2

Britain’s dependence on the production by foreigners of a surplus of food and raw materials beyond their own needs

The matter may be clarified if we summarise what precedes, and much of what follows, in this proposition:—

The present conditions in Europe show that much of its dense population (notably the population of these islands) canonly live at a standard necessary for civilisation (leisure, social peace, individual freedom) by means of certain co-operative processes, which must be carried on largely across frontiers. The mere physical existence of much of the population of Britain is dependent upon the production by foreigners of a surplus of food and raw materials beyond their own needs.The processes of production have become of the complex kind which cannot be compelled by preponderant power, exacted by physical coercion.But the attempt at such coercion, the inevitable results of a policy aimed at securing predominant power, provoking resistance and friction, can and does paralyse the necessary processes, and by so doing is undermining the economic foundations of British life.

The processes of production have become of the complex kind which cannot be compelled by preponderant power, exacted by physical coercion.

But the attempt at such coercion, the inevitable results of a policy aimed at securing predominant power, provoking resistance and friction, can and does paralyse the necessary processes, and by so doing is undermining the economic foundations of British life.

What are the facts supporting the foregoing proposition?

Many whose instincts of national protection would become immediately alert at the possibility of a naval blockade of these islands, remain indifferent to the possibility of a blockade arising in another but every bit as effective a fashion.

That is through the failure of the food and raw material, upon which our populations and our industries depend, to be produced at all owing to the progressive social disintegration which seems to be going on over the greater part of the world. To the degree to which it is true to say that Britain’s life is dependent upon her fleet, it is true to say that it is dependent upon the production by foreigners of a surplus above their own needs of food and raw material. This is the most fundamental fact in the economic situation of Britain: a large portion of her population are fed by the exchange of coal, or services and manufactures based on coal, for the surplus production, mainly food and raw material, of peoples living overseas.[2]Whetherthe failure of food to reach us were due to the sinking of our ships at sea or the failure of those ships to obtain cargoes at the port of embarkation the result in the end would be the same. Indeed, the latter method, if complete, would be the more serious as an armistice or surrender would not bring relief.

The hypothesis has been put in an extreme form in order to depict the situation as vividly as possible. But such a condition as the complete failure of the foreigner’s surplus does not seem to-day so preposterous as it might have done five years ago. For that surplus has shrunk enormously and great areas that once contributed to feeding us can do so no longer. Those areas already include Russia, Siberia, the Balkans, and a large part of the Near and Far East. What we are practically concerned with, of course, is not the immediate disappearance of that surplus on which our industries depend, but the degree to which its reduction increases for us the cost of food, and so intensifies all the social problems that arise out of an increasing cost of living. Let the standard alike of consumption and production of our overseas white customers decline to the standard of India and China, and our foreign trade would correspondingly decrease; the decline in the world’s production of food would mean that much less for us; it would reduce the volume of our trade, or in terms of our own products, cost that much more; this in turn would increase the cost of our manufactures, create an economic situation which one could describe with infinite technical complexity, but which, however technical and complex that description were made, would finally come to this—that our own toil would become less productive.

That is a relatively new situation. In the youth of men now living, these islands with their twenty-five or thirty millionpopulation were, so far as vital needs are concerned, self-sufficing. What will be the situation when the children now growing up in our homes become members of a British population which may number fifty, sixty, or seventy millions? (Germany’s population, which, at the outbreak of war, was nearly seventy millions, was in 1870 a good deal less than the present population of Great Britain.)

Moreover, the problem is affected by what is perhaps the most important economic change in the world since the industrial revolution, namely the alteration in the ratio of the exchange value of manufactures and food—the shift over of advantage in exchange from the side of the industrialist and manufacturer to the side of the producer of food.

Until the last years of the nineteenth century the world was a place in which it was relatively easy to produce food, and nearly the whole of its population was doing it. In North and South America, in Russia, Siberia, China, India, the universal occupation was agriculture, carried on largely (save in the case of China and India) upon new soil, its first fertility as yet unexhausted. A tiny minority of the world’s population only was engaged in industry in the modern sense: in producing things in factories by machinery, in making iron and steel. Only in Great Britain, in Northern Germany, in a few districts in the United States, had large-scale industry been systematically developed. It is easy to see, therefore, what immense advantage in exchange the industrialist had. What he had for sale was relatively scarce; what the agriculturist had for sale was produced the world over and was,in terms of manufactures, extremely cheap. It was the economic paradox of the time that in countries like America, South and North, the farmer—the producer of food—was naturally visualised as a poverty-stricken individual—a ‘hayseed’ dressed in cotton jeans, without the conveniences and amenities of civilisation, while it was in the few industrial centres that the vast wealth was being piled up. But as the new land in North America andArgentina and Siberia became occupied and its first fertility exhausted, as the migration from the land to the towns set in, it became possible with the spread of technical training throughout the world, with the wider distribution of mechanical power and the development of transport, for every country in some measure to engage in manufacture, and the older industrial centres lost some of their monopoly advantage in dealing with the food producer. In Cobden’s day it was almost true to say that England spun cotton for the world. To-day cotton is spun where cotton is grown; in India, in the Southern States of America, in China.

