FOOTNOTE:

FOOTNOTE:[3]Since this was written the mark has fallen far beyond.

[3]Since this was written the mark has fallen far beyond.

The Charleville speech[4]and M. Poincaré's reply to Lord Curzon's despatch[5]leave things exactly where they were. Rumour said the reply would be long and logical. For once rumour hath not lied. M. Poincaré regards this exchange of bolstered notes as a pillow fight which he is quite prepared to prolong in order to gain time whilst the real struggle is developing to its destined end. The prominence given in the press to the fact that this rigid reply is "courteous" is significant of the pitiable condition to which the Entente has been brought by these maladroit negotiations.

What will Mr. Stanley Baldwin and Lord Curzon do next? Much depends for Europe on that next step, and something for them also hangs upon their action or inaction. One is reminded ofthe answer given by Émile Ollivier to the question addressed to him as to his opinion of one of Napoleon the Third's experiments in constitutional government: "Si c'est une fin, vous êtes perdu; si c'est un commencement, vous êtes fondé." That sage comment is equally applicable to the Curzon note.

We can only "wait and see," first for the French official reply, and second for the decision of the British Government upon that note. The only new factor in the situation that may have a determining influence on events is the accession of Herr Stresemann to the German Chancellorship.[6]I know nothing of him beyond newspaper report, but he is generally supposed to be a man of energy, courage and resource. If that be true, his appointment to the official leadership of the German people may be an event of the first magnitude. We shall soon know what he is made of. Germany has suffered more from weak or misguided leadership in recent years than any great country in the world. It blundered her into the War, it blundered through the War, it blundered into the armistice, itblundered during the peace negotiations, and it has blundered her affairs badly after the peace. But no one can predict what Germany is capable of with a wise and strong leadership. Herr Stresemann has a responsibility cast upon him and an opportunity afforded him such as have not been given to any statesman since the days of Stein and his coadjutors for regenerating his country and lifting her out of the slough of despond in which she has been sinking deeper and deeper. Those who ignore the effect which powerful and magnetic personalities may have upon the fortunes of nations in despair must have forgotten their history books. The fall of Dr. Cuno and the rise of Herr Stresemann may well turn out to be a more decisive event than the despatch or the publication of the Curzon note. But if he lacks those rare qualities which alone can inspire a people in an emergency to heroic action and endurance, then there is nothing but chaos ahead of Germany. For the moment it is more important to keep a discerning eye on Herr Stresemann than to watch this endless fencing between Downing Street and the Quai d'Orsay.

It is not often I find myself in agreement withM. Poincaré, but when he states that British unemployment is not attributable to the occupation of the Ruhr I am substantially in accord with him. In July last[7]I called the attention of the House of Commons to world conditions which injuriously affected our export trade and made unemployment on a large scale inevitable in the British labour market for some time to come. We are more dependent on our overseas trade, export, entrepôt, shipping and incidental business than any country in the world. Almost half our industrial and commercial activities are associated with outside trade in all its forms. That is not a full statement of the case, for if this important section of our business were to languish, the home trade would also necessarily suffer by the consequential diminution in the purchasing capacity of our people. Before the French ever entered the Ruhr our overseas trade was down to 75 per cent. of its pre-war level. Our population has increased by two millions since 1913; our taxation has increased fourfold; our national debt tenfold; but our business is down 25 per cent. To what is this fall in our outside sales and services attributable? It is the direct consequenceof the War. Our customers throughout Europe are impoverished. What is just as bad, our customers' customers are impoverished. So that neither can buy at our stalls the quantities or the qualities which they could be relied upon to purchase before the War. Until Europe can buy, Australia, Canada, India and China cannot pay, as the Prime Minister pointed out in his last speech in the House of Commons. Germany, before the War, bought Australian wool, Canadian grain, Indian jute and tea, and the proceeds as often as not went to pay for goods bought by those countries in British markets. The same observation applies to Russia, Austria, and the Levantine countries. The purchasing capacity of Europe must, therefore, be replenished, a process which will, at best, take years of patient industry. The mischief of the Ruhr lies not in the creation of bad trade, but in retarding the process of recovery. It has undoubtedly had that effect.

Before the French entered the Ruhr trade was gradually if slowly improving all round. The prices of 1922 were lower than those of 1921; therefore, the contrast in sterling was not as apparent as it became on the examination of weights andmeasures. The export figures, notably in manufactured goods, show a decided increase on those of the preceding year. This advance is reflected in the statistics of unemployment. During the first ten months of 1922 there was a reduction of over 500,000 in the numbers of the registered unemployed. The succeeding ten months give only a slight improvement. Something has happened to arrest the rate of progress towards better times. This is where the Ruhr comes in. Even if it is not, to quote the Prime Minister, a penknife stuck in the watch and stopping the works, it is certainly more than a grain of dust which has perceptibly slowed the action of the sensitive machinery of trade.

The effect of the Ruhr disturbance would continue for some time if the penknife were removed now. For the moment M. Poincaré is wedging it in more deeply and firmly. Even if he withdrew it now, the works would not recover their normal steadiness for a long while. During these last disturbing months Germany has become appreciably poorer. Her wealth production has been depressed throughout most of her industrial areas. To a certain extent Lorraine and Belgium have also beenaffected adversely. The reservoir of wealth upon which industry draws has not been filling up as it ought if the world is ever to recover.

These things are hidden from France. She is a more self-contained country than Britain—perhaps also a more self-centred country. Even after the Napoleonic wars, which drained her best manhood and exhausted her fine nervous virility, she suffered from no interval of economic depression. Her great and victorious rival across the Channel lumbered painfully through fifteen years of misery, poverty and distress. Her own population, basking in the sunshine of prosperity, regarded across the narrow waters, with a natural contentment, the dark fogs that enveloped and drenched their old enemies. Commiseration or sympathy from them at that time was not to be expected. We had fought them for twenty years with an inveterate pertinacity and at last beaten them to the ground and occupied their capital. To-day we suffer because we helped to save their capital from foreign occupation and their country from being humbled to the dust by a foreign foe. Neither in French speeches, notes, nor articles is there any appreciation shown of that cardinal fact in the situation.

