The Economic Consequences of the Peace Part 5

[7] The precise force of this reservation is discussed in detail in Chapter V.

[8] I also omit those which have no special relevance to the German Settlement. The second of the Fourteen Points, which relates to the Freedom of the Seas, is omitted because the Allies did not accept it. Any italics are mine.

[9] Part VIII. Annex III. (1).

[10] Part VIII. Annex III. (3).

[11] In the years before the war the average s.h.i.+pbuilding output of Germany was about 350,000 tons annually, exclusive of wars.h.i.+ps.

[12] Part VIII. Annex III. (5).

[13] Art. 119.

[14] Arts. 120 and 257.

[15] Art. 122.

[16] Arts. 121 and 297(b). The exercise or non-exercise of this option of expropriation appears to lie, not with the Reparation Commission, but with the particular Power in whose territory the property has become situated by cession or mandation.

[17] Art. 297 (h) and para. 4 of Annex to Part X. Section IV.

[18] Arts. 53 and 74.

[19] In 1871 Germany granted France credit for the railways of Alsace-Lorraine but not for State property. At that time, however, the railways were private property. As they afterwards became the property of the German Government, the French Government have held, in spite of the large additional capital which Germany has sunk in them, that their treatment must follow the precedent of State property generally.

[20] Arts. 55 and 255. This follows the precedent of 1871.

[21] Art. 297 (_b_).

[22] Part X. Sections III. and IV. and Art. 243.

[23] The interpretation of the words between inverted commas is a little dubious. The phrase is so wide as to seem to include private debts. But in the final draft of the Treaty private debts are not explicitly referred to.

[24] This provision is mitigated in the case of German property in Poland and the other new States, the proceeds of liquidation in these areas being payable direct to the owner (Art. 92.)

[25] Part X. Section IV. Annex, para. 10: "Germany will, within six months from the coming into force of the present Treaty, deliver to each Allied or a.s.sociated Power all securities, certificates, deeds, or other doc.u.ments of t.i.tle held by its nationals and relating to property, rights, or interests situated in the territory of that Allied or a.s.sociated Power.... Germany will at any time on demand of any Allied or a.s.sociated Power furnish such information as may be required with regard to the territory, rights, and interests of German nationals within the territory of such Allied or a.s.sociated Power, or with regard to any transactions concerning such property, rights, or interests effected since July 1, 1914."

[26] "Any public utility undertaking or concession" is a vague phrase, the precise interpretation of which is not provided for.

[27] Art. 260.

[28] Art. 235.

[29] Art. 118.

[30] Arts. 129 and 132.

[31] Arts. 135-137.

[32] Arts. 135-140.

[33] Art. 141: "Germany renounces all rights, t.i.tles and privileges conferred on her by the General Act of Algeciras of April 7, 1906, and by the Franco-German Agreements, of Feb. 9, 1909, and Nov. 4, 1911...."

[34] Art. 148: "All treaties, agreements, arrangements and contracts concluded by Germany with Egypt are regarded as abrogated from Aug. 4, 1914." Art. 153: "All property and possessions in Egypt of the German Empire and the German States pa.s.s to the Egyptian Government without payment."

[35] Art. 289.

[36] Art. 45.

[37] Part IV. Section IV. Annex, Chap. III.

[38] "We take over the owners.h.i.+p of the Sarre mines, and in order not to be inconvenienced in the exploitation of these coal deposits, we const.i.tute a distinct little estate for the 600,000 Germans who inhabit this coal basin, and in fifteen years we shall endeavor by a plebiscite to bring them to declare that they want to be French. We know what that means. During fifteen years we are going to work on them, to attack them from every point, till we obtain from them a declaration of love. It is evidently a less brutal proceeding than the _coup de force_ which detached from us our Alsatians and Lorrainers. But if less brutal, it is more hypocritical. We know quite well between ourselves that it is an attempt to annex these 600,000 Germans. One can understand very well the reasons of an economic nature which have led Clemenceau to wish to give us these Sarre coal deposits, but in order to acquire them must we give ourselves the appearance of wanting to juggle with 600,000 Germans in order to make Frenchmen of them in fifteen years?" (M. Herve in _La Victorie_, May 31, 1919).

[39] This plebiscite is the most important of the concessions accorded to Germany in the Allies' Final Note, and one for which Mr.

Lloyd George, who never approved the Allies' policy on the Eastern frontiers of Germany, can claim the chief credit. The vote cannot take place before the spring of 1920, and may be postponed until 1921. In the meantime the province will be governed by an Allied Commission. The vote will be taken by communes, and the final frontiers will be determined by the Allies, who shall have regard, partly to the results of the vote in each commune, and partly "to the geographical and economic conditions of the locality." It would require great local knowledge to predict the result. By voting Polish, a locality can escape liability for the indemnity, and for the crus.h.i.+ng taxation consequent on voting German, a factor not to be neglected. On the other hand, the bankruptcy and incompetence of the new Polish State might deter those who were disposed to vote on economic rather than on racial grounds. It has also been stated that the conditions of life in such matters as sanitation and social legislation are incomparably better in Upper Silesia than in the adjacent districts of Poland, where similar legislation is in its infancy. The argument in the text a.s.sumes that Upper Silesia will cease to be German. But much may happen in a year, and the a.s.sumption is not certain. To the extent that it proves erroneous the conclusions must be modified.

[40] German authorities claim, not without contradiction, that to judge from the votes cast at elections, one-third of the population would elect in the Polish interest, and two-thirds in the German.

