Belgium under which the pronouncements of our responsible statesmen at many different dates have certainly laid us. Great Britain ought not to seek any payment at all from Germany for herself until the just claims of Belgium have been fully satisfied. But this is no reason why we or they should not tell the truth about the amount.

While the French claims are immensely greater, here too there has been excessive exaggeration, as responsible French statisticians have themselves pointed out. Not above 10 per cent of the area of France was effectively occupied by the enemy, and not above 4 per cent lay within the area of substantial devastation. Of the sixty French towns having a population exceeding 35,000, only two were destroyed—Reims (115,178) and St. Quentin (55,571); three others were occupied—Lille, Roubaix, and Douai—and suffered from loot of machinery and other property, but were not substantially injured otherwise. Amiens, Calais, Dunkerque, and Boulogne suffered secondary damage by bombardment and from the air; but the value of Calais and Boulogne must have been increased by the new works of various kinds erected for the use of the British Army.

The Annuaire Statistique de la France, 1917, values the entire house property of France at $11,900,000,000 (59.5 milliard francs).[84] An estimate current in France of $4,000,000,000 (20 milliard francs) for the destruction of house property alone is, therefore, obviously wide of the mark.[85] $600,000,000 at pre-war prices, or say $1,250,000,000 at the present time, is much nearer the right figure. Estimates of the value of the land of France (apart from buildings) vary from $12,400,000,000 to $15,580,000,000, so that it would be extravagant to put the damage on this head as high as $500,000,000. Farm Capital for the whole of France has not been put by responsible authorities above $2,100,000,000.[86] There remain the loss of furniture and machinery, the damage to the coal-mines and the transport system, and many other minor items. But these losses, however serious, cannot be reckoned in value by hundreds of millions of dollars in respect of so small a part of France. In short, it will be difficult to establish a bill exceeding $2,500,000,000 for physical and material damage in the occupied and devastated areas of Northern France.[87] I am confirmed in this estimate by the opinion of M. Rene Pupin, the author of the most comprehensive and scientific estimate of the pre-war wealth of France,[88] which I did not come across until after my own figure had been arrived at. This authority estimates the material losses of the invaded regions at from $2,000,000,000 to $3,000,000,000 (10 to 15 milliards),[89] between which my own figure falls half-way.

Nevertheless, M. Dubois, speaking on behalf of the Budget Commission of the Chamber, has given the figure of $13,000,000,000 (65 milliard francs) "as a minimum" without counting "war levies, losses at sea, the roads, or the loss of public monuments." And M. Loucheur, the Minister of Industrial Reconstruction, stated before the Senate on the 17th February, 1919, that the reconstitution of the devastated regions would involve an expenditure of $15,000,000,000 (75 milliard francs),—more than double M. Pupin's estimate of the entire wealth of their inhabitants. But then at that time M. Loucheur was taking a prominent part in advocating the claims of France before the Peace Conference, and, like others, may have found strict veracity inconsistent with the demands of patriotism.[90]

The figure discussed so far is not, however, the totality of the French claims. There remain, in particular, levies and requisitions on the occupied areas and the losses of the French mercantile marine at sea from the attacks of German cruisers and submarines. Probably $1,000,000,000 would be ample to cover all such claims; but to be on the safe side, we will, somewhat arbitrarily, make an addition to the French claim of $1,500,000,000 on all heads, bringing it to $4,000,000,000 in all.

The statements of M. Dubois and M. Loucheur were made in the early spring of 1919. A speech delivered by M. Klotz before the French Chamber six months later (Sept. 5, 1919) was less excusable. In this speech the French Minister of Finance estimated the total French claims for damage to property (presumably inclusive of losses at sea, etc., but apart from pensions and allowances) at $26,800,000,000 (134 milliard francs), or more than six times my estimate. Even if my figure prove erroneous, M. Klotz's can never have been justified. So grave has been the deception practised on the French people by their Ministers that when the inevitable enlightenment comes, as it soon must (both as to their own claims and as to Germany's capacity to meet them), the repercussions will strike at more than M. Klotz, and may even involve the order of Government and Society for which he stands.

British claims on the present basis would be practically limited to losses by sea—losses of hulls and losses of cargoes. Claims would lie, of course, for damage to civilian property in air raids and by bombardment from the sea, but in relation to such figures as we are now dealing with, the money value involved is insignificant,—$25,000,000 might cover them all, and $50,000,000 would certainly do so.