This is a condition which (as the pages which follow reveal in greater detail) the intensification of nationalism and its hostility to international arrangement will render very much more acute. The patriotism of the future China or Argentina—or India and Australia, for that matter—may demand the home production of goods now bought in (say) England. It may not in economic terms benefit the populations who thus insist upon a complete national economy. But ‘defence is more than opulence.’ The very insecurity which the absence of a definitely organised international order involves will be invoked as justifying the attempt at economic self-sufficiency. Nationalism creates the situation to which it points as justification for its policy: it makes the very real dangers that it fears. And as Nationalism thus breaks up the efficient transnational division of labour and diminishes total productivity, the resultant pressure of population or diminished means of subsistence will push to keener rivalry for the conquest of territory. The circle can become exceedingly vicious—so vicious, indeed, that we may finally go back to the self-sufficing village community; a Europe sparsely populated if the resultant clerical influence is unable to check prudence in the matter of the birth-rate, densely populated to a Chinese or Indian degree if the birth-rate is uncontrolled.

The economic chaos and social disintegration which havestricken so much of the world have brought a sharp reminder of the primary, the elemental place of food in the catalogue of man’s needs, and the relative ease and rapidity with which most else can be jettisoned in our complex civilisation, provided only that the stomach can be filled.

Before the War the towns of Europe were the luxurious and opulent centres; the rural districts were comparatively poor. To-day it is the cities of the Continent that are half-starved or famine-stricken, while the farms are well-fed and relatively opulent. In Russia, Poland, Hungary, Germany, Austria, the cities perish, but the peasants for the most part have a sufficiency. The cities are finding that with the breakdown of the old stability—of the transport and credit systems particularly—they cannot obtain food from the farmers. This process which we now see at work on the Continent is in fact the reversal of our historical development.

As money acquired a stable value and transport and communication became easy and cheap, the manor ceased to be self-contained, to weave its own clothes and make its own implements. But the Russian peasants are proving to-day that if the railroads break down, and the paper money loses its value, the farm can become once more self-sufficing. Better to thresh the wheat with a flail, to weave clothes from the wool, than to exchange wheat and wool for a money that will buy neither cloth nor threshing machinery. But a country-side that weaves its own cloth and threshes its grain by hand is one that has little surplus of food for great cities—as Vienna, Buda-Pest, Moscow, and Petrograd have already discovered.

If England is destined in truth to remain the workshop of that world which produces the food and raw material, then she has indeed a very direct interest in the maintenance of all those processes upon which the pre-war exchange between farm and factory, city and country, depended.[3]

The ‘farm’ upon which the ‘factory’ of Great Britain depends is the food-producing world as a whole. It does not suffice that the overseas world should merely support itself as it did, say, in the tenth century, but it must be induced by hope of advantage to exchange a surplus for those things which we can deliver to it more economically than it can make them for itself. Because the necessary social and political stability, with its material super-structure of transport and credit, operating trans-nationally, has broken down, much of Europe is returning to its earlier simple life of unco-ordinated production, and its total fertility is being very greatly reduced. The consequent reaction of a diminished food supply for ourselves is already being felt.

It will be said: Does not the unquestioned rise in the standard of wages, despite all the talk of debt, expenditure, unbalanced budgets, public bankruptcy, disprove any theory of a vital connection between a stable Europe and our own prosperity? Indeed, has not the experience of the War discredited much of the theory of the interdependence of nations?