All that is clear at the moment is the stubbornness of the French attitude. M. Poincaré has not so far receded one millimetre from his original position. Threats and cajoleries alike are answered by a repetition of the same formulæ, with the slight variations in word or phrase which one would expect from a practised writer. But the theme is always the same and the application is identical to the point of monotony. He is not winning much coal out of his discourses and literary exercises, but to do him justice he is getting something for his country. Last year Lord Balfour, in the note he sent to the Allies on behalf of the British Government, offered to forego all claims for debts and reparations if Britain were secured against payment of the American debt. That meant a surrender of claims aggregating over £3,000,000,000 in return for an assured £1,000,000,000. A very handsome and generous offer. The Curzon note proposes to surrender all our claims for a precarious return of £710,000,000. The Ruhr occupation has already brought down the British claim against the Allies by £290,000,000. M. Poincaré may not be able to extract reparations out of Germany, but in seven months he has succeeded in forcing £290,000,000out of Great Britain. He will certainly ask for more—and probably receive it.

Mr. Bonar Law was right when he said that under certain conditions Great Britain would be the only country to pay a war indemnity. Those conditions have arisen under his successors.

Criccieth, August 20th, 1923.

FOOTNOTES:[4]M. Poincaré's speech at Charleville on August 19th, on the subject of French policy in the Ruhr.[5]The British note was sent to France, August 13th, 1923, and M. Poincaré's reply was received on August 23rd.[6]The German Government fell on August 13th, 1923, and Herr Stresemann succeeded Dr. Cuno as Chancellor.[7]House of Commons, July 16th, 1923.

[4]M. Poincaré's speech at Charleville on August 19th, on the subject of French policy in the Ruhr.

[5]The British note was sent to France, August 13th, 1923, and M. Poincaré's reply was received on August 23rd.

[6]The German Government fell on August 13th, 1923, and Herr Stresemann succeeded Dr. Cuno as Chancellor.

[7]House of Commons, July 16th, 1923.

The pen-and-ink joust is suspended for a fortnight, whilst the figures of British unemployment are leaping upwards. When the exhausted British knights have been reinvigorated by French waters they will once more charge full tilt at the French champion—at least, they will have made up their minds by then whether they will shiver another fountain-pen against his blotting-pad.

This is the advice ponderously and pompously tendered them in inspired articles. So far, the French nation is jubilant that M. Poincaré has scored heavily on points. He is a defter penman, and, moreover, he does not delegate his draughtsmanship to a Committee of Ministers, all holding irreconcilable views as to how to proceed, when to proceed, and whither to proceed, and amongst whom there is no agreement except on one point—that no one quite knows what action to propose.

Up to this last reply they cherished the vain delusion that the French could be shelled out of the Ruhr by reproaches which were both querulous and apologetic. That is not the way to shift continental statesmanship from its purpose. The French Foreign Office is better informed as to Cabinet divisions in this country than are the British public. It knows that the Prime Minister and Foreign Secretary dare not take measures which will hamper French action in the Ruhr.

When the Tory Diehards placed co-operation with France in the forefront of their programme they honestly meant it. For them it was not a mere manœuvre to unhorse the Coalition. They cannot, therefore, support an attitude of resistance to French pressure on Germany. A refusal to join France in squeezing Germany is to them a continuation of the evil of the Coalition they overthrew with the help of Mr. Stanley Baldwin and Lord Curzon. They will not tolerate it.

That explains the impotence of British diplomacy in a situation which is so critical to our existence as a great commercial people. The Cabinet can agree on wordy notes; they are hopelessly divided as to action. They have, therefore, dispersed far andwide to search for fortuitous guidance hither and thither—some in the tranquillity of their English country houses; some in the healing springs of France; some in the mists of Scottish moorlands. Mayhap one of them will bring home a policy acceptable to his colleagues. It is all very humiliating to the Empire that raised ten millions of men and spent £10,000,000,000 of its treasure to win the War. The net result of the voluminous correspondence on which our rulers have concentrated months of anxious wisdom and unwearying hesitancy is that the Allies whom we saved from destruction refuse to move one inch out of their road to secure our friendly companionship. They are marching resolutely in one direction, whilst we are shambling along in another.

We have travelled long distances from each other since January last, and we are now altogether out of sight of the position we held in common when we met the Germans at Cannes early last year.[9]The Entente has never been more cordial than it was then—it has never shown more promise of hopeful partnership for the peace of the world. We were on the point of securing an amicable andbusinesslike arrangement with Germany for the payment of reparations and of concluding an agreement for protecting the frontiers of France and Belgium against the possibility of future invasion.

From these starting-points it was proposed that Britain, France, Italy, and Belgium should advance together to a general settlement of European problems in East and West—political, financial, economic and transport. This we had agreed to do and, with the unity and goodwill which then prevailed, could have accomplished.

But M. Poincaré had no use for the dove of peace. He wanted to fly his falcon. He had trained and bred it in the French farmyard, and there it had brought down many a domestic bird successfully. When his chance came he flew it at the wounded German eagle. It is poor sport, and somewhat cruel, but it evidently gives great joy to Frenchmen of a sort. The best are ashamed of it, but their voices are drowned in the clamour of the unthinking. If the helpless bird is torn to pieces, there is nothing in that for French or Belgian larders.

Quite unintentionally the hawk has brought down the Entente also. It may not be dead, but it has made its last flight. Henceforth internationalarrangements will be on a less exclusive basis. France is irrevocably committed to the exploitation of the Ruhr by force. That is what "pay or stay" means. To that policy the majority in this country are definitely opposed. If the Diehards in the Cabinet were by any chance to win, and either Mr. Baldwin surrendered or resigned in favour of a Poincarist administration in this country, neither he nor any possible successors could carry the country along into the Ruhr venture.

Some of them around the Prime Minister who have so suddenly assumed pro-French sentiments as the shortest cut to higher altitudes than those to which they have yet succeeded in climbing, know full well that, although they may use the Diehards for their own ends, if they succeeded in their somewhat sinister purpose they could not carry out the Diehard policy.

