Chapter VI: Vindication by Events

If the question merely concerned the past, if it were only a matter of proving that this or that 'School of thought' was right, this re-examination of arguments put forward before the War would be a sterile business enough. But it concerns the present and the future; bears directly and pertinently upon the reasons which have led us into the existing chaos; and the means by which we might hope to emerge. As much to-day as before the War (and far more obviously) is it true that upon the reply to the questions raised in this discussion depends the continuance of our civilisation. Our society is still racked by a fierce struggle for political power, our populations still demand the method of coercion, still refuse to face the facts of interdependence, still insist clamorously upon a policy which denies those facts.

The propositions we are here discussing were not, it is well to recall, merely to the effect that 'war does not pay,' but that the ideas and impulses out of which it grows, and which underlay--and still underlie--European politics, give us an unworkable society; and that unless they can be corrected they will increasingly involve social collapse and disintegration.

That conclusion was opposed, as we have seen, on two main grounds. One was that the desire for conquest and extension of territory did not enter appreciably into the causes of war, 'since no one really believed that victory could advantage them.' The other ground of objection, in contradistinction, was that the economic advantages of conquest or military predominance were so great and so obvious that to deny them was mere paradox-mongering.

The validity of both criticisms has been very thoroughly tested in the period that has followed the Armistice. Whether it be true or not that the competition for territory, the belief that predominant power could be turned to economic account, entered into the causes of the War, that competition and belief have certainly entered into the settlement and must be reckoned among the causes of the next war. The proposition that the economic advantages of conquest and coercion are illusory is hardly to-day a paradox, however much policy may still ignore the facts.

The outstanding facts of the present situation most worth our attention in this connection are these: Military predominance, successful war, evidently offer no solution either of specifically international or of our common social and economic problems. The political disintegration going on over wide areas in Europe is undoubtedly related very intimately to economic conditions: actual lack of food, the struggle for ever-increasing wages and better conditions. Our attempted remedies--our conferences for dealing with international credit, the suggestion of an international loan, the loans actually made to the enemy--are a confession of the international character of that problem. All this shows that the economic question, alike nationally and internationally, is not, it is true, something that ought to occupy all the energies of men, but something that will, unless dealt with adequately; is a question that simply cannot be swept aside with magnificent gestures. Finally, the nature of the settlement actually made by the victor, its characteristic defects, the failure to realise adequately the victor's dependence on the economic life of the vanquished, show clearly enough that, even in the free democracies, orthodox statecraft did indeed suffer from the misconception which _The Great Illusion_ attributed to it.

What do we see to-day in Europe? Our preponderant military power--overwhelming, irresistible, unquestioned--is impotent to secure the most elementary forms of wealth needed by our people: fuel, food, shelter. France, who in the forty years of her 'defeat' had the soundest finances in Europe, is, as a victor over the greatest industrial nation in Europe, all but bankrupt. (The franc has fallen to a discount of over seventy per cent.) All the recurrent threats of extended military occupation fail to secure reparations and indemnities, the restoration of credit, exchange, of general confidence and security.

And just as we are finding that the things necessary for the life of our peoples cannot be secured by military force exercised against foreign nations or a beaten enemy, so are we finding that the same method of force within the limits of the nation used by one group as against another, fails equally. The temper or attitude towards life which leads us to attempt to achieve our end by the forcible imposition of our will upon others, by dictatorship, and to reject agreement, has produced in some degree everywhere revolt and rebellion on the one side, and repression on the other; or a general disruption and the breakdown of the co-operative processes by which mankind lives. All the raw materials of wealth are here on the earth as they were ten years ago. Yet Europe either starves or slips into social chaos, because of the economic difficulty.

In the way of the necessary co-operation stands the Balkanisation of Europe. Why are we Balkanised rather than Federalised? Why do Balkan and other border States fight fiercely over this coalfield or that harbour? Why does France still oppose trade with Russia, and plot for the control of an enlarged Poland or a reactionary Hungary? Why does America now wash her hands of the whole muddle in Europe?

Because everywhere the statesmen and the public believe that if only the power of their State were great enough, they could be independent of rival States, achieve political and economic security and dispense with agreements and obligations.