The first few years of the War did, indeed, seem to discredit it, to show that this interdependence was not so vital as had been supposed. Germany seemed for a long time really to be self-supporting, to manage without contact with other peoples. It seemed possible to re-direct the channels of trade with relative ease. It really appeared for a time that the powers of theGovernments could modify fundamentally the normal process of credit almost at will, which would have been about equivalent to the discovery of perpetual motion! Not only was private credit maintained by governmental assistance, but exchanges were successfully ‘pegged’; collapse could be prevented apparently with ease. Industry itself showed a similar elasticity. In this country it seemed possible to withdraw five or six million men from actual production, and so organise the remainder as to enable them to produce enough not only to maintain themselves, but the country at large and the army, in food, clothing and other necessaries. And this was accomplished at a standard of living above rather than below that which obtained when the country was at peace, and when the six or seven or eight millions engaged in war or its maintenance were engaged in the production of consumable wealth. It seemed an economic miracle that with these millions withdrawn from production, though remaining consumers, the total industrial output should be very little less than it was before the War.

But we are beginning to see how this miracle was performed, and also what is the truth as to the self-sufficiency of the great nations. As late as the early summer of 1918, when, even after four years of the exhausting drain of war, well-fed German armies were still advancing and gaining victories, and German guns were bombarding Paris (for the first time in the War), the edifice of German self-sufficiency seemed to be sound. But this apparently stalwart economic structure crumbled in a few months into utter ruins and the German population was starving and freezing, without adequate food, fuel, clothing. England has in large measure escaped this result just because her contacts with the rest of the world have been maintained while Germany’s have not. These latter were not even re-established at the Armistice; in many respects her economic isolation was more complete after the War than during it. Moreover, because our contacts with the rest of the world aremaintained by shipping, a very great flexibility is given to our extra-national economic relationships. Our lines of communication can be switched from one side of the world to the other instantly, whereas a country whose approaches are by railroads may find its communications embarrassed for a generation if new frontiers render the old lines inapplicable to the new political conditions.

In the first year or so following the Armistice there was a curious contradiction in the prevailing attitude towards the economic situation at home. The newspapers were full of headlines about the Road to Ruin and National Bankruptcy; the Government plainly was unable to make both ends meet; the financial world was immensely relieved when America postponed the payments of debts to her; we were pathetically appealing to her to come and save us; the British sovereign, which for generations has been a standard of value for the world and the symbol of security, dropped to a discount of 20 per cent, in terms of the dollar; our Continental creditors were even worse off; the French could only pay us in a depreciated paper currency, the value of which in terms of the dollar varied between a third and a fourth of what it was before the War; the lira was cheaper still. Yet side by side with this we had stories of a trade boom (especially in textiles and cotton), so great that merchants and manufacturers refused to go to their offices, in order to dodge the flood of orders so vastly in excess of what they could fulfil. Side by side with depreciated paper currency, with public debts so crippling that the Government could only balance its budget by loans which were not successful when floated, the amusement trades flourished as never before. Theatre, music hall, and cinematograph receipts beat all records. There was a greater demand for motor-cars than the trade could supply. The Riviera was fuller than it had ever been before. The working class itself was competing with others for the purchase of luxuries which in the past that class never knew. And while the financial situation madeit impossible, apparently, to find capital for building houses to live in, ample capital was forthcoming wherewith to build cinema palaces. We heard and read of famine almost at our doors, and saw great prosperity around us; read daily of impending bankruptcy—and of high profits and lavish spending; of world-wide unrest and revolution—and higher wages than the workers had ever known.

Complex and contradictory as the facts seemed, the difficulty of a true estimate was rendered greater by the position in which European Governments found themselves placed. These Governments were faced by the necessity of maintaining credit and confidence at almost any cost. They must not, therefore, throw too great an emphasis upon the dark features. Yet the need for economy and production was declared to be as great as it was during the war. To create a mood of seriousness and sober resolution adequate to the situation would involve stressing facts which, in their efforts to obtain loans, internal or external, and to maintain credit, governments were compelled to minimise.

Then, of course, the facts were obscured mainly by the purchasing power created by the manufacture of credit and paper money. Some light is thrown upon this ambiguous situation by a fact which is now so manifest—that this juxtaposition of growing indebtedness and lavish spending, high wages, high profits, active trade, and a rising standard of living, were all things that marked the condition of Germany in the first few years of the War. Industrial concerns showed profits such as they had never shown before; wages steadily rose; and money was plentiful. But the profits were made and the wages were paid in a money that continually declined in value—as ours is declining. The higher consumption drew upon sources that were steadily being depleted—as ours are being depleted. The production was in certain cases maintained by very uneconomic methods: as by working only the best seams in the coal mines, by devoting no effort to the proper upkeep of plant(locomotives on the railway which ordinarily would go into the repair shop every six weeks were kept running somehow during the whole course of the War). In this sense the people were ‘living upon capital’—devoting, that is, to the needs of current consumption energy which should have been devoted to ensuring future production. In another way, they were converting into income what is normally a source of capital. An increase in profits or wages, which ordinarily would have provided a margin, over and above current expenditure, out of which capital for new plant, etc., could have been drawn, was rapidly nullified by a corresponding increase in prices. Loans for the purpose even of capital expenditure involved an inflation of currency which still further increased prices, thus diminishing the value of the capital so provided, necessitating the issue of further loans which had the same effect. And so the vicious circle was narrowed. Even after four years of this kind of thing the edifice had in many respects the outward appearances of prosperity. As late as April, 1918, the German organisation, as we have noted, was still capable of maintaining a military machine which could not only hold its own but compel the retirement of the combined forces of France, Britain, America, and minor Allies. But once the underlying process of disintegration became apparent, the whole structure went to pieces.