They are, therefore, endeavouring to provide for contingencies by negotiating on their own a fresh understanding with France. But British Premiers are not appointed at Rambouillet nor do they draw their authority from the Quai d'Orsay. Whatever may be thought of Mr. Bonar Law or of Mr. Stanley Baldwin by political partisans, no one suggeststhat they derived their promotion from other than purely British sources.

But for a fortnight nothing is to happen—except the spread of unemployment in Britain and of despair in Germany. At the end of the fortnight will there be a surrejoinder to M. Poincaré's rejoinder? Or will there be another conference?

Both M. Poincaré and the present Parliamentary régime in Britain came into power on the cry of "Enough of these eternal conferences; let us return to the good old diplomatic methods that prevailed before the War"—and, they might add, "which helped to make it possible." Nevertheless, Mr. Bonar Law's administration during its short tenure of six months participated in four European conferences, and M. Poincaré, during his eighteen months' official career, has found it necessary to take part, directly, in five conferences, and directly and indirectly in eight. The French Press are urging him on to add another to a record which already beats that of M. Briand in the matter of "joy-riding"—to quote the contemptuous Diehard name for international conferences during Coalition days.

It is a suspicious circumstance that those whowere once resentful and scornful of conferences should now be clamouring for one both here and in France. The reason is scarcely concealed by ardent advocates of the resumption of "picnic diplomacy." At the old conferences, so it is contended, France was invariably forced to give way. Now she can and will command the situation.

There is a new note of confidence ringing through French despatches and echoed in the French Press. France must get what she wants; Britain must take what she is given. The French share of reparations must first be assured—debts due to Britain can come out of what is left. It is rather greedy, but characteristic, of the British that they should expect to be paid what is owing to them! With their smug and hypocritical Puritan temperament and outlook they insist that contracts should be respected! France, for the sake of the Entente, will make a concession even to British cupidity and pharisaism. It will permit the British Empire to collect—not the whole of what is due to her, but a much-reduced claim out of Germany once the French demand for reparations is cashed or as good as cashed!

To me this is a new France. During my yearsof discussion with French statesmen I never heard this voice. I had three or four talks with M. Poincaré, and I never heard him speak in these supercilious tones. Impunity has developed them since to their present pitch of stridency.

Belgium is to suggest a meeting of the Premiers. When it comes the French minimum terms are to be rigid and unequivocal. Here they are:—

1. France must be paid her irreducible minimum of £1,300,000,000 in respect of reparations, whatever happens to any one else.2. Belgium is also to have her priority of £100,000,000.3. As Germany cannot raise these huge sums immediately, France and Belgium are to hold the Ruhr until they are paid. Hints have been thrown out by the more conciliatory French journals that the French Government might consider an early retirement from the Ruhr if the payment of reparations were made the subject of an international guarantee. That implies Britain and America becoming sureties for payment of the German indemnity!4. As to the rest, France and Belgium have noobjection, subject to the above conditions, to Great Britain collecting £700,000,000,i.e., about 23 per cent., of her international claims (debts and reparations) from Germany. But this munificent concession is to be made on the distinct understanding that she forgoes entirely the remaining 77 per cent. of her bonds. The Allies and Germany between them owe Great Britain £3,000,000,000. The French and Belgian governments are willing that Great Britain should collect £700,000,000 of that amount from Germany, provided the remaining £2,300,000,000 is for ever cancelled—and always provided that the £1,400,000,000 due to France and Belgium has been satisfactorily guaranteed.5. These handsome terms can only be propounded if Germany first of all withdraws all passive resistance in the Ruhr. That is an essential preliminary.

1. France must be paid her irreducible minimum of £1,300,000,000 in respect of reparations, whatever happens to any one else.

2. Belgium is also to have her priority of £100,000,000.

3. As Germany cannot raise these huge sums immediately, France and Belgium are to hold the Ruhr until they are paid. Hints have been thrown out by the more conciliatory French journals that the French Government might consider an early retirement from the Ruhr if the payment of reparations were made the subject of an international guarantee. That implies Britain and America becoming sureties for payment of the German indemnity!

4. As to the rest, France and Belgium have noobjection, subject to the above conditions, to Great Britain collecting £700,000,000,i.e., about 23 per cent., of her international claims (debts and reparations) from Germany. But this munificent concession is to be made on the distinct understanding that she forgoes entirely the remaining 77 per cent. of her bonds. The Allies and Germany between them owe Great Britain £3,000,000,000. The French and Belgian governments are willing that Great Britain should collect £700,000,000 of that amount from Germany, provided the remaining £2,300,000,000 is for ever cancelled—and always provided that the £1,400,000,000 due to France and Belgium has been satisfactorily guaranteed.

5. These handsome terms can only be propounded if Germany first of all withdraws all passive resistance in the Ruhr. That is an essential preliminary.

The French government have stated these terms with such precision and such emphasis, and repeated them with such undeviating insistence, that any departure from them on the French side seems impossible. The hope of a conference rests entirely on the confidence in a British surrender. There isa dismal "joy-ride" in prospect for the British Prime Minister and his Foreign Secretary. Is it conceivable they can contemplate such a capitulation? I do not see how the present Government, after all it has said and written, can so far submit to French dictation as to make it likely that further discussions would lead to agreement.

What is the alternative? Herr Stresemann can alone answer that question. It is not yet clear what he means to do. Perhaps he is feeling his way to a decision.

London, August 27th, 1923.

FOOTNOTES:[8]London, August 27th, 1923.[9]The Cannes Conference, January, 1922.

[8]London, August 27th, 1923.

[9]The Cannes Conference, January, 1922.

As I roll homeward along the coast of Spain a wireless message announces that the British government have accepted the American debt terms.

The details which I have received are not sufficient to enable me to form an opinion regarding the character of those terms, or their bearing on Allied indebtedness to Britain as to the terms of payment. I know nothing of the steps taken by Mr. Baldwin and the government of which he is a member to make this the first step in an all-round settlement of inter-Allied debts. That is a matter of infinite moment to us, and I assume that this is somewhere—and effectively—in the arrangement.