The British mercantile vessels lost by enemy action, excluding fishing vessels, numbered 2479, with an aggregate of 7,759,090 tons gross.[91] There is room for considerable divergence of opinion as to the proper rate to take for replacement cost; at the figure of $150 per gross ton, which with the rapid growth of shipbuilding may soon be too high but can be replaced by any other which better authorities[92] may prefer, the aggregate claim is $1,150,000,000. To this must be added the loss of cargoes, the value of which is almost entirely a matter of guesswork. An estimate of $200 per ton of shipping lost may be as good an approximation as is possible, that is to say $1,550,000,000, making $2,700,000,000 altogether.

An addition to this of $150,000,000, to cover air raids, bombardments, claims of interned civilians, and miscellaneous items of every description, should be more than sufficient,—making a total claim for Great Britain of $2,850,000,000. It is surprising, perhaps, that the money value of Great Britain's claim should be so little short of that of France and actually in excess of that of Belgium. But, measured either by pecuniary loss or real loss to the economic power of the country, the injury to her mercantile marine was enormous.

There remain the claims of Italy, Serbia, and Roumania for damage by invasion and of these and other countries, as for example Greece,[93] for losses at sea. I will assume for the present argument that these claims rank against Germany, even when they were directly caused not by her but by her allies; but that it is not proposed to enter any such claims on behalf of Russia.[94] Italy's losses by invasion and at sea cannot be very heavy, and a figure of from $250,000,000 to $500,000,000 would be fully adequate to cover them. The losses of Serbia, although from a human point of view her sufferings were the greatest of all,[95] are not measured pecuniarily by very great figures, on account of her low economic development. Dr. Stamp (loc. cit.) quotes an estimate by the Italian statistician Maroi, which puts the national wealth of Serbia at $2,400,000,000 or $525 per head,[96] and the greater part of this would be represented by land which has sustained no permanent damage.[97] In view of the very inadequate data for guessing at more than the general magnitude of the legitimate claims of this group of countries, I prefer to make one guess rather than several and to put the figure for the whole group at the round sum of $1,250,000,000.

We are finally left with the following—

Belgium $ 2,500,000,000[98] France 4,000,000,000 Great Britain 2,850,000,000 Other Allies 1,250,000,000 ———————- Total $10,600,000,000

I need not impress on the reader that there is much guesswork in the above, and the figure for France in particular is likely to be criticized. But I feel some confidence that the general magnitude, as distinct from the precise figures, is not hopelessly erroneous; and this may be expressed by the statement that a claim against Germany, based on the interpretation of the pre-Armistice engagements of the Allied Powers which is adopted above, would assuredly be found to exceed $8,000,000,000 and to fall short of $15,000,000,000.

This is the amount of the claim which we were entitled to present to the enemy. For reasons which will appear more fully later on, I believe that it would have been a wise and just act to have asked the German Government at the Peace Negotiations to agree to a sum of $10,000,000,000 in final settlement, without further examination of particulars. This would have provided an immediate and certain solution, and would have required from Germany a sum which, if she were granted certain indulgences, it might not have proved entirely impossible for her to pay. This sum should have been divided up amongst the Allies themselves on a basis of need and general equity.

But the question was not settled on its merits.

II. The Conference and the Terms of the Treaty

I do not believe that, at the date of the Armistice, responsible authorities in the Allied countries expected any indemnity from Germany beyond the cost of reparation for the direct material damage which had resulted from the invasion of Allied territory and from the submarine campaign. At that time there were serious doubts as to whether Germany intended to accept our terms, which in other respects were inevitably very severe, and it would have been thought an unstatesmanlike act to risk a continuance of the war by demanding a money payment which Allied opinion was not then anticipating and which probably could not be secured in any case. The French, I think, never quite accepted this point of view; but it was certainly the British attitude; and in this atmosphere the pre-Armistice conditions were framed.

A month later the atmosphere had changed completely. We had discovered how hopeless the German position really was, a discovery which some, though not all, had anticipated, but which no one had dared reckon on as a certainty. It was evident that we could have secured unconditional surrender if we had determined to get it.