It is that unnoticed process of disintegration, preceding the final collapse, which should interest us. For the general method employed by Germany for meeting the consumption of war and disguising the growing scarcity is in many respects the method her neighbours adopted for meeting the consumption of a new standard of life on the basis of less total wealth—a standard which, on the part of the workers, means both shorter hours and a larger share of their produce, and on the part of other classes a larger share of the more expensive luxuries. Like the Germans of 1914-18, we are drawing for current consumption upon the fund which, in a morehealthy situation, would go to provide for renewal of plant and provision of new capital. To ‘eat the seed corn’ may give an appearance of present plenty at the cost of starvation later.

It is extremely unlikely that there will ever be in England the sudden catastrophic economic collapse which we have witnessed in Russia, Germany, Austria, and Central Europe generally. But we shall none the less be concerned. As the increased wages gained by strikes lose with increasing rapidity their value in purchasing power, thus wiping out the effect of the industrial ‘victory,’ irritation among the workers will grow. On minds so prepared the Continental experiments in social reconstruction—prompted by conditions immeasurably more acute—will act with the force of hypnotic suggestion. Our Government may attempt to cope with these movements by repression or political devices. Tempers will be too bad and patience too short to give the sound solutions a real chance. And an economic situation, not in itself inherently desperate, may get steadily worse because of the loss of social discipline and of political insight, the failure to realise past expectations, the continuance of military burdens created by external political chaos.

What has actually happened in so much of Europe around us ought certainly to prevent any too complacent sense of security. In the midst of this old civilisation are (in Mr. Hoover’s calculation) some hundred million folk, who before the War managed to support themselves in fair comfort but are now unable to be truly self-supporting. Yet they live upon the same soil and in the presence of the same natural resources as before the War. Their inability to use that soil and those materials is not due to the mere physical destruction of war, for the famine is worst where there has been no physical destructionat all. It is not a lack of labour, for millions are unemployed, seeking work. Nor is it lack of technical or scientific knowledge, upon which (very erroneously) we are apt to look as the one sufficient factor of civilisation; for our technical knowledge in the management of matter is greater even than before the War.

What then is the reason why these millions starve in the midst of potential plenty? It is that they have lost, from certain moral causes examined later in these pages, the capacity to co-ordinate their labour sufficiently to carry on the processes by which alone labour and knowledge can be applied to an exploitation of nature sufficiently complete to support our dense modern populations.

The fact that wealth is not to-day a material which can be taken, but a process which can only be maintained by virtue of certain moral factors, marks a change in human relationship, the significance of which still seems to escape us.

The manor, or even the eighteenth century village, was roughly a self-sufficing unit. It mattered little to that unit what became of the outside world. The manor or village was independent; its people could be cut off from the outside world, could ravage the near parts of it and remain unaffected. But when the development of communication and the discovery of steam turns the agricultural community into coal miners, these are no longer indifferent to the condition of the outside world. Cut them off from the agriculturalists who take their coal or manufactures, or let these latter be unable to carry on their calling, and the miner starves. He cannot eat his coal. He is no longed independent. His life hangs upon certain activities of others. Where his forebears could have raided and ravaged with no particular hurt to themselves, the miner cannot. He is dependent upon those others and has given them hostages. He is no longer ‘independent,’ however clamorously in his Nationalist oratory he may use that word. He has been forced into a relation of partnership. And how very small is the effectivenessof any physical coercion he can apply, in order to exact the services by which he lives, we shall see presently.