As to the payment of our own debt, the government represent the real sentiment of the nation as a whole. The British taxpayer is no doubt fully alive to the fact that this heavy debt was incurred by him during the war in the main in order to finance American supplies to our Allies. We couldhave paid for all the supplies we required for our own use without resort to any loan from the American government. Nevertheless, the money was advanced by the lender on our credit and our signature.

Our credit as a nation, therefore, demands that we should pay. Whether we can collect enough money from our own debtors to meet this charge becomes increasingly doubtful, as it is becoming increasingly needful.

Britain is alone in thinking she is under any moral obligation to pay the external liabilities incurred for the effective prosecution of the war. The attitude of the late and of the present government is identical in this respect.

Why have the British public taken a different view of their national obligations towards external war debts from that adopted by other Allies? In giving the answer I do not wish to dwell on obvious ethical considerations which must weigh whenever you consider whether you will carry out an engagement which you have entered into with another who has already performed his part of the engagement on the strength of your promise.

These ought to be conclusive; but to urge themmight be deemed to be an unworthy reflection on the honour of those who take a different view of their national duty.

I have no desire to offer censure or criticism upon their decision. They, no doubt, have their reasons for the course they are adopting. We have certainly overwhelming reasons for showing an honest readiness to pay our debts.

The settling up of accounts is always an unpleasant business, especially amongst friends. Strangers expect it and prepare for it—and there is no resentment when the bill arrives. But a man hates reminding his friend at the end of a business in which both have been engaged in warm amity that there is "a little balance" to be paid up. He has been expecting the friend to mention the matter to him. So he puts off introducing the unpleasant topic from year to year. But the friend disappoints his expectations. Not a hint comes from that quarter of any realisation that there is anything due. It soon looks as if it had been forgotten altogether.

The friend is most insistent on collecting the business accounts due to himself. He is angry at alldelays in payment of his own bills. But his conscience is blind on the side of the debts he himself owes. It is not an uncommon experience, and we are suffering from it to-day. The war left us a creditor nation to the extent of over 2,000 million pounds, and a debtor nation to the extent of about half that amount. We readily accepted an invitation from our creditor to discuss the repayment of the debt we owe. Our debtors have displayed an invincible reluctance to enter into a similar discussion with us.

That ought not to influence our final decision. Britain is the greatest of all international traders, and her credit rests on the reputation she has well earned—that her bond is a sacred trust which her people always honour and redeem without counting the cost in toil and treasure. I remember when war broke out the panic which seized bankers and brokers as they contemplated the obligations incurred by British firms with their support to finance world trade. These liabilities ran into hundreds of millions sterling, and the only security for repayment was represented by a bundle of flimsy paper, criss-crossed with the signatures of men most ofwhom no British banker had ever seen, many of them dwelling in countries with whom we were actually at war.

There was one signature, however, on each paper which was known to bankers and carried with it the good name of Britain throughout the world; and it was that of some well-known British firm. Traders in far-distant lands parted with their produce on the credit of that signature and of the country with which it was associated.

It is true that the government had no responsibility for any of these transactions; but the honour of Britain was involved in seeing that the foreign merchants should not suffer ruin because they put their trust in British commercial integrity. For that reason the British government of the day shouldered the burden, took all the risk, and although it meant a liability of between four hundred and five hundred millions sterling, not a voice was raised in protest.

The action then taken, though quite unprecedented, was not only honourable; it was wise. It saved British pride from a reproach; it also saved British credit from a blow from which it would not have recovered for a generation. During thatgeneration this lucrative business would have passed into other hands.

As soon as the war was over the people of Britain, with an instinctive impulse that required no persuasion to stimulate its activity, set about the task of restoring their war-battered credit. Government, bankers, merchants, brokers, manufacturers, and workers of all kinds were of one mind; borrowing must come to an end; Britain must pay her way—whatever the sacrifice. Expenditure was ruthlessly cut down. The army and navy were reduced below pre-war dimensions. Other services were curtailed. Heavy taxation was imposed—taxation such as no other country bears. The budget at home must balance. Debts to other countries must be paid off. Already large sums have been paid abroad. It required courage and constancy to pursue such a policy; but the endurance of the nation was beyond praise. It is now calmly facing the liquidation of this heavy debt to the United States of America; but no party has yet arisen, or is likely to arise, to demand that the hand of the negotiators should be arrested. Britain means to pay the last of her debts without a murmur.

We are already reaping some of the reward. The purchasing value of our currency has already risen under its burdens, and, as a consequence, the cost of living has fallen steadily, while other countries who have pursued a different policy find the cost of living for their people ascending month by month.

A short time ago we were taunted in the French Chamber of Deputies by the president of the council that our unsound financial policy had been responsible for our unemployment. It is true that if we had gone on borrowing instead of paying our way—if we had defied our foreign creditors instead of paying them—we also, like many other European countries, might have fostered an artificial prosperity by means of a discredited currency. But British credit would have rapidly disappeared beyond recovery and British trade would soon have followed. Meanwhile, the cost of living in Great Britain would have been double what it is to-day. We all therefore dismissed that policy from our minds without paying it the tribute of a discussion.

Trust is the only soil in which credit flourishes. Had that trust been forfeited British buyers and consequently British consumers would to-day havebeen paying more for their wheat, their meat, their cotton, and their wool. The burden of repayment to the United States will be infinitely less than that of the indirect burden involved in large purchases with a discredited currency.

The government are therefore right in arranging with the American treasury without loss of time for the liquidation of a debt incurred by this country. I am taking for granted that they have made every effort to see that the agreement shall form a part of an all-round settlement of inter-Allied debts. But as to our own debt the moral obligation must remain whatever our Allies do or fail to do. Why it was incurred, the circumstances in which it was entered into, the purposes for which the money was advanced, were open to the consideration of the American government in arranging terms. That, however, was their privilege; ours is to honour our signature.

A cold shiver ran down the back of England when it was announced officially that the British government had definitely agreed to pay over £30,000,000 a year for sixty years to the United States in respect of debts incurred by us on behalf of our Allies without seeking a contribution from our debtors to protect the taxpayers of this country. It is not that anyone dreamt the evil dream of repudiation. That was never woven into the texture even of the worst nightmare out of the many that have disturbed our repose since the greatest nightmare of all left the world a quivering nervous wreck.