If they had any vivid sense of the vast dangers to which reliance upon isolated power exposed any State, however great; if they had realised how the prosperity and social peace of their own States depended upon the reconciliation and well-being of the vanquished, the Treaty would have been a very different document, peace would long since have been established with Russia, and the moral foundations of co-operation would be present.

By every road that presented itself, _The Great Illusion_ attempted to reveal the vital interdependence of peoples--within and without the State--and, as a corollary to that interdependence, the very strict limits of the force that can be exercised against any one whose life, and daily--and willing--labour is necessary to us. It was not merely the absence of these ideas but the very active presence of the directly contrary ideas of rival and conflicting interest, which explained the drift that the present writer thought--and said so often--would, unless checked, lead Western civilisation to a vast orgy of physical self-destruction and moral violence and chaos.

The economic conditions which constitute one part of the vindication of _The Great Illusion_ are of course those described in the first part of this book, particularly in the first chapter. All that need be added here are a few suggestions as to the relationship between those conditions and the propositions we are concerned to verify.

As bearing upon the truth of those propositions, we cannot neglect the condition of Germany.

If ever national military power, the sheer efficiency of the military instrument, could ensure a nation's political and economic security, Germany should have been secure. It was not any lack of the 'impulse to defence,' of the 'manly and virile qualities' so beloved of the militarist, no tendency to 'softness,' no 'emasculating internationalism' which betrayed her. She fell because she failed to realise that she too, for all her power, had need of a co-operation throughout the world, which her force could not compel; and that she must secure a certain moral co-operation in her purposes or be defeated. She failed, not for lack of 'intense nationalism,' but by reason of it, because the policy which guided the employment of her military instrument had in it too small a regard for the moral factors in the world at large, which might set in motion material forces against her.

It is hardly possible to doubt that the easy victories of 1871 marked the point at which the German spirit took the wrong turning, and rendered her statesmen incapable of seeing the forces which were massing for her destruction. The presence in 1919 of German delegates at Versailles in the capacity of vanquished can only be adequately explained by recalling the presence there of German statesmen as victors in 1871. It took forty years for some of the moral fruits of victory to manifest themselves in the German spirit.

But the very severity of the present German lot is one that lends itself to sophistry. It will be argued: 'You say that preponderant military power, victory, is ineffective to economic ends. Well, look at the difference between ourselves and Germany. The victors, though they may not flourish, are at least better off than the vanquished. If we are lean, they starve. Our military power is not economically futile.'

If to bring about hardship to ourselves in order that some one else may suffer still greater hardship is an economic gain, then it is untrue to say that conquest is economically futile. But I had assumed that advantage or utility was to be measured by the good to us, not by the harm done to others at our cost. We are arguing for the moment the economic, and not the ethical aspect of the thing. Keep for a moment to those terms. If you were told that an enterprise was going to be extremely profitable and you lost half your fortune in it, you would certainly regard as curious the logic of the reply, that after all you _had_ gained, because others in the same enterprise had lost everything.

We are considering in effect whether the facts show that nations must, in order to provide bread for their people, defeat in war competing nations who otherwise would secure it. But that economic case for the 'biological inevitability' of war is destroyed if it is true that, after having beaten the rival nation, we find that we have less bread than before; that the future security of our food is less; and that out of our own diminished store we have to feed a defeated enemy who, before his defeat, managed to feed himself, and helped to feed us as well.

And that is precisely what the present facts reveal.

Reference has already been made to the position of France. In the forty years of her defeat France was the banker of Europe. She exacted tribute in the form of dividends and interest upon investments from Russia, the Near East, Germany herself; exacted it in a form which suited the peculiar genius of her people and added to the security of her social life. She was Germany's creditor, and managed to secure from her conqueror of 1871 the prompt payment of the debts owing to her. When France was not in a position to compel anything whatsoever from Germany by military force, the financial claims of Frenchmen upon Germany were readily discountable in any market of the world. To-day, the financial claims on Germany, made by a France which is militarily all-powerful, simply cannot be discounted anywhere. The indemnity vouchers, whatever may be the military predominance behind them, are simply not negotiable instruments so long as they depend upon present policy. They are a form of paper which no banker would dream of discounting on their commercial merits.