This situation of interdependence is of course felt much more acutely by some countries than others—much more by England, for instance, than by France. France in the matter of essential foodstuffs can be nearly self-supporting, England cannot. For England, an outside world of fairly high production is a matter of life and death; the economic consideration must in this sense take precedence of others. In the case of France considerations of political security are apt to take precedence of economic considerations. France can weaken her neighbours vitally without being brought to starvation. She can purchase security at the cost of mere loss of profits on foreign trade by the economic destruction of, say, Central Europe. The same policy would for Britain in the long run spell starvation. And it is this fundamental difference of economic situation which is at the bottom of much of the divergence of policy between Britain and France which has recently become so acute.

This is the more evident when we examine recent changes of detail in this general situation special to England. Before the War a very large proportion of our food and raw material was supplied by the United States. But our economic relationship with that country has been changed as the result of the War. Previous to 1914 we were the creditor and America the debtor nation. She was obliged to transmit to us large sums in interest on investments of British capital. These annual payments were in fact made in the form of food and raw materials, for which, in a national sense, we did not have to give goods or services in return. We are now less in the position of creditor, more in that of debtor. America does not have to transmit to us. Whereas, originally, we did an immense proportion of America’s carrying trade, because she had no ocean-going mercantile marine, she has begun to do her own carrying. Further, the pressure of her population upon her food resources is rapidly growing. The law diminishingreturns is in some instances beginning to apply to the production of food, which in the past has been plentiful without fertilisers and under a very wasteful and simple system. And in America, as elsewhere, the standard of consumption, owing to a great increase of the wage standard, has grown, while the standard of production has not always correspondingly increased.

The practical effect of this is to throw England into greater dependence upon certain new sources of food—or trade, which in the end is the same thing. The position becomes clearer if we reflect that our dependence becomes more acute with every increase of our population. Our children now at school may be faced by the problem of finding food for a population of sixty or seventy millions on these islands. A high agricultural productivity on the part of countries like Russia and Siberia and the Balkans might well be then a life and death matter.

Now the European famine has taught us a good deal about the necessary conditions of high agricultural productivity. The co-operation of manufactures—of railways for taking crops out and fertilisers in, of machinery, tools, wagons, clothing—is one of them. That manufacturing itself must be done by division of labour is another: the country or area that is fitted to supply textiles or cream separators is not necessarily fitted to supply steel rails: yet until the latter are supplied the former cannot be obtained. Often productivity is paralysed simply because transport has broken down owing to lack of rolling stock, or coal, or lubricants, or spare parts for locomotives; or because a debased currency makes it impossible to secure food from peasants, who will not surrender it in return for paper that has no value—the manufactures which might ultimately give it value being paralysed. The lack of confidence in the maintenance of the value of paper money, for instance, is rapidly diminishing the food productivity of the soil; peasants will not toil to produce food which they cannot exchange, through the medium of money, for the things which they need—clothing, implements, and so on. This diminishing productivityis further aggravated by the impossibility of obtaining fertilisers (some of which are industrial products, and all of which require transport), machines, tools, etc. The food producing capacity of Europe cannot be maintained without the full co-operation of the non-agricultural industries—transport, manufactures, coal mining, sound banking—and the maintenance of political order. Nothing but the restoration of all the economic processes of Europe as a whole can prevent a declining productivity that must intensify social and political disorder, of which we may merely have seen the beginning.

But if this interdependence of factory and farm in the production of food is indisputable, though generally ignored, it involves a further fact just as indisputable, and even more completely ignored. And the further fact is that the manufacturing and the farming, neither of which can go on without the other, may well be situated in different States. Vienna starves largely because the coal needed for its factories is now situated in a foreign State—Czecho-Slovakia—which, partly from political motives perhaps, fails to deliver it. Great food producing areas in the Balkans and Russia are dependent for their tools and machinery, for the stability of the money without which the food will not be produced, upon the industries of Germany. Those industries are destroyed, the markets have disappeared, and with them the incentive to production. The railroads of what ought to be food producing States are disorganized from lack of rolling stock, due to the same paralysis of German industry; and so the food production is diminished. Tens of millions of acres outside Germany, whose food the world sorely needs, have been rendered barren by the industrial paralysis of the Central Empires which the economic terms of the Treaty render inevitable.