Nor did we expect remission of our debts. Whenever we were tempted to exaggerate the bounds of human charity paragraphs appeared that reminded us of the attitude of the "Middle West." America was discovered by Europe centuries ago, but the "Middle West," as a political entity, is tountutored Europeans a discovery of the war. We were then told by returning explorers that it was the seat of the American conscience—inexorable, intractable, but irresistible when engaged in any enterprise. How potent this conscience was, as a world force, the war demonstrated. From the heights it hurled an avalanche of force against Germany that overwhelmed the last hope of resistance. Unfortunately for us when it came to debts we struck against the hard side of the Middle West conscience.

Our hope was therefore not in remission. There were, however, many other possibilities. We were not the only debtors of the American government. Other Allies had borrowed not merely indirectly through us, but directly from America. We had every confidence that the United States government would not mete out to Britain severer treatment than it was prepared to accord to our Allies. We had to contend, it is true, with legends of our inexhaustible wealth. Apart from our great coal deposits, and a climate which leaves those who endure it no alternative but activity, we have no treasure except the industry, the resources and the inherited skill of our people. We have nothing like the richplains and the fertilising and ripening sunshine of France, which maintain sixty per cent. of its population. Our sources of wealth—apart from coal—are precarious, for they depend more largely than any other country on conditions outside our own. We are international providers, merchants and carriers. A sixty-year contract to pay large sums across the seas is in many respects a more serious consideration for us than for countries whose riches are inherent in their soil and are, therefore, more self-contained. The demoralised condition of the world markets has left us with a larger proportion of our industrial population unemployed than any other European country. I hear tales of unemployment in the United States of America, but the reports that reach us here on American unemployment are so contradictory that I can build no argument upon them. But, as to the gigantic dimensions of our unemployed problem there can be no doubt. We have 1,400,000 workmen on the unemployed register drawing unemployment pay in one form or another. The annual cost to the nation of feeding its workless population runs to over £100,000,000—almost the figure of the annuity demanded from Germany as a war indemnity.

Although there are signs of improvement the omens point to a prolonged period of subnormal trade. Continuous depression for years will mean that Britain will suffer more from the devastation to her trade caused by the war than France from the devastation of her provinces. Our country, anxious about its means of livelihood, with a million and a half of its workmen walking the streets in a vain search for work, has to bear the heaviest burden of taxation in the world. Why? Because it has not only to pay interest on its own heavy war debts, but also on £3,000,000,000 which it either advanced to the Allies or incurred on their behalf. That is why we felt hopeful that the United States would not discriminate against a nation so situated.

When I talk of debts the Allies owe to us, I want to emphasise the fact that these debts are not paper myths nor tricks of accountancy. They are onerous facts representing a real burden borne at this hour by the bent and panting taxpayer of Britain. If these loans had never been made the weight on his shoulders to-day would have been lighter by over two shillings in the pound. He is every year paying to the actual lenders—some British, some American—that proportion of his income.It is a weight he undertook to carry for his Allies during the war on the sacred pledge of those Allies that they would take it over after the war. The American government borrowed from their public to make advances to Great Britain, and have called upon the British taxpayer to redeem his pledge. We make no complaint, for the demand is a mitigation of the strict letter of the bond. But that amount is in substance part of the debt owing by the Allies to Britain. And the British taxpayer naturally feels it is hard on him to have to bear not only his own legitimate burdens but that he should in addition have to carry the debts of his less heavily taxed brethren in continental countries. He naturally inferred that if equal pressure had been administered on all debtors alike it would have forced an all-around consultation which would have terminated in an all-round settlement.

That was the real purport of the Balfour note. The true significance of that great document has been entirely misunderstood—sometimes carelessly, sometimes purposely, sometimes insolently. I guarantee that not one per cent. of its critics if confronted suddenly with an examination on its contents would secure one mark out of a hundred.It has suffered the same fate as the treaty of Versailles. Opinion is sharply divided as to both between those who rend without reading and those who read without rending. Most men have received their impressions of the Balfour note from denunciatory phrases penned by writers who received their ideas about it from men who gave instructions to condemn it without ever reading it. The men who really understood both the Versailles treaty and the Balfour note have been too busy to find time to inform, to interpret, and to explain.

But the time has come when the public attention should be once more drawn to the remarkable and far-reaching proposals of the Balfour note. They constitute an offer on the part of Britain to measure the amount of her claims against her Allies by the extent of her obligations to the United States of America. The British government even offered to include the claim of their country against Germany in this generous concession. What does that mean in reference to present conditions? That if the Allies and Germany between them found the £30,000,000 a year which Britain has undertaken to pay America, she would forgo her claim to the £3,300,000,000 due to her under contract and treaty. Itwas a great offer and if accepted would have produced results beneficent beyond computation. Britain, which would have been the heaviest direct loser, would have profited indirectly through the world recovery that would have ensued.

How was it received? Some criticised it because it asked too little—some because it demanded too much. Many criticised because they were determined to approve nothing that emanated from such a government, but most of its censors condemned it because they never took the trouble to understand it, and the shrillest among the street cries happened to denounce it. The government that propounded it soon after left the seat of authority, and the administration that succeeded put forward a new scheme which attracted even less acceptance. So this great project which would have settled for ever the question which above all others is vexing peace and unsettling minds in Europe was pigeon-holed where it was not already basketed.

But surely this is not the end of all endeavours to reach a settlement of the question of inter-Allied debts. We cannot rest satisfied with an arrangement which effectively binds us to pay without prospect of the slightest contribution from our debtors.What America cannot indulge in we cannot afford. The gold of Europe now lies in its coffers. Who are we—plunged in the mire of debt up to our nostrils—to give ourselves airs of generosity superior to the only golden land left in this war-stripped earth?

If there is to be a general jubilee in which all alike participate in order to give the world a new start, then I feel sure Britain will play her part bravely and nobly. But a jerry-mandered jubilee which frees France, Italy and Belgium from all their debts whilst leaving Britain sweating to pay off debts incurred for her Allies on the strength of their bond—that we cannot bear.

