This is the most expensive war which has ever been waged in material, in men, and in money. The conference in Paris was mostly concerned with money. For the year ending Dec. 31 next the aggregate expenditure of the Allies will not be far short of £2,000,000,000. The British Empire will be spending considerably more than either of our two great allies—probably up to £100,000,000 to £150,000,000 more than the highest figure to be spent by the other two great allies. We have created a new army; we have to maintain a huge navy. We are paying liberal separation allowances. We have to bring troops from the ends of the earth; we have to wage war not merely in Europe, but in Asia, in North, East, and South Africa. I must say just a few words as to the relative position of the three great countries which led us to make the arrangements on financial matters which we recommend to our respective Governments. Britain and France are two of the richest countries in the world. In fact, they are the great bankers of the world. We could pay for our huge expenditure on the war for five years, allowing a substantial sum for depreciation, out of the proceeds of our investments abroad. France could carry on the war for two or three years at least out of the proceeds of her investments abroad, and both countries would still have something to spare to advance to their allies. This is a most important consideration, for at the present moment the Allies are fighting the whole of the mobilized strength of Germany, with perhaps less than one-third of their own strength. The problem of the war to the Allies is to bring the remaining two-thirds of their resources and strength into the fighting line at the earliest possible moment. This is largely, though by no means entirely, a question of finance.
Russia is in a different position from either Britain or France. She is a prodigiously rich country in natural resources—about the richest country in the world in natural resources. Food, raw material—she produces practically every commodity. She has a great and growing population, a virile and industrious people. Her resources are overflowing and she has labor to develop them in abundance. By a stroke of the pen Russia has since the war began enormously increased her resources by suppressing the sale of all alcoholic liquors. [Cheers.] It can hardly be realized that by that means alone she has increased the productivity of her labor by something between 30 and 50 per cent., just as if she had added millions of laborers to the labor reserves of Russia without even increasing the expense of maintaining them, and whatever the devastation of the country may be Russia has more than anticipated its wastage by that great act of national heroism and sacrifice. [Cheers.] The great difficulty with Russia is that, although she has great natural resources, she has not yet been able to command the capital within her own dominions to develop those resources even during the times of peace. In time of war she has additional difficulties. She cannot sell her commodities for several reasons. One is that a good deal of what she depends upon for raising capital abroad will be absorbed by the exigencies of the war in her own country. Beyond that the yield of her minerals will not be quite as great, because the labor will be absorbed in her armies.
There is not the same access to her markets. She has difficulty in exporting her goods, and in addition to that her purchases abroad are enormously increased in consequence of the war. Russia, therefore, has special difficulty in the matter of financing outside purchases for the war. Those are some of the difficulties with which we were confronted.
France has also special difficulties. I am not sure that we quite realize the strain put upon that gallant country [cheers] up to the present moment. For the moment she bears far and away the greatest strain of the war in proportion to her resources. She has the largest proportion of her men under arms. The enemy are in occupation of parts of her richest territory. They are within fifty-five miles of her capital, exactly as if we had a huge German army at Oxford. It is only a few months since the bankers of Paris could hear the sound of the enemy's guns from their counting houses, and they can hear the same sound now, some of them, from their country houses. In those circumstances the money markets of a country are not at their very best. That has been one of the difficulties with which France has been confronted in raising vast sums of money to carry on the war and helping to finance the allied States.
There is a wonderful confidence, notwithstanding these facts, possessing the whole nation. [Cheers.] Nothing strikes the visitor to Paris more than that. There is a calm, a serene confidence, which is supposed to be incompatible with the temperament of the Celt by those who do do not know it. [Laughter.] There is a general assurance that the Germans have lost their tide, and that now the German armies have as remote a chance of crushing France as they have of overrunning the planet Mars. [Cheers.] That is the feeling which pervades every class of the community, and that is reflected in the money market there. The difficulties of France in that respect are passing away, and the arrangement that has now been made in France for the purpose of raising sums of money to promote their military purposes will, I have not the faintest doubt, be crowned with the completest success. [Cheers.]
But we have a number of small States which are compelled to look to the greater countries in alliance for financial support. There is Belgium, which until recently was a very rich country, devastated, desolate, and almost entirely in the hands of the enemy, with an army and a civil government to maintain, but with no revenue. We have to see that she does not suffer [cheers] until the period of restoration comes to her, and compensation. [Cheers.] Then there is Serbia, with the population of Ireland—a people of peasants maintaining an army of 500,000 and fighting her third great war within two years, and fighting that with great resource, great courage, and bravery. [Cheers.] But she had no reserve of wealth, and now no exports with which she can purchase munitions of war outside, and she has hardly any manufactures of her own. That is the position as far as the smaller States are concerned.
There are also other States preparing for war, and it is obviously our interest that they should be well equipped for that task. They can only borrow in the French and English markets.
But we had our own special difficulties, and I think I ought to mention those. Two-thirds of our food supplies are purchased abroad. The enormous quantities of raw materials for our manufactures and our industries are largely absorbed in war equipment, and our ships in war transport. We cannot pay as usual in exports, freights, and services; our savings for the moment are not what they would be in the case of peace. We cannot, therefore, pay for our imports in that way. We have to purchase abroad. We have to increase our purchases abroad for war purposes. In addition to that we have to create enormous credits to enable other countries to do the same thing. The balance is, therefore, heavily against us for the first time. There is no danger, but in a conference of the kind we had at Paris I could not overlook the fact that it was necessary for us to exercise great vigilance in regard to our gold.
These were the complex problems we had to discuss and adjust, and we had to determine how we could most effectually mobilize the financial resources of the Allies so as to be of the greatest help to the common cause. For the moment undoubtedly ours is still the best market in the world. An alliance in a great war to be effective needs that each country must bring all its resources, whatever they are, into the common stock. An alliance for war cannot be conducted on limited liability principles. If one country in the alliance has more trained and armed men ready with guns, rifles, and ammunition than another she must bring them all up against the common enemy, without regard to the fact that the others cannot for the moment make a similar contribution. But it is equally true that the same principle applies to the country with the larger navy or the country with the greater resources in capital and credit. They must be made available to the utmost for the purpose of the alliance, whether the other countries make a similar contribution or not. That is the principle upon which the conference determined to recommend to their respective Governments a mobilization of our financial resources for the war.
The first practical suggestion we had to consider was the suggestion that has been debated very considerably in the press—the suggestion of a joint loan. We discussed that very fully and we came to the conclusion that it was the very worst way of utilizing our resources. It would have frightened every Bourse and attracted none. It would have made the worst of every national credit and the best of none. Would the interest paid have been the interest upon which we could raise money, the rate at which France could have raised money, or the rate at which Russia could raise money? If we paid a high rate of interest we could never raise more money at low rates. If instead of raising £350,000,000 a few weeks ago for our own purposes we had floated a great joint loan of £1,000,000,000, the House can very well imagine what the result would have been. We decided after a good deal of discussion and reflection that each country should raise money for its own needs within its own markets in so far as their conditions allowed, but that if help were needed by any country for outside purchases then those who could best afford to render assistance for the time being should do so.