Speaking of the need of Russian agriculture for German industry, Mr. Maynard Keynes, who has worked out the statistics revealing the relative position of Germany to the rest of Europe, writes:—

‘It is impossible geographically and for many other reasons for Englishmen, Frenchmen, or Americans to undertake it—we have neither the incentive nor the means for doing the work on a sufficient scale. Germany, on the other hand, has the experience, the incentive, and to a large extent, the materials for furnishing the Russian peasant with the goods of which he has been starved for the past five years, for reorganising the business of transport and collection, and so for bringing into the world’s pool, for the common advantage, the supplies from which we are now disastrously cut off.... If we oppose in detail every means by which Germany or Russia can recover their material well-being, because we feel a national, racial, or political hatred for their populations or their governments, we must be prepared to face the consequences of such feelings. Even if there is no moral solidarity between the newly-related races of Europe, there is an economic solidarity which we cannot disregard. Even now, the world markets are one. If we do not allow Germany to exchange products with Russia and so feed herself, she must inevitably compete with us for the produce of the New World. The more successful we are in snapping economic relations between Germany and Russia, the more we shall depress the level of our own economic standards and increase the gravity of our own domestic problems.’[4]

It is not merely the productivity of Russia which is involved. Round Germany as a central support the rest of the European economic system grouped itself, and upon the prosperity and enterprise of Germany the prosperity of the rest of the Continent mainly depended. Germany was the best customer of Russia, Norway, Poland, Belgium, Switzerland, Italy, and Austria-Hungary; she was the second best customer of Great Britain, Sweden, and Denmark; and the third best customer of France. She was the largest source of supply to Russia, Norway, Sweden, Denmark, Poland, Switzerland, Italy,Austria-Hungary, Rumania, and Bulgaria; and the second largest source of supply to Great Britain, Belgium, and France. Britain sent more experts to Germany than to any other country in the world except India, and bought more from her than any other country in the world except the United States. There was no European country except those west of Germany which did not do more than a quarter of their total trade with her; and in the case of Russia, Austria-Hungary, and Poland, the proportion was far greater. To retard or prevent the economic restoration of Germany means retarding the economic reconstruction of Europe.

This gives us a hint of the deep causes underlying the present divergence of French and British policy with reference to the economic reconstruction of Russia and Central Europe. A Britain of sixty or seventy millions faced by the situation with reference to America that has just been touched upon, might well find that the development of the resources of Russia, Siberia, and the Near East—even at the cost of dividing the profits thereof in terms of industrial development with Germany, each supplying that for which it was best suited—was the essential condition of food and social peace. France has no such pre-occupation. Her concern is political: the maintenance of a military predominance on which she believes her political security to depend, an object that might well be facilitated by the political disintegration of Europe even though it involved its economic disintegration.

That brings us to the political factor in the decline in productivity. From it we may learn something of the moral factor, which is the ultimate condition of any co-operation whatsoever.

The relationship of the political to the economic situation is illustrated most vividly, perhaps, in the case of Austria. Mr. Hoover, in testimony given to a United States Senate Committee, has declared bluntly that it is no use talking of loans to Austria which imply future security, if the presentpolitical status is to be maintained, because that status has rendered the old economic activities impossible. Speaking before the Committee, he said:—

‘The political situation in Austria I hesitate to discuss, but it is the cause of the trouble. Austria has now no hope of being anything more than a perpetual poorhouse, because all her lands that produce food have been taken from her. This, I will say, was done without American inspiration. If this political situation continues, and Austria is made a perpetual mendicant, the United States should not provide the charity. We should make the loan suggested with full notice that those who undertake to continue Austria’s present status must pay the bill. Present Austria faces three alternatives—death, migration, or a complete industrial diversion and re-organization. Her economic rehabilitation seems impossible after the way she was broken up at the Peace Conference. Her present territory will produce only enough food for three months, and she has now no factories which might produce products to be exchanged for food.’[5]

To realise what can really be accomplished by statesmanship that has a soul above such trifles as food and fuel, when it sets its hand to map-drawing, one should attempt to visualise the state of Vienna to-day. Mr A. G. Gardiner, the English journalist, has sketched it thus:—

‘To conceive its situation one must imagine London suddenly cut off from all the sources of its life, no access to the sea, frontiers of hostile Powers all round it, every coalfield of Yorkshire or South Wales or Scotland in foreign hands, no citizen able to travel to Birmingham or Manchester without a passport, the mills it had financed in Lancashire taken from it, no coal to burn, no food to eat, and—with its shilling downin value to a farthing—no money to buy raw materials for its labour, industry at a standstill, hundreds of thousands living (or dying) on charity, nothing prospering except the vile exploiters of misery, the traffickers in food, the traffickers in vice. That is the Vienna which the peace criminals have made.‘Vienna was the financial and administrative centre of fifty million of people. It financed textile factories, paper manufacturing, machine works, beet growing, and scores of other industries in German Bohemia. It owned coal mines at Teschen. It drew its food from Hungary. From every quarter of the Empire there came to Vienna the half-manufactured products of the provinces for the finishing processes, tailoring, dyeing, glass-working, in which a vast population found employment.‘Suddenly all this elaborate structure of economic life was swept away. Vienna, instead of being the vital centre of fifty millions of people, finds itself a derelict city with a province of six millions. It is cut off from its coal supplies, from its food supplies, from its factories, from everything that means existence. It is enveloped by tariff walls.’