I trust the government will insist on an arrangement with our Allies which, even if it is not a replica of our contract with the American government, will at any rate ensure us a contribution that will safeguard us against loss under that contract. It is I fear hopeless to expect that we should be recouped the 2s.in the pound which interest on Allied debts costs our taxpayers, but at any rate we might be guaranteed against the 6d.in the pound which the American instalments involve. I feel the effort is beset with difficulties and that the outlook is nothopeful. There have of late been a few discouraging symptoms. One is the reception accorded at the recent Paris conference to the British prime minister's liberal offer regarding inter-Allied debts. It was a tactical error to open the conference with such a scheme and the effect was singularly unfortunate.

Had I been disposed to press my criticisms on the conduct of the recent negotiations in Paris it would have been that they were so managed that for the first time since the war Britain has been completely isolated at a European conference. That is a misfortune, for it encouraged the French government to rash action. Up to the last conference Britain and Italy had remained in substantial accord even when France and Belgium took a different view, and Belgium had never before quitted any of the gatherings in complete disagreement with Great Britain. So France, always tempted as she was to occupy the Ruhr, hesitated to do so in the face of so formidable an Allied resistance. What is relevant, however, to the subject of this article is the cause of our unwonted isolation on the occasion of the last conference. The British premier started the negotiations by tabling proposals which promised forgiveness of most of theindebtedness of these countries to Britain, but which implied immediate arrangements for beginning repayment of the rest. This suggestion of repayment instantly consolidated opposition to the whole of the British plan. It became clear that existing governments on the continent had no intention, unless firmly pressed, of paying the smallest percentage of the debt they incurred on the faith of a solemn engagement to repay the loan when that was possible, and to pay interest meanwhile. If we point to the fact as we did in the Balfour note, that we have undertaken to repay the United States of America the heavy debt incurred by us on behalf of the Allies, they simply shrug their shoulders and say in effect: "That is your affair. We repay neither Britain nor America, and there is an end of it."

The other unpleasant incident is a speech delivered by M. Poincaré in the French Chamber in the course of which he dealt casually with the subject of inter-Allied indebtedness. The French prime minister then announced categorically that France had no intention of paying her debts until she has first received her share of reparations from Germany. What does that mean in effect? That the France represented by M. Poincaré has nointention of ever paying her debts. When the colossal figure of German reparations is taken into account thirty years is a moderate estimate of the period required for its liquidation. Is the French debt to lie dormant carrying no interest meanwhile? If it is, then the debt is practically wiped out, for the present value of £500,000,000 debt payable thirty years hence is insignificant. The present government of France have therefore declared they do not mean to pay what France owes. Surely the time to dictate the conditions of your repayment of a loan—when you propose to pay, how much you propose to pay, or whether you mean to pay at all—is when you are borrowing and not after you have spent the money.

And yet in the same speech in which M. Poincaré serves up hot platitudes for senatorial palates about the sanctity of national obligations, he dismisses France's faithful ally with the cold comfort that France is too busy collecting the accounts due to her to attend to the debts she owes. I believe in my heart that there is a France of which he is not the spokesman—a great France which will not treat shabbily a faithful friend who stood by her in the hour of despair and who is now staggering underunparalleled burdens incurred in the discharge of the obligations of friendship.

All this makes it more necessary that the situation should be cleared up without undue delay. Having just completed negotiations for liquidating our own war indebtedness to America we are in a position to insist on a settlement with those on whose behalf we incurred that indebtedness. If nothing is done the conditions will harden against us. We shall be assumed to have accepted the Poincaré repudiation. I do not know what conditions the government have made with the United States government as to the marketability of the securities to be created in funding our debt. If they are to be placed on the market the chance of any future deal is destroyed. Ere that be done we must know where we are in reference to our own claims. I trust the government will act promptly. Delay was justifiable so long as we were in the same position in reference to what we owed as what we claimed. The Baldwin settlement has altered all that. If we do not insist on an arrangement now the British taxpayer will have the fate of Issachar—that of the poor beast between two burdens—his own and that of the Allies.

It is the duty of every patriotic citizen, in view of the difficulties with which the country is confronted, to assist the government of the day by every means at his disposal. Factious criticism disturbs judgment and tends to unnerve. Governments to-day require full command of mind and nerve to enable them to arrive at sound decisions and to persevere in them. Faction is, therefore, treason to the country.

That does not, however, preclude a calm survey of the elections and their meaning. Quite the contrary, for we must think of the future and prepare for it.

The result of the elections has fully justified those who maintained that no party standing alone could hope to secure the measure of public support which will guarantee stable government. It is true that the Conservatives have succeeded in obtaining the return of a majority of members to the newParliament. But the most notable feature of the elections is the return of a decisive majority of members by a very definite minority of the electors.

I observe that the prime minister, in returning thanks to the nation, claims that he has received a vote of confidence from the people of this country. Out of a total poll of fifteen millions his candidates secured less than six million votes. Making full allowance for uncontested seats, this figure cannot be stretched out to a height much above six millions.

That means that only two-fifths of the electorate voted confidence in the administration, whilst three-fifths voted confidence in other leaders or groups. A party which has a majority of three millions recorded against it on a national referendum can hardly claim to have received a national vote of confidence.

It might be argued that when the question of confidence or no confidence comes to be stated, the National Liberals having promised co-operation, the votes recorded by them ought not to be placed on the debit side of the confidence account. The basis of the appeal made by the National Liberalcandidates for support is practically that stated by me in my Manchester speech:

"The supreme task of statesmanship at this hour is the pacification of the nations, so that the people shall have leisure to devote themselves to the peaceful avocations of life, to fill up the depleted reservoirs from which we all draw.

"My course is a clear one. I will support with all my might any government that devotes itself and lends its energy to that task with single-mindedness, fearlessness, and with resolution—provided it does not embark upon measures which inflict permanent injury upon the country, whether these measures be reactionary or revolutionary. That does not mean that I pledge myself to support inefficiency, vacillation, or infirmity in any government or in any party. But any government that does not pursue that course I will resist with all my might. That is my policy."

