‘Co-operation between nations has become essential for the very life of their peoples. But that co-operation does not take place as between States at all. A trading corporation called “Britain” does not buy cotton from another corporation called “America.” A manufacturer in Manchester strikes a bargain with a merchant in Louisiana in order to keep a bargain with a dyer in Germany, and three, or a much larger number of parties, enter into virtual, or perhaps actual, contract, and form a mutually dependent economic community (numbering, it may be, with the work-people in the group of industries involved, some millions of individuals)—an economic entity so far as one can exist which does not include all organised society. The special interests of such a community may become hostile to those of another community, but it will almost certainly not be a “national” one, but one of a like nature, say a shipping ring or groups of international bankers or Stock Exchange speculators. The frontiers of such communities do not coincide with the areas in which operate the functions of the State. How could a State, say Britain, act on behalf of an economic entity such as that just indicated? By pressure against America or Germany? But the community against which the British manufacturer in this case wants pressure exercised is not “America” or “Germany”—both want it exercised against the shipping ring or the speculators or the bankers who in part are British. If Britain injures America or Germany as a whole, she injures necessarily the economic entity which it was her object to protect.’[19]
This line of reasoning is no longer valid, for it was based upon a system of economic individualism, upon a distinction between the functions proper to the State and those proper to the citizen. This individualist system has been profoundly transformed in the direction of national control by the measures adopted everywhere for the purposes of war; a transformation that the confiscatory clauses of the Treaty and the arrangements for the payment of the indemnity help to render permanent. While the old understanding or convention has been destroyed—or its disappearance very greatly accelerated—by the Allies, no new one has so far been established to take its place. To that fact we must ascribe much of the economic paralysis that has come upon the world.
I am aware, of course, that the passage I have quoted did not tell the whole story; that already before the War the power of the political State was being more and more used by ‘big business’; that in China, Mexico, Central America, the Near East, Morocco, Persia, Mesopotamia, wherever there was undeveloped and disorderly territory, private enterprise was exercising pressure upon the State to use its power to ensure sources of raw material or areas for the investment of capital. That phase of the question is dealt with at greater length elsewhere.[20] But the actual (whatever the potential) economic importance of the territory about which the nations quarrelled was as yet, in 1914, small; the part taken by Governments in the control and direction of international trade was negligible. Europe lived by processes that went on without serious obstacle across frontiers. Little States, for instance, without Colonies (Scandinavia, Switzerland) not only maintained a standard of living for their people quite as high as that in the great States, but maintained it moreover by virtue of a foreign trade relatively as considerable. And the forces which preserved the international understanding by which that trade was carried on were obviously great.
It was not true, before the War, to say that Germany had to expand her frontiers to feed her population. It is true that with her, as with us, her soil did not produce the food needed for the populations living on it; as with us, about fifteen millions were being fed by means of trade with territories which politically she did not ‘own,’ and did not need to ‘own’—with Russia, with South America, with Asia, with our own Colonies. Like us Germany was turning her coal and iron into bread. The process could have gone on almost indefinitely, so long as the coal and iron lasted, as the tendency to territorial division of labour was being intensified by the development of transport and invention. (The pressure of the population on the food resources of these islands was possibly greater under the Heptarchy than at present, when they support forty-five millions.) Under the old economic order conquest meant, not a transfer of wealth from one set of persons to another—for the soil of Alsace, for instance, remained in the hands of those who had owned it under France—but a change of administration. The change may have been as unwarrantable and oppressive as you will, but it did not involve economic strangulation of the conquered peoples or any very fundamental economic change at all. French economic life did not wither as the result of the changes of frontier in 1872, and French factories were not shut off from raw material, French cities were not stricken with starvation as the result of France’s defeat. Her economic and financial recovery was extraordinarily rapid; her financial position a year or two after the War was sounder than that of Germany. It seemed, therefore, that if Germany, of all nations, and Bismarck, of all statesmen, could thus respect the convention which after war secured the immunity of private trade and property, it must indeed be deeply rooted in international comity.
Indeed, the ‘trans-national’ economic activities of individuals, which had ensued so widespread an international economy, and the principle of the immunity of private property from seizure after conquest, had become so firmly rooted in international relationship as to survive all the changes of war and conquest. They were based on a principle that had received recognition in English Treaties dating back to the time of Magna Carta, and that had gradually become a convention of international relationship.
At Versailles the Germans pointed out that their country was certainly not left with resources to feed its population. The Allies replied to that, not by denying the fact—to which their own advisers, like Mr Hoover, have indeed pointedly called attention—but as follows:—
‘It would appear to be a fundamental fallacy that the political control of a country is essential in order to procure a reasonable share of its products. Such a proposal finds no foundation in economic law or history.’[21]
In making their reply the Allies seemed momentarily to have overlooked one fact—their own handiwork in the Treaty.
Before the War it would have been a true reply. But the Allies have transformed what were, before the War, dangerous fallacies into monstrous truths.
President Wilson has described the position of Germany under the Treaty in these terms:—