But there was another new factor in the situation which was of greater local importance. The British Prime Minister had perceived that the conclusion of hostilities might soon bring with it the break-up of the political bloc upon which he was depending for his personal ascendency, and that the domestic difficulties which would be attendant on demobilization, the turn-over of industry from war to peace conditions, the financial situation, and the general psychological reactions of men's minds, would provide his enemies with powerful weapons, if he were to leave them time to mature. The best chance, therefore, of consolidating his power, which was personal and exercised, as such, independently of party or principle, to an extent unusual in British politics, evidently lay in active hostilities before the prestige of victory had abated, and in an attempt to found on the emotions of the moment a new basis of power which might outlast the inevitable reactions of the near future. Within a brief period, therefore, after the Armistice, the popular victor, at the height of his influence and his authority, decreed a General Election. It was widely recognized at the time as an act of political immorality. There were no grounds of public interest which did not call for a short delay until the issues of the new age had a little defined themselves and until the country had something more specific before it on which to declare its mind and to instruct its new representatives. But the claims of private ambition determined otherwise.

For a time all went well. But before the campaign was far advanced Government candidates were finding themselves handicapped by the lack of an effective cry. The War Cabinet was demanding a further lease of authority on the ground of having won the war. But partly because the new issues had not yet defined themselves, partly out of regard for the delicate balance of a Coalition Party, the Prime Minister's future policy was the subject of silence or generalities. The campaign seemed, therefore, to fall a little flat. In the light of subsequent events it seems improbable that the Coalition Party was ever in real danger. But party managers are easily "rattled." The Prime Minister's more neurotic advisers told him that he was not safe from dangerous surprises, and the Prime Minister lent an ear to them. The party managers demanded more "ginger." The Prime Minister looked about for some.

On the assumption that the return of the Prime Minister to power was the primary consideration, the rest followed naturally. At that juncture there was a clamor from certain quarters that the Government had given by no means sufficiently clear undertakings that they were not going "to let the Hun off." Mr. Hughes was evoking a good deal of attention by his demands for a very large indemnity,[99] and Lord Northcliffe was lending his powerful aid to the same cause. This pointed the Prime Minister to a stone for two birds. By himself adopting the policy of Mr. Hughes and Lord Northcliffe, he could at the same time silence those powerful critics and provide his party managers with an effective platform cry to drown the increasing voices of criticism from other quarters.

The progress of the General Election of 1918 affords a sad, dramatic history of the essential weakness of one who draws his chief inspiration not from his own true impulses, but from the grosser effiuxions of the atmosphere which momentarily surrounds him. The Prime Minister's natural instincts, as they so often are, were right and reasonable. He himself did not believe in hanging the Kaiser or in the wisdom or the possibility of a great indemnity. On the 22nd of November he and Mr. Bonar Law issued their Election Manifesto. It contains no allusion of any kind either to the one or to the other but, speaking, rather, of Disarmament and the League of Nations, concludes that "our first task must be to conclude a just and lasting peace, and so to establish the foundations of a new Europe that occasion for further wars may be for ever averted." In his speech at Wolverhampton on the eve of the Dissolution (November 24), there is no word of Reparation or Indemnity. On the following day at Glasgow, Mr. Bonar Law would promise nothing. "We are going to the Conference," he said, "as one of a number of allies, and you cannot expect a member of the Government, whatever he may think, to state in public before he goes into that Conference, what line he is going to take in regard to any particular question." But a few days later at Newcastle (November 29) the Prime Minister was warming to his work: "When Germany defeated France she made France pay. That is the principle which she herself has established. There is absolutely no doubt about the principle, and that is the principle we should proceed upon—that Germany must pay the costs of the war up to the limit of her capacity to do so." But he accompanied this statement of principle with many "words of warning" as to the practical difficulties of the case: "We have appointed a strong Committee of experts, representing every shade of opinion, to consider this question very carefully and to advise us. There is no doubt as to the justice of the demand. She ought to pay, she must pay as far as she can, but we are not going to allow her to pay in such a way as to wreck our industries." At this stage the Prime Minister sought to indicate that he intended great severity, without raising excessive hopes of actually getting the money, or committing himself to a particular line of action at the Conference. It was rumored that a high city authority had committed himself to the opinion that Germany could certainly pay $100,000,000,000 and that this authority for his part would not care to discredit a figure of twice that sum. The Treasury officials, as Mr. Lloyd George indicated, took a different view. He could, therefore, shelter himself behind the wide discrepancy between the opinions of his different advisers, and regard the precise figure of Germany's capacity to pay as an open question in the treatment of which he must do his best for his country's interests. As to our engagements under the Fourteen Points he was always silent.