Only a few months after these lines were printed, the prophecy began to be fulfilled more and more completely. Every possible step has been taken by Germany to bring about peace on the basis of a draw. The slogan, ‘Peace without annexations or indemnities,’ was coined to that end. At first the Allies believed that this formula originated in Russia; as a matter of fact, however, it was worked out in Berlin and then suggested to the Russian Socialists through secret agents whom Germany has successfully established in the Petrograd Soviet. These Socialists, doubtless well-meaning, but over-fond of theories and always ready to embrace the wildest utopian schemes,—ignorant, too, of all realities, as has been shown by the steady aggravation of the general situation in Russia since they came into power with the Revolution,—have declared enthusiastically for the ‘peace without annexations and indemnities.’ As there exist also in the other Allied countries groups of Socialists with a stronger grip on theories than on facts, and also because Allied sympathies naturally rallied strongly to the support of the Russian Revolution, the formula, ‘peace without annexations or indemnities,’ thanks to its apparent origin, has unquestionably made serious inroads on a certain section of Allied public opinion.
The Stockholm manœuvres, engineered by all the powerful and varied means at the disposal of German propagandists, were designed to establish this formula as the fixed basis of all peace negotiations. When the astuteness of the Allied governments prevented the fulfillment of this attempt within the period desired by Berlin, the Vatican was persuaded through Viennese agencies to throw its influence on the side of peace as determined by Germany.
As a matter of fact, the Pope’s peace proposals, while not embodying the exact terms of the Kaiser’s formula, involved, in the last analysis, practically the same essential results. Berlin, therefore, in order to assure unceasing discussion of her formula,—a discussion tending at least to bring about an armistice, which would split up and morally disarm the Allies, thus making it possible for her to deal with them separately,—outdid herself in mobilizing toward one end the most widely divergent forces, from the Maximalist anarchists of Petrograd to the most hidebound reactionaries of the Sacred College. The extent, the vigor, and the persistence of the amazing ‘pacifist’ offensive launched by Germany were such that the expressions ‘peace without indemnities or annexations,’ ‘drawn game,’ ‘white peace,’ ‘paix boiteuse,’ have become as current in the Allied countries as if they had some established connection with reality. This is entirely contrary to the fact: with the best intentions in the world, peace without annexations or indemnities, as things stand now, is impossible. There can be no ‘white peace,’ no ‘drawn game,’ no ‘paix boiteuse.’
To tell the truth, a section of Allied opinion has become befuddled by these formulæ of Berlin, whose function is to accomplish in the moral order the same asphyxiating action as that of the gases employed on the battlefield by the German General Staff. The result of this moral intoxication is that important groups of the Allies begin to juggle with words and lose sight of facts. As the natural outcome of giving serious thought to impossibilities, grave errors are made in weighing the present situation, with an attendant weakening of the joint action of the Allied democracies. It is imperative, therefore, that the pursuit of Utopias, leading only to disaster, be abandoned, and that we return to those realities which alone can lead to victory and the establishment of a durable peace.
If the formula ‘peace without annexations and indemnities’ has been allowed to insinuate itself into the general discussion, it is only because great numbers of the Allied peoples fail to understand the overwhelming advantages which Germany, by means of the war, has been able to assure to herself for the present and the future. The object of this paper is to show just what these advantages are, and at the same time to brand the utter hypocrisy of the slogan, ‘peace without annexations and indemnities,’ which, regarded even in the most favorable light, would allow Germany to make off with immense booty, leaving the Allies to face the incalculable losses incurred by them in a war launched by their adversary.
The significance of the low rate
of German exchange
The continual fall of German exchange is regarded by many of the Allies as proof of the progressive and irremediable impoverishment of Germany. When, for instance, the mark drops 47 per cent in Switzerland, while the franc has depreciated only 13 per cent, Frenchmen are for the most part inclined to believe that the war has affected the two countries in relatively the same proportion; they then conclude that Germany’s financial situation is infinitely worse than that of France. In reality, such a comprehensive conclusion cannot be reached simply through the rise and fall of exchange, which reflects only certain special aspects of the financial situation of a country.
Among the various causes affecting exchange, there are two principal ones. The first is moral. It cannot be denied that the fluctuation of exchange responds to foreign confidence. If German exchange is low, it implies, to a certain extent at least, the existence of a universal conviction that in the long run Germany cannot hold out against her formidable ring of adversaries. As a result, there is no great demand for the currency of a state whose credit, it is thought, must finally collapse. It should be noted, however, that the reason for this fall of exchange is only a moral evaluation anticipating a probable outcome; it is not due to a mathematically certain estimate of what Germany now stands to win or lose as a result of the war.
The second great factor affecting exchange, on the other hand, is based on present realities which are susceptible of being accurately determined. Germany, since she has been blockaded by sea, exports infinitely less than formerly; consequently, her ability to settle her accounts in foreign countries is limited. When she was able to sell the United States a million marks’ worth of merchandise, she then had at her disposal a million marks with which to pay cash for such imports as she needed. Now that her exports have been so reduced, she has little money to spare for spending abroad. If she wishes to increase these foreign purchases, she must export her gold and consequently reduce the security behind her banknotes. This results in a lowering of the basis of German credit, with a resulting drop in exchange.
We shall now see that this falling exchange, whatever its importance, does not take into account all the elements of the general financial situation.