To-day France stands as the conquerer of the richest ore-fields in the world, of territory which is geographically the industrial centre of Europe; of a vast Empire in Africa and Asia; in a position of predominance in Poland, Hungary, and Rumania. She has acquired through the Reparations Commission such power over the enemy countries as to reduce them almost to the economic position of an Asiatic or African colony. If ever wealth could be conquered, France has conquered it. If political power could really be turned to economic account, France ought to-day to be rich beyond any nation in history. Never was there such an opportunity of turning military power into wealth.

Then why is she bankrupt? Why is France faced by economic and financial difficulties so acute that the situation seems inextricable save by social revolution, a social reconstruction, that is, involving new principles of taxation, directly aiming at the re-distribution of wealth, a re-distribution resisted by the property-owning classes. These, like other classes, have since the Armistice been so persistently fed upon the fable of making the Boche pay, that the government is unable to induce them to face reality.[126]

With a public debt of 233,729 million of francs (about £9,300,000,000, at the pre-war rate of exchange); with the permanent problem of a declining population accentuated by the loss of millions of men killed and wounded in the war, and complicated by the importation of coloured labour; with the exchange value of the franc reduced to sixty in terms of the British pound, and to fifteen in terms of the American dollar,[127] the position of victorious France in the hour of her complete military predominance over Europe seems wellnigh desperate.

She could of course secure very considerable alleviation of her present difficulties if she would consent to the only condition upon which Germany could make a considerable contribution to Reparations; the restoration of German industry. But to that one indispensable condition of indemnity or reparation France will not consent, because the French feel that a flourishing Germany would be a Germany dangerous to the security of France.

In this condition one may recall a part of _The Great Illusion_ case which, more than any other of the 'preposterous propositions,' excited derision and scepticism before the War. That was the part dealing with the difficulties of securing an indemnity. In a chapter (of the early 1910 Edition) entitled _The Indemnity Futility_, occurred these passages:--

'The difficulty in the case of a large indemnity is not so much the
payment by the vanquished as the receiving by the victor ...

'When a nation receives an indemnity of a large amount of gold, one
or two things happens: either the money is exchanged for real
wealth with other nations, in which case the greatly increased
imports compete directly with the home producers, or the money is
kept within the frontiers and is not exchanged for real wealth from
abroad, and prices inevitably rise.... The rise in price of home
commodities hampers the nation receiving the indemnity in selling
those commodities in the neutral markets of the world, especially
as the loss of so large a sum by the vanquished nation has just the
reverse effect of cheapening prices and therefore, enabling that
nation to compete on better terms with the conqueror in neutral
markets.'--(p. 76.)

The effect of the payment of the French indemnity of 1872 upon German industry was analysed at length.

This chapter was criticised by economists in Britain, France, and America. I do not think that a single economist of note admitted the slightest validity in this argument. Several accused the author of adopting protectionist fallacies in an attempt to 'make out a case.' It happens that he is a convinced Free Trader. But he is also aware that it is quite impracticable to dissociate national psychology from international commercial problems. Remembering what popular feeling about the expansion of enemy trade must be on the morrow of war, he asked the reader to imagine vast imports of enemy goods as the means of paying an indemnity, and went on:--

'Do we not know that there would be such a howl about the ruin of
home industry that no Government could stand the clamour for a
week?... That this influx of goods for nothing would be represented
as a deep-laid plot on the part of foreign nations to ruin the home
trade, and that the citizens would rise in their wrath to prevent
the accomplishment of such a plot? Is not this very operation by
which foreign nations tax themselves to send abroad goods, not for
nothing (that would be a crime at present unthinkable), but at
below cost, the offence to which we have given the name of
"dumping"? When it is carried very far, as in the case of sugar,
even Free Trade nations like Great Britain join International
Conferences to prevent these gifts being made!...'

The fact that not one single economist, so far as I know, would at the time admit the validity of these arguments, is worth consideration. Very learned men may sometimes be led astray by keeping their learning in watertight compartments, 'economics' in one compartment and 'politics' or political psychology in another. The politicians seemed to misread the economies and the economists the politics.

What are the post-war facts in this connection? We may get them summarised on the one hand by the Prime Minister of Great Britain and on the other by the expert adviser of the British Delegation to the Peace Conference.