[41] It must not be overlooked, however, that, amongst the other concessions relating to Silesia accorded in the Allies' Final Note, there has been included Article 90, by which "Poland undertakes to permit for a period of fifteen years the exportation to Germany of the products of the mines in any part of Upper Silesia transferred to Poland in accordance with the present Treaty. Such products shall be free from all export duties or other charges or restrictions on exportation.

Poland agrees to take such steps as may be necessary to secure that any such products shall be available for sale to purchasers in Germany on terms as favorable as are applicable to like products sold under similar conditions to purchasers in Poland or in any other country." This does not apparently amount to a right of preemption, and it is not easy to estimate its effective practical consequences. It is evident, however, that in so far as the mines are maintained at their former efficiency, and in so far as Germany is in a position to purchase substantially her former supplies from that source, the loss is limited to the effect on her balance of trade, and is without the more serious repercussions on her economic life which are contemplated in the text. Here is an opportunity for the Allies to render more tolerable the actual operation of the settlement. The Germans, it should be added, have pointed out that the same economic argument which adds the Saar fields to France allots Upper Silesia to Germany. For whereas the Silesian mines are essential to the economic life of Germany, Poland does not need them. Of Poland's pre-war annual demand of 10,500,000 tons, 6,800,000 tons were supplied by the indisputably Polish districts adjacent to Upper Silesia.

1,500,000 tons from Upper Silesia (out of a total Upper Silesian output of 43,500,000 tons), and the balance from what is now Czecho-Slovakia.

Even without any supply from Upper Silesia and Czecho-Slovakia, Poland could probably meet her requirements by the fuller exploitation of her own coalfields which are not yet scientifically developed, or from the deposits of Western Galicia which are now to be annexed to her.

[42] France is also to receive annually for three years 35,000 tons of benzol, 60,000 tons of coal tar, and 30,000 tons of sulphate of ammonia.

[43] The Reparation Commission is authorized under the Treaty (Part VIII Annex V. para. 10) "to postpone or to cancel deliveries" if they consider "that the full exercise of the foregoing options would interfere unduly with the industrial requirements of Germany." In the event of such postponements or cancellations "the coal to replace coal from destroyed mines shall receive priority over other deliveries." This concluding clause is of the greatest importance, if, as will be seen, it is physically impossible for Germany to furnish the full 45,000,000; for it means that France will receive 20,000,000 tons before Italy receives anything. The Reparation Commission has no discretion to modify this.

The Italian Press has not failed to notice the significance of the provision, and alleges that this clause was inserted during the absence of the Italian representatives from Paris (_Corriere della Sera_, July 19, 1919).

[44] It follows that the current rate of production in Germany has sunk to about 60 per cent of that of 1913. The effect on reserves has naturally been disastrous, and the prospects for the coming winter are dangerous.

[45] This a.s.sumes a loss of output of 15 per cent as compared with the estimate of 30 per cent quoted above.

[46] This supposes a loss of 23 per cent of Germany's industrial undertaking and a diminution of 13 per cent in her other requirements.

[47] The reader must he reminded in particular that the above calculations take no account of the German production of lignite, which yielded in 1913 13,000,000 tons of rough lignite in addition to an amount converted into 21,000,000 tons of briquette. This amount of lignite, however, was required in Germany before the war _in addition to_ the quant.i.ties of coal a.s.sumed above. I am not competent to speak on the extent to which the loss of coal can be made good by the extended use of lignite or by economies in its present employment; but some authorities believe that Germany may obtain substantial compensation for her loss of coal by paying more attention to her deposits of lignite.

[48] Mr. Hoover, in July, 1919, estimated that the coal output of Europe, excluding Russia and the Balkans, had dropped from 679,500,000 tons to 443,000,000 tons,--as a result in a minor degree of loss of material and labor, but owing chiefly to a relaxation of physical effort after the privations and sufferings of the war, a lack of rolling-stock and transport, and the unsettled political fate of some of the mining districts.

[49] Numerous commercial agreements during the war ware arranged on these lines. But in the month of June, 1919, alone, minor agreements providing for payment in coal were made by Germany with Denmark, Norway, and Switzerland. The amounts involved were not large, but without them Germany could not have obtained b.u.t.ter from Denmark, fats and herrings from Norway, or milk and cattle from Switzerland.

[50] "Some 60,000 Ruhr miners have agreed to work extra s.h.i.+fts--so-called b.u.t.ter-s.h.i.+fts--for the purpose of furnis.h.i.+ng coal for export to Denmark hence b.u.t.ter will be exported in return. The b.u.t.ter will benefit the miners in the first place, as they have worked specially to obtain it" (_Kolnische Zeitung_, June 11, 1919).

[51] What of the prospects of whisky-s.h.i.+fts in England?

[52] As early as September, 1919, the Coal Commission had to face the physical impracticability of enforcing the demands of the Treaty, and agreed to modify them as follows:--"Germany shall in the next six months make deliveries corresponding to an annual delivery of 20 million tons as compared with 43 millions as provided in the Peace Treaty. If Germany's total production exceeds the present level of about 108 millions a year, 60 per cent of extra production, up to 128 millions, shall be delivered to the Entente and 50 per cent of any extra beyond that, until the figure provided in the Peace Treaty is reached.

If the total production falls below 108 millions the Entente will examine the situation, after hearing Germany, and take account of it."

[53] 21,136,265 tons out of a total of 28,607,903 tons. The loss of iron-ore in respect of Upper Silesia is insignificant. The exclusion of the iron and steel of Luxemburg from the German Customs Union is, however, important, especially when this loss is added to that of Alsace-Lorraine. It may be added in pa.s.sing that Upper Silesia includes 75 per cent of the zinc production of Germany.