I have perused the addresses of many National Liberal candidates and I have addressed many meetings in their constituencies, and I find that their attitude towards the government is defined in these terms, with purely verbal variations. The address of Mr. J. D. Gilbert, who won CentralSouthwark, is a very fair sample taken out of the bulk:

"If you honour me again with your confidence I will support any progressive measures brought forward by the present government or any other government. I shall not offer factious opposition or nagging criticism while our country is in difficulties at home or abroad."

There may be one or two who went further, but none expressed confidence.

I have made some inquiries as to the number of Conservative votes polled by National Liberal candidates. I am informed that on an average it represents less than one-third of the total. At the last election 167 National Liberal candidates were put up. They polled an aggregate of 1,652,823 votes, that is, an average of 9,897 per candidate. What proportion of this vote was Conservative? There is a good practical method of testing this question. In sixty-two seats National Liberals were fought by Conservative as well as by other candidates. In these cases the average vote polled by National Liberals was 6,820. That means thatwhere the Conservatives supported National Liberal candidates their votes would represent about 30 per cent. of the poll for these candidates. On the other hand, the number of Liberal votes polled by Conservatives, where a compact existed, at least balances this account, for although the total in each constituency does not equal the figures of the Conservative support in National Liberal constituencies, still, that support was spread over many more constituencies.

The prime minister and his chief electioneering manager both emphatically repudiated the suggestion that there was any pact between Conservatives and National Liberals, and urged that there were only local arrangements made between the candidates of the two parties for their mutual convenience.

As the head of the National Liberal group I expressed grave doubts as to the composition of the ministry, and much apprehension as to the language in which its policy was defined. That represents the general attitude of the National Liberals toward the government. Their support, therefore, cannot be claimed in totalling the votes recorded for the government.

The fact, therefore, remains that those who voted confidence in the government represent only forty per cent. of those who went to the poll and twenty-five per cent. of the total electorate.

I place this fact in the forefront, because it is bound to have a profound effect upon the course of events during—maybe beyond—the lifetime of this parliament. It is the first time, certainly since the Reform Act, that a pronounced minority of the electorate has succeeded in securing the control of parliament and the government of the country.

It would be idle to pretend that in a democratic country like ours, thoroughly imbued with the spirit of representative government, this does not weaken the moral authority of the government of the day. Therefore, if the government is wise it will bear that fact in mind and will not commit itself to policies which challenge the nine millions who between them represent a majority of the people of this country.

It is not a very good beginning to claim these striking figures as a vote of confidence. I sincerely trust it does not indicate a resolve to ignore, if not to defy, what is an obvious and ought to be a governing factor in the policy of the government.

A corollary to this curious working of ourelectoral system is to be found in the under-representation of the other parties in the present parliament, and unless representative government is to be discredited altogether, the present parliament ought at once to devote its mind and direct its energies to the discovery of some method and machinery which will avert the danger which clearly arises from the working of the present system.

The parliament of 1918 undoubtedly gave a larger majority to the government than the figures warranted. But the majority of votes cast for government candidates was so overwhelming that under any system of voting there would have been a larger working majority for the government than that which the present government can command. So when trouble arose it was not open to any section of the community to object that the government had no authority because it did not represent the electorate of this country.

We are faced with a new danger to constitutional government. What has happened at this election may be repeated at the next—but not necessarily in favour of the same party.

If we are to be governed by a succession of administrations who rule in spite of the protest of amajority of the people, the authority of government will be weakened beyond repair.

The luck of the electoral table has this time favoured the Conservatives. Next time it may turn in favour of the Labour Party. They have at this election secured 55 seats out of a total of 141 by a minority of votes.

The conditions were, in many respects, against them. Their funds were exhausted by the prolonged period of heavy unemployment. The trade union movement was passing through an ebb tide in its prosperity, both in funds and in members. There was a good deal of discontent with the trade union leaders. Many workmen felt they had been let down badly by some of their activities in industrial disputes.

Moreover, Labour has been committed by visionaries to a rash experiment which handicapped it severely in the election. Next time may be the spring tide of Labour. They have learnt their lesson at the polls, and are not likely to repeat the blunder of November, 1922.

This time the votes cast for them have attained the gigantic aggregate of four millions and a quarter. Supposing under those conditions they addanother two millions to their poll. Although the other groups may secure between them nine millions of votes, Labour may have the same luck as the Conservatives at the last election and be placed in power by a decisive majority of members elected by a minority of votes.

I am not going to speculate as to what may happen under those conditions; the kind of legislation that may be proposed; the action of the House of Lords in reference to it, provoking, as it undoubtedly will, a fierce class conflict; or the turn given to administration in the various departments of government.

Of one thing I am, however, certain. That is, that as a minority administration in 1922 and onwards will help to discredit government with certain classes of the community, a minority Labour administration would weaken the respect of other classes for representative government, and between them an atmosphere will be created inimical to the moral authority of all government in this country.

I have many a time warned the public that, in spite of appearances, this country is in many respects very top-heavy. It is over-industrialised. Its means of livelihood are in some waysprecarious, and depend on conditions over which we have very little control, and once something happens which may have the effect of causing a lean-over either in one direction or in the other, it will be more difficult to recover than in lands where the population depends in the main for its livelihood upon the cultivation of the soil and the development of the natural resources of the country.

I therefore earnestly trust that in the interests of stability and good government, which must be based on the goodwill and co-operation of the community as a whole, this parliament will apply its mind seriously to finding some means of preventing a repetition either in one direction or another of this freak of representative government.

Another feature of the election is the heavy vote polled by Liberal candidates in spite of untoward circumstances.

Whatever the difficulties of the Labour Party might be in this election they were not comparable to those under which Liberalism fought the campaign. It was divided by bitter internecine conflicts. The leaders of one section seemed to be more intent on keeping representatives of the other section out of parliament than on fighting for thecommon cause. The bulk of their speeches was devoted to attacks on the leaders of the other Liberal group, and there was not much room left for a statement of the Liberal case.