Mr Lloyd George, speaking two years after the Armistice, and after prolonged and exhaustive debates on this problem, says:--

'What I have put forward is an expression of the views of all the
experts.... Every one wants gold, which Germany has not got, and
they will not take German goods. Nations can only pay debts by
gold, goods, services, or bills of exchange on nations which are
its debtors.[128]

'The real difficulty ... is due to the difficulty of securing
payment outside the limits of Germany. Germany could pay--pay
easily--inside her own boundary, but she could not export her
forests, railways, or land across her own frontiers and make them
over to the Allies. Take the railways, for example. Suppose the
Allies took possession of them and doubled the charges; they would
be paid in paper marks which would be valueless directly they
crossed the frontier.

'The only way Germany could pay was by way of exports--that is by
difference between German imports and exports. If, however, German
imports were too much restricted, the Germans would be unable to
obtain food and raw materials necessary for their manufactures.
Some of Germany's principal markets--Russia and Central
Europe--were no longer purchasers, and if she exported too much to
the Allies, it meant the ruin of their industry and lack of
employment for their people. Even in the case of neutrals it was
only possible generally to increase German exports by depriving our
traders of their markets.'[129]

There is not a line here that is not a paraphrase of the chapter in the early edition of _The Great Illusion_.

The following is the comment of Mr Maynard Keynes, ex-Advisor to the British Treasury, on the claims put forward after the Paris Conference of January 1921:--

'It would be easy to point out how, if Germany could compass the
vast export trade which the Paris proposals contemplate, it could
only be by ousting some of the staple trades of Great Britain from
the markets of the world. Exports of what commodities, we may ask,
in addition to her present exports, is Germany going to find a
market for in 1922--to look no farther ahead--which will enable her
to make the payment of between £150,000,000 and £200,000,000
including the export proportion which will be due from her in that
year? Germany's five principal exports before the War were iron,
steel, and machinery, coal and coke, woollen goods and cotton
goods. Which of these trades does Paris think she is going to
develop on a hitherto unprecedented scale? Or if not these, what
others? And how is she going to finance the import of raw materials
which, except in the case of coal and coke, are a prior necessity
to manufacture, if the proceeds of the goods when made will not be
available to repay the credits? I ask these questions in respect of
the year 1922 because many people may erroneously believe that
while the proposed settlement is necessarily of a problematic
character for the later years--only time can show--it makes some
sort of a start possible. These questions are serious and
practical, and they deserve to be answered. If the Paris proposals
are more than wind, they mean a vast re-organisation of the
channels of international trade. If anything remotely like them is
really intended to happen, the reactions on the trade and industry
of this country are incalculable. It is an outrage that they should
be dealt with by the methods of the poker party of which news comes
from Paris.'[130]

If the expert economists failed to admit the validity of _The Great Illusion_ argument fifteen years ago, the general public has barely a glimmering of it to-day. It is true that our miners realise that vast deliveries of coal for nothing by Germany disorganise our coal export trade. British shipbuilding has been disastrously affected by the Treaty clauses touching the surrender of German tonnage--so much so that the Government have now recommended the abandonment of these clauses, which were among the most stringent and popular in the whole Treaty. The French Government has flatly refused to accept German machinery to replace that destroyed by the German armies, while French labour refuses to allow German labour, in any quantity, to operate in the devastated regions. Thus coal, ships, machinery, manufactures, labour, as means of payment, have either already created great economic havoc or have been rejected because they might. Yet our papers continue to shout that 'Germany can pay,' implying that failure to do so is merely a matter of her will. Of course she can pay--if we let her. Payment means increasing German foreign trade. Suppose, then, we put the question 'Can German Foreign Trade be increased?' Obviously it can. It depends mainly on us. To put the question in its truer form shows that the problem is much more a matter of our will than of Germany's. Incidentally, of course, German diplomacy has been as stupid as our own. If the German representatives had said, in effect: 'It is common ground that we can pay only in commodities. If you will indicate the kind and quantity of goods we shall deliver, and will facilitate the import into Germany of, and the payment for, the necessary food and raw material, we will accept--on that condition--even your figures of reparation.' The Allies, of course, could not have given the necessary undertaking, and the real nature of the problem would have stood revealed.[131]

The review of the situation of France given in the preceding pages will certainly be criticised on the ground that it gives altogether too great weight to the temporary embarrassment, and leaves out the advantages which future generations of Frenchmen will reap.