‘Vienna was the financial and administrative centre of fifty million of people. It financed textile factories, paper manufacturing, machine works, beet growing, and scores of other industries in German Bohemia. It owned coal mines at Teschen. It drew its food from Hungary. From every quarter of the Empire there came to Vienna the half-manufactured products of the provinces for the finishing processes, tailoring, dyeing, glass-working, in which a vast population found employment.

‘Suddenly all this elaborate structure of economic life was swept away. Vienna, instead of being the vital centre of fifty millions of people, finds itself a derelict city with a province of six millions. It is cut off from its coal supplies, from its food supplies, from its factories, from everything that means existence. It is enveloped by tariff walls.’

The writer goes on to explain that the evils are not limited to Austria. In this unhappy Balkanised Society that the peace has created at the heart of Europe, every State is at issue with its neighbours: the Czechs with the Poles, the Hungarians with the Czechs, the Rumanians with the Hungarians, and all with Austria. The whole Empire is parcelled out into quarrelling factions, with their rival tariffs, their passports and their animosities. All free intercourse has stopped, all free interchange of commodities has ceased. Each starves the other and is starved by the other. ‘I met a banker travelling from Buda-Pest to Berlin by Vienna and Bavaria. I asked him why he went so far out of his way to get to his goal, and he replied that it was easier to do that than to get through the barbed-wire entanglements of Czecho-Slovakia. There is great hungerin Bohemia, and it is due largely to the same all-embracing cause. Formerly the Czech peasants used to go to Hungary to gather the harvest and returned with corn as part payment. Now intercourse has stopped, the Hungarian cornfields are without the necessary labour, and the Czech peasant starves at home, or is fed by the American Relief Fund. “One year of peace,” said Herr Renner, the Chancellor, to me, “has wrought more ruin than five years of war.”’

Mr Gardiner’s final verdict[6]does not in essence differ from that of Mr Hoover:—

‘It is the levity of mind which has plunged this great city into ruin that is inexplicable. The political dismemberment of Austria might be forgiven. That was repeatedly declared by the Allies not to be an object of the War; but the policy of the French, backed by the industrious propaganda of a mischievous newspaper group in this country, triumphed and the promise was dishonoured. Austria-Hungary was broken into political fragments. That might be defended as a political necessity. But the economic dismemberment was as gratuitous as it was deadly. It could have been provided against if ordinary foresight had been employed. Austria-Hungary was an economic unit, a single texture of the commercial, industrial, and financial interests.’[7]

We have talked readily enough in the past of this or that being a ‘menace to civilisation.’ The phrase has been applied indifferently to a host of things from Prussian Militarism to the tango. No particular meaning was attached to the phrase, and we did not believe that the material security of our civilisation—the delivery of the letters and the milk in the morning, and the regular running of the ‘Tubes’—would ever be endangered in our times.

But this is what has happened in a few months. We have seen one of the greatest and most brilliant capitals of Europe, a city completely untouched by the physical devastation of war, endowed beyond most with the equipment of modern technical learning and industry, with some of the greatest factories, medical schools and hospitals of our times, unable to save its children from death by simple starvation—unable, with all that equipment, to provide them each with a little milk and a few ounces of flour every day.

It is sometimes suggested that as political factors (particularly the drawing of frontiers) entered to some extent at least into the present distribution of population, political forces can re-distribute that population. But re-distribution would mean in fact killing.

So to re-direct the vast currents of European industry as to involve a great re-distribution of the population would demanda period of time so great that during the necessary stoppage of the economic process most of the population concerned would be dead—even if we could imagine sufficient stability to permit of these vast changes taking place according to the naïve and what we now know to be fantastic, programme of our Treaties. And since the political forces—as we shall see—are extremely unstable, the new distribution would presumably again one day undergo a similarly murderous modification.

That brings us to the question suggested in the proposition set out some pages back, how far preponderant political power can ensure or compel those processes by which a population in the position of that of these islands lives.

For, as against much of the foregoing, it is sometimes urged that Britain’s concern in the Continental chaos is not really vital, because while the British Isles cannot be self-sufficing, the British Empire can be.

