Incidentally, the history of the indemnity negotiations illuminates extraordinarily the truth upon which the present writer happens so often to have insisted, namely, that in dealing with the economics of nationalism, one cannot dissociate from the problem the moral facts which make the nationalism—without which there would be no nationalisms, and therefore no ‘international’ economics.
A book by the present author published some fifteen years ago has a chapter entitled ‘The Indemnity Futility.’ In the first edition the main emphasis of the chapter was thrown on this suggestion: on the morrow of a great war the victor would be in no temper to see the foreign trade of his beaten enemy expand by leaps and bounds, yet by no other means than by an immense foreign trade could a nation pay an indemnity commensurate with the vast expenditure of modern war. The idea that it would be paid in ‘money,’ which by some economic witchcraft should not involve the export of goods, was declared to be a gross and ignorant fallacy. The traders of the victorious nation would have to face a greatly sharpened competition from the beaten nation; or the victor would have to go without any very considerable indemnity. The chapter takes the ground that an indemnity is not in terms of theoretical economics an impossibility: it merely indicates the indispensable condition of securing it—the revival of the enemy’s economic strength—and suggests that this would present for the victorious nation, not only a practical difficulty of internal politics (the pressure of Protectionist groups) but a grave political difficulty arising out of the theory upon which defence by preponderant isolated national power is based. A country possessing the economic strength to pay a vast indemnity is of potential military strength. And this is a risk your nationalists will not accept.
Even friendly Free Trade critics shook their heads at this and implied that the argument was a reversion to Protectionist illusions for the purpose of making a case. That misunderstanding (for the argument does not involve acceptance of Protectionist premises) seemed so general that in subsequent editions of the book this particular passage was deleted.[9]
It is not necessary now to labour the point, in view of all that has happened in Paris. The dilemma suggested fifteen years ago is precisely the dilemma which confronted the makers of the Peace Treaty; it is, indeed, precisely the dilemma which confronts us to-day.
It applies not only to the Indemnity, Reparations, but to our entire policy, to larger aspects of our relations with the enemy. Hence the paralysis which results from the two mutually exclusive aims of the Treaty of Versailles: the desire on the one hand to reduce the enemy’s strength by checking his economic vitality—and on the other to restore the general productivity of Europe, to which the economic life of the enemy is indispensable.
France found herself, at the end of the War, in a desperate financial position and in dire need of all the help which could come from the enemy towards the restoration of her devastated districts. She presented demands for reparation running to vast, unprecedented sums. So be it. Germany then was to be permitted to return to active and productive work, to be permitted to have the iron and the other raw materials necessary for the production of the agricultural machinery, the building material and other sorts of goods France needed. Not the least in the world! Germany was to produce this great mass of wealth, but her factories were to remain closed, her rolling stock was to be taken from her, she was to have neither food nor raw materials. This is not some malicious travesty of the attitude which prevailed at the time that the Treaty was made. It was, and to a large extent still is, the position taken by many French publicists as well as by some in England. Mr. Vanderlip, the American banker, describes in his book[10] the attitude which he found in Paris during the Conference in these words: ‘The French burn to milk the cow but insist first that its throat must be cut.’
Despite the lessons of the year which followed the signing of the Treaty, one may doubt whether even now the nature of wealth and ‘money’ has come home to the Chauvinists of the Entente countries. The demand that we should at one and the same time forbid Germany to sell so much as a pen-knife in the markets of the world and yet compel her to pay us a tribute which could only be paid by virtue of a foreign trade greater than any which she has been able to maintain in the past—these mutually exclusive demands are still made in our own Parliament and Press.
How powerfully the Nationalist fears operate to obscure the plain alternatives is revealed in a letter of M. André Tardieu, written more than eighteen months after the Armistice.
M. Tardieu, who was M. Clemenceau’s political lieutenant in the framing of the Treaty, and one of the principal inspirers of the French policy, writing in July, 1920, long after the condition of Europe and the Continent’s economic dependence on Germany had become visible, ‘warns’ us of the ‘danger’ that Germany may recover unless the Treaty is applied in all its rigour! He says:—
‘Remember your own history and remember what the rat de terre de cousin which Great Britain regarded with such disdain after the Treaty of Frankfurt became in less than forty years. We shall see Germany recover economically, profiting by the ruins she has made in other countries, with a rapidity which will astonish the world. When that day arrives, if we have given way at Spa to the madness of letting her off part of the debt that was born of her crime, no courses will be too strong for the Governments which allowed themselves to be duped. M. Clemenceau always said to British and American statesmen: “We of France understand Germany better than you.” M. Clemenceau was right, and in bringing his colleagues round to his point of view he did good work for the welfare of humanity. If the work of last year is to be undone, the world will be delivered up to the economic hegemony of Germany before twenty-five years have passed. There could be no better proof than the recent despatches of The Times correspondent in Germany, which bear witness to the fever of production which consumes Herr Stinnes and his like. Such evidence is stronger than the biased statistics of Mr Keynes. Those who refuse to take it into account will be the criminals in the eyes of their respective countries.’[11]