Now, whatever the future may have in store, it will certainly have for France the task of defending her conquests if she either withholds their product (particularly iron) from the peoples of Central Europe who need them, or if she makes of their possession a means of exacting a tribute which they feel to be burdensome and unjust. Again we are faced by the same dilemma; if Germany gets the iron, her population goes on expanding and her potential power of resistance goes on increasing. Thus France's burden of defence would grow steadily greater, while her population remained constant or declined. This difficulty of French deficiency in human raw material is not a remote contingency; it is an actual difficulty of to-day, which France is trying to meet in part by the arming of the negro population of her African colonies, and in part by the device of satellite militarisms, as in Poland. But the precariousness of such methods is already apparent.

The arming of the African negro carries its appalling possibilities on its face. Its development cannot possibly avoid the gravest complication of the industrial problem. It is the Servile State in its most sinister form; and unless Europe is itself ready for slavery it will stop this reintroduction of slavery for the purposes of militarism.

The other device has also its self-defeating element. To support an imperialist Poland means a hostile Russia; yet Poland, wedged in between a hostile Slav mass on the one side and a hostile Teutonic one on the other, herself compounded of Russian, German, Austrian, Lithuanian, Ukrainian, and Jewish elements, ruled largely by a landowning aristocracy when the countries on both sides have managed to transfer the great estates to the peasants, is as likely, in these days, to be a military liability as a military asset.

These things are not irrelevant to the problem of turning military power to economic account: they are of the very essence of the problem.

Not less so is this consideration: If France should for political reasons persist in a policy which means a progressive reduction in the productivity of Europe, that policy would be at its very roots directly contrary to the vital interests of England. The foregoing pages have explained why the increasing population of these islands, that live by selling coal or its products, are dependent upon the high productivity of the outside world. France is self-supporting and has no such pre-occupation. Already the divergence is seen in the case of the Russian policy. Britain direly needs the wheat of Russia to reduce the cost of living--or improve the value of what she has to sell, which is very nearly the same thing. France does not need Russian foodstuffs, and in terms of narrow self-interest (cutting her losses in Czarist bonds) can afford to be indifferent to the devastation of Russia. As soon as this divergence reaches a certain degree, rupture becomes inevitable.

The mainspring of French policy during the last two years has been fear--fear of the economic revival of Germany which might be the beginning of a military revival. The measures necessary to check German economic revival inevitably increase German resentment, which is taken as proof of the need for increasingly severe measures of repression. Those measures are tending already to deprive France of her most powerful military Allies. That fact still further increases the burden that will be thrown upon her. Such burdens must inevitably make very large deductions from the 'profits' of her new conquests.

Note in view of these circumstances some further difficulties of turning those conquests to account. Take the iron mines of Lorraine.[132] France has now within her borders what is, as already noted, the geographical centre of Continental industry. How shall she turn that fact to account?

For the iron to become wealth at all, for France to become the actual centre of European industry, there must be a European industry: the railroads and factories and steamship lines as consumers of the iron must once more operate. To do that they in their turn must have _their_ market in the shape of active consumption on the part of the millions of Europe. In other words the Continent must be economically restored. But that it cannot be while Germany is economically paralysed. Germany's industry is the very keystone of the European industry and agriculture--whether in Russia, Poland, the Balkans, or the Near East--which is the indispensable market of the French iron.[133] Even if we could imagine such a thing as a reconstruction of Europe on lines that would in some wonderful way put seventy or eighty million Germans into a secondary place--involving as it would vast redistributions of population--the process obviously would take years or generations. Meantime Europe goes to pieces. 'Men will not always die quietly' as Mr Keynes puts it. What is to become of French credit while France is suppressing Bolshevik upheavals in Poland or Hungary caused by the starvation of cities through the new economic readjustments? Europe famishes now for want of credit. But credit implies a certain dependence upon the steady course of future events, some assurance, for instance, that this particular railway line to which advances are made will not find itself, in a year or two's time, deprived of its traffic in the interest of economic rearrangements resulting from an attempt to re-draw the economic map of Europe. Nor can such re-drawing disregard the present. It is no good telling peasants who have not ploughs or reapers or who cannot get fertilisers because their railroad has no locomotives, that a new line running on their side of the new frontier will be built ten or fifteen years hence. You cannot stop the patients breathing 'for just a few hours' while experiments are made with vital organs. The operation must adapt itself to the fact that all the time he must breathe. And to the degree to which we attempt violently to re-direct the economic currents, does the security upon which our credit depends decline.[134]