During the War a very bold attempt was made to devise a scheme by which political power should be used to force the economic development of the world into certain national channels, a scheme whereby the military power of the dominant group should be so used as to ensure it a permanent preponderance of economic resources. The plan is supposed to have emanated from Mr Hughes, the Prime Minister of Australia, and the Allies (during Mr Asquith’s Premiership incidentally) met in Paris for its consideration. Mr Hughes’s idea seems to have been to organise the world into economic categories: the British Empire first in order of mutual preference, the Allies next, the neutrals next, and the enemy States last of all. Russia was, of course, included among the Allies, America among the neutrals, the States then Austria-Hungary among the enemies.

One has only to imagine some such scheme having been voted and put into operation, and the modifications which political changes would to-day compel, to get an idea of merely the first of the difficulties of using political and military power, with a basis of separate and competing nationalisms, foreconomic purposes. The very nature of military nationalism makes surrender of competition in favour of long continued co-operation for common purposes, a moral impossibility. The foundations of the power are unstable, the wills which determine its use contradictory.

Yet military power must rest upon Alliance. Even the British Empire found that its defence needed Allies. And if the British Empire is to be self-sufficing, its trade canalised into channels drawn along certain political lines, the preferences and prohibitions will create many animosities. Are we to sacrifice our self-sufficiency for the sake of American and French friendship, or risk losing the friendship by preferences designed to ensure self-sufficiency? Yet to the extent that our trade is with countries like North and South America we cannot exercise on its behalf even the shadow of military coercion.

But that is only the beginning of the difficulty.

A suggestive fact is that ever since the population of these islands became dependent upon overseas trade, that trade has been not mainly with the Empire but with foreigners. It is to-day.[8]And if one reflects for a moment upon the present political relationship of the Imperial Government to Ireland, Egypt, India, South Africa, and the tariff and immigration legislation that has marked the economic history of Australia and Canada during the last twenty years, one will get some idea of the difficulty which surrounds the employment of political power for the shaping of an economic policy to subserve any large and long-continued political end.

The difficulties of an imperial policy in this respect do not differ much in character from the difficulties encountered in Paris. The British Empire, too, has its problems of ‘Balkanisation,’problems that have arisen also from the anti-social element of ‘absolute’ nationalism. The present Nationalist fermentation within the Empire reveals very practical limits to the use of political power. We cannot compel the purchase of British goods by Egyptian, Indian, or Irish Nationalists. Moreover, an Indian or Egyptian boycott or Irish agitation, may well deprive political domination of any possibility of economic advantage. The readiness with which British opinion has accepted very large steps towards the independence and evacuation of Egypt after having fiercely resisted such a policy for a generation, would seem to suggest that some part of the truth in this matter is receiving general recognition. It is hardly less noteworthy that popular newspapers—that one could not have imagined taking such a view at the time, say, of the Boer war—now strenuously oppose further commitments in Mesopotamia and Persia—and do so on financial grounds. And even where the relations of the Imperial Government with States like Canada or Australia are of the most cordial kind, the impotence of political power for exacting economic advantage has become an axiom of imperial statecraft. The day that the Government in London proposed to set in motion its army or navy for the purpose of compelling Canada or Australia to cease the manufacture of cotton or steel in order to give England a market, would be the day, as we are all aware, of another Declaration of Independence. Any preference would be the result of consent, agreement, debate, contract: not of coercion.

But the most striking demonstration yet afforded in history of the limits placed by modern industrial conditions upon the economic effectiveness of political power is afforded by the story of the attempt to secure reparations, indemnity, and even coal from Germany, and the attempt of the victors, like France, to repair the disastrous financial situation which has followed war by the military seizure of the wealth of a beaten enemy. That story is instructive both by reason of the light which itthrows upon the facts as to the economic value of military power, and upon the attitude of public and statesmen towards these facts.

When, some fifteen years ago, it was suggested that, given the conditions of modern trade and industry, a victor would not in practice be able to turn his military preponderance to economic account even in such a relatively simple matter as the payment of an indemnity, the suggestion was met with all but universal derision. European economists of international reputation implied that an author who could make a suggestion of that kind was just playing with paradox for the purpose of notoriety. And as for newspaper criticism—it revealed the fact that in the minds of the critics it was as simple a matter for an army to ‘take’ a nation’s wealth once military victory had been achieved, as it would be for a big schoolboy to take an apple from a little one.

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 competitionfrom 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 thisgreat 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:—

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