What happened in Manchester is typical. Here the rank and file took the matter in hand and enforced agreement. Lord Grey was brought down to bless it. But the whole of his benedictory speech consisted of a thin and dreary drip of querulous comment on the leaders of the other group, with a distinct hint that the return of a Conservative government would be by no means a bad thing in the interests of the country.

The speech was hailed by a Tory journal with the heading "Lord Grey Supports Mr. Bonar Law." He then went straight to support Mr. McKinnon Wood as candidate with a repetition of the same speech. Thence he rushed off to reiterate the same performance at Bedford in support of Lady Lawson, and he finished off by reciting it for two days at meetings in support of Mr. Walter Runciman.

No wonder that he succeeded in damping Liberal enthusiasm to such an extent that his unfortunate protégés surprised even their opponents in the poverty of the support given them at the polls.

As soon as the coalition broke up the leaders of this Liberal section met to consider the situation. The one positive result of their deliberations was not the issue of a ringing appeal for unity on the basis of Liberal principles, but a peevish intimation through the press that efforts at unity were to be discouraged at the election. It was clearly ordained that the Coalition Liberals should be crushed out. The Conservatives spurned them, and the Independent Liberals gave notice that they had no use for them. They were destined for extinction. Lord Crewe's speech proceeded on the same lines. May I say how sincerely I rejoice in the tribute to the "amateur diplomatist" which is implied in the conferring by a Conservative government of the blue ribbon of diplomacy upon the leader of the Independent Liberals in the House of Lords?

This precipitate and lamentable decision lost at least forty Liberal seats, gave to the Conservatives their majority, and what is equally important established the Labour Party as His Majesty's official Opposition in the House of Commons. The latter is much the most serious practical result of the decisions of the Independent leaders to debar united action at the last election. If Liberals hadunited when the Coalition came to an end, Liberalism might have polled five million votes. It would have now held a powerful second position in parliament, and the country and the nation would have looked to it in the future as it has hitherto done in the past for the alternative to "Toryism." Instead of that it is a poor split third. How could they expect to win at the polls? The National Liberals were pursued into their constituencies. Thirty-five National Liberal seats were assailed by Independent Liberal candidates. I am not making a complaint, but offering an explanation. Whatever the views of the National Liberal leaders might have been on the subject of Liberal unity they were given no chance to effect it, and although they entered into no national compact with the Conservatives their followers in certain areas had no option but to negotiate local arrangements with the Conservatives for mutual support. The implacable attitude of the Independent Liberals left them no choice in the matter.

What was the inevitable result? No real fight was put up for Liberal principles on either side. The Independent Liberals were tangled by the personal preoccupation of their leaders. They hadaccumulated enormous dumps of ammunition for the day of battle on the assumption that the main attack would be on the Coalition Liberals, and, although the Conservatives now lined the opposite trenches, anger dominated strategy, and the guns were still fired at their old foes, whilst the Tory government was only bombarded with bouquets. On the other hand, the National Liberal leaders were embarrassed by the engagements into which their followers had been driven by the action of the Independent Liberal leaders and the two warring factions.

The National Liberals, in spite of their enormous difficulties, have not been exterminated. I am not going to enter into a barren inquiry as to whether their numbers are or are not greater than those of Mr. Asquith's followers. Let it be assumed that they are equal. The marvel is that under these fratricidal conditions so many Liberals of any complexion have been returned.

I am not setting forth these unhappy facts in order to prolong the controversy which has poisoned Liberalism for years, but in order to call attention to the vitality which, in spite of these depressing conditions, can bring up 4,100,000 voters to thepolls. Electorally Liberalism is the balancing power, and if it casts its united strength against either reaction or subversion its influence must be decisive, whatever the composition of this parliament may be.

It is common knowledge that the Independent Liberals confidently anticipated the return of at least 120 members of their group. The fact that they only succeeded in securing the return of about fifty is naturally to them a source of deep disappointment.

If the failure of high hopes leads to contemplation of the real causes of that failure and a sincere desire is manifested to substitute co-operation for conflict my colleagues and I will welcome it. We cannot force our society on an unwilling company.

During the campaign I repeatedly expressed the hope that one outcome of this election would be to bring moderate men of progressive outlook in all parties to see the wisdom of acting together.

But progressive minds are by no means confined to the Liberal party. I have met and worked with them in the Conservative party, and the election will have taught many men and women in the Labour party that violent and extravagant proposalsimpede progress. If the limits are not too narrowly drawn, this parliament may witness the effective association of men of many parties who are genuinely concerned in the advancement of mankind along the paths of peace and progress for the attainment of their common ideals. If that end is achieved, the coming years will not be spent in vain.

One word as to the National Liberals. When the dissolution came no party was ever placed in a more embarrassing and even desperate situation.

The Conservatives have at their disposal a great political machine. The Labour party could command the support of all the trade unions, with their elaborate machinery for organising the wage-earning population. The Independent Liberals had in England and in Scotland captured the Liberal machine almost in its entirety, and had spent six years in perfecting it, their leaders having no other occupation.

The National Liberal leaders inherited no political machinery, and were too preoccupied with great world affairs to be able to devote any time to the improvisation of an effective new organisation.

Conservatives, Independent Liberals, and Labour all alike attacked National Liberal seats where they thought any advantage might be gained for their respective parties by doing so. The Conservatives only refrained from attack in cases where they thought there was more to be gained by arrangement. There was a great volume of popular sentiment behind our group. I visited Britain, north, south, east, west, and I have never witnessed such crowds nor such enthusiasm at any electoral contest in which I have ever taken part; but there was no organisation to convert acclamation into electoral power, and you could not build up a vast political machine in three weeks. Our supporters were not provided with an opportunity to test their strength in two-thirds of the constituencies. In nearly three hundred constituencies they could not do so without impairing the chances of Liberal candidates. A compact with Conservatives ruled them out of others.

It is a wonder that, in spite of these adverse and even paralysing conditions our numbers are twice those of the Independent Liberals in 1918.

We have now for the first time full opportunity for placing our case and point of view before thecountry and organising support for them. It is our duty to do so.

Every month will contribute its justification for the course we have hitherto pursued, and for the counsel we have steadfastly given to a country struggling through abnormal difficulties.

London, November 20th, 1922.

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