There are other considerations. A French journalist asks plaintively: 'If we want the coal why don't we go in and take it'--by the occupation of the Ruhr. The implication is that France could get the coal for nothing. Well, France has taken over the Saar Valley. By no means does she get the coal for nothing. The miners have to be paid. France tried paying them at an especially low rate. The production fell off; the miners were discontented and underfed. They had to be paid more. Even so the Saar has been 'very restless' under French control, and the last word, as we know, will rest with the men. Miners who feel they are working for the enemy of their fatherland are not going to give a high production. It is a long exploded illusion that slave labour--labour under physical compulsion--is a productive form of labour. Its output invariably is small. So assuredly France does not get this coal for nothing. And from the difference between the price which it costs her as owner of the mines and administrator of their workers, and that which she would pay if she had to buy the coal from the original owners and administrators (if there is a difference on the credit side at all) has to be deducted the ultimate cost of defence and of the political complications that that has involved. Precise figures are obviously not available; but it is equally obvious that the profit of seizure is microscopic.

Always does the fundamental dilemma remain. France will need above all, if she is to profit by these raw materials of European industry, markets, and again markets. But markets mean that the iron which has been captured must be returned to the nation from which it was taken, on conditions economically advantageous to that nation. A central Europe that is consuming large quantities of metallurgical products is a Central Europe growing in wealth and power and potentially dangerous unless reconciled. And reconciliation will include economic justice, access to the very 'property' that has been seized.

The foregoing is not now, as it was when the present author wrote in similar terms a decade since, mere speculation or hypothesis. Our present difficulties with reference to the indemnity or reparations, the fall in the exchanges, or the supply of coal, are precisely of the order just indicated. The conqueror is caught in the grip of just those difficulties in turning conquest to economic account upon which _The Great Illusion_ so repeatedly insisted.

The part played by credit--as the sensory nerve of the economic organism--has, despite the appearances to the contrary in the early part of the War, confirmed those propositions that dealt with it. Credit--as the extension of the use of money--is society's bookkeeping. The debauchery of the currencies means of course juggling with the promises to pay. The general relation of credit to a certain dependability upon the future has already been dealt with.[135] The object here is to call attention to the present admissions that the maintenance or re-creation of credit is in very truth an indispensable element in the recovery of Europe. Those admissions consist in the steps that are being taken internationally, the emphasis which the governments themselves are laying upon this factor. Yet ten years ago the 'diplomatic expert' positively resented the introduction of such a subject into the discussion of foreign affairs at all. Serious consideration of the subject was generally dismissed by the orthodox authority on international politics with some contemptuous reference to 'cosmopolitan usury.'

Even now we seize every opportunity of disguising the truth to ourselves. In the midst of the chaos we may sometimes see flamboyant statements that England at any rate is greater and richer than before. (It is a statement, indeed, very apt to come from our European co-belligerents, worse off than ourselves.) It is true, of course, that we have extended our Empire; that we have to-day the same materials of wealth as--or more than--we had before the War; that we have improved technical knowledge. But we are learning that to turn all this to account there must be not only at home, but abroad, a widespread capacity for orderly co-operation; the diffusion throughout the world of a certain moral quality. And the war, for the time being, at least, has very greatly diminished that quality. Because Welsh miners have absorbed certain ideas and developed a certain temperament, the wealth of many millions who are not miners declines. The idea of a self-sufficing Empire that can disregard the chaos of the outside world recedes steadily into the background when we see the infection of certain ideas beginning the work of disintegration within the Empire. Our control over Egypt has almost vanished; that over India is endangered; our relations with Ireland affect those with America and even with some of our white colonies. Our Empire, too, depends upon the prevalence of certain ideas.