The Economic Consequences of the Peace Part 6

[54] In April, 1919, the British Ministry of Munitions despatched an expert Commission to examine the conditions of the iron and steel works in Lorraine and the occupied areas of Germany. The Report states that the iron and steel works in Lorraine, and to a lesser extent in the Saar Valley, are dependent on supplies of coal and c.o.ke from Westphalia. It is necessary to mix Westphalian coal with Saar coal to obtain a good furnace c.o.ke. The entire dependence of all the Lorraine iron and steel works upon Germany for fuel supplies "places them," says the Report, "in a very unenviable position."

[55] Arts. 264, 265, 266, and 267. These provisions can only be extended beyond five years by the Council of the League of Nations.

[56] Art. 268 (_a_).

[57] Art. 268 (_b_) and (_c_).

[58] The Grand Duchy is also deneutralized and Germany binds herself to "accept in advance all international arrangements which may be concluded by the Allied and a.s.sociated Powers relating to the Grand Duchy" (Art. 40). At the end of September, 1919, a plebiscite was held to determine whether Luxemburg should join the French or the Belgian Customs Union, which decided by a substantial majority in favour of the former. The third alternative of the maintenance of the union with Germany was not left open to the electorate.

[59] Art. 269.

[60] Art. 270.

[61] The occupation provisions may be conveniently summarized at this point. German territory situated west of the Rhine, together with the bridge-heads, is subject to occupation for a period of fifteen years (Art. 428). If, however, "the conditions of the present Treaty are faithfully carried out by Germany," the Cologne district will be evacuated after five years, and the Coblenz district after ten years (Art. 429). It is, however, further provided that if at the expiration of fifteen years "the guarantees against unprovoked aggression by Germany are not considered sufficient by the Allied and a.s.sociated Governments, the evacuation of the occupying troops may be delayed to the extent regarded as necessary for the purpose of obtaining the required guarantees" (Art. 429); and also that "in case either during the occupation or after the expiration of the fifteen years, the Reparation Commission finds that Germany refuses to observe the whole or part of her obligations under the present Treaty with regard to Reparation, the whole or part of the areas specified in Article 429 will be re-occupied immediately by the Allied and a.s.sociated Powers" (Art.

430). Since it will be impossible for Germany to fulfil the whole of her Reparation obligations, the effect of the above provisions will be in practice that the Allies will occupy the left bank of the Rhine just so long as they choose. They will also govern it in such manner as they may determine (_e.g._ not only as regards customs, but such matters as the respective authority of the local German representatives and the Allied Governing Commission), since "all matters relating to the occupation and not provided for by the present Treaty shall be regulated by subsequent agreements, which Germany hereby undertakes to observe" (Art. 432). The actual Agreement under which the occupied areas are to be administered for the present has been published as a White Paper [Cd. 222]. The supreme authority is to be in the hands of an Inter-Allied Rhineland Commission, consisting of a Belgian, a French, a British, and an American member. The articles of this Agreement are very fairly and reasonably drawn.

[62] Art. 365. After five years this Article is subject to revision by the Council of the League of Nations.

[63] The German Government withdrew, as from September 1, 1919, all preferential railway tariffs for the export of iron and steel goods, on the ground that these privileges would have been more than counterbalanced by the corresponding privileges which, under this Article of the Treaty, they would have been forced to give to Allied traders.

[64] Art. 367.

[65] Questions of interpretation and application are to be referred to the League of Nations (Art. 376).

[66] Art. 250.

[67] Art 371. This provision is even applied "to the lines of former Russian Poland converted by Germany to the German gage, such lines being regarded as detached from the Prussian State System."

[68] Arts. 332-337. Exception may be taken, however, to the second paragraph of Art. 332, which allows the vessels of other nations to trade between German towns but forbids German vessels to trade between non-German towns except with special permission; and Art. 333, which prohibits Germany from making use of her river system as a source of revenue, may be injudicious.

[69] The Niemen and the Moselle are to be similarly treated at a later date if required.

[70] Art. 338.

[71] Art. 344. This is with particular reference to the Elbe and the Oder; the Danube and the Rhine are dealt with in relation to the existing Commissions.

[72] Art. 339.

[73] Art. 357.

[74] Art. 358. Germany is, however, to be allowed some payment or credit in respect of power so taken by France.

[75] Art. 66.

CHAPTER V

REPARATION

I. _Undertakings given prior to the Peace Negotiations_

The categories of damage in respect of which the Allies were ent.i.tled to ask for Reparation are governed by the relevant pa.s.sages in President Wilson's Fourteen Points of January 8, 1918, as modified by the Allied Governments in their qualifying Note, the text of which the President formally communicated to the German Government as the basis of peace on November 5, 1918. These pa.s.sages have been quoted in full at the beginning of Chapter IV. That is to say, "compensation will be made by Germany for all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from the air." The limiting quality of this sentence is reinforced by the pa.s.sage in the President's speech before Congress on February 11, 1918 (the terms of this speech being an express part of the contract with the enemy), that there shall be "no contributions" and "no punitive damages."

It has sometimes been argued that the preamble to paragraph 19[76] of the Armistice Terms, to the effect "that any future claims and demands of the Allies and the United States of America remain unaffected," wiped out all precedent conditions, and left the Allies free to make whatever demands they chose. But it is not possible to maintain that this casual protective phrase, to which no one at the time attached any particular importance, did away with all the formal communications which pa.s.sed between the President and the German Government as to the basis of the Terms of Peace during the days preceding the Armistice, abolished the Fourteen Points, and converted the German acceptance of the Armistice Terms into unconditional surrender, so far as it affects the Financial Clauses. It is merely the usual phrase of the draftsman, who, about to rehea.r.s.e a list of certain claims, wishes to guard himself from the implication that such list is exhaustive. In any case, this contention is disposed of by the Allied reply to the German observations on the first draft of the Treaty, where it is admitted that the terms of the Reparation Chapter must be governed by the President's Note of November 5.

a.s.suming then that the terms of this Note are binding, we are left to elucidate the precise force of the phrase--"all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from the air." Few sentences in history have given so much work to the sophists and the lawyers, as we shall see in the next section of this chapter, as this apparently simple and unambiguous statement. Some have not scrupled to argue that it covers the entire cost of the war; for, they point out, the entire cost of the war has to be met by taxation, and such taxation is "damaging to the civilian population." They admit that the phrase is c.u.mbrous, and that it would have been simpler to have said "all loss and expenditure of whatever description"; and they allow that the apparent emphasis of damage to the persons and property of _civilians_ is unfortunate; but errors of draftsmans.h.i.+p should not, in their opinion, shut off the Allies from the rights inherent in victors.

But there are not only the limitations of the phrase in its natural meaning and the emphasis on civilian damages as distinct from military expenditure generally; it must also be remembered that the context of the term is in elucidation of the meaning of the term "restoration" in the President's Fourteen Points. The Fourteen Points provide for damage in invaded territory--Belgium, France, Roumania, Serbia, and Montenegro (Italy being unaccountably omitted)--but they do not cover losses at sea by submarine, bombardments from the sea (as at Scarborough), or damage done by air raids. It was to repair these omissions, which involved losses to the life and property of civilians not really distinguishable in kind from those effected in occupied territory, that the Supreme Council of the Allies in Paris proposed to President Wilson their qualifications. At that time--the last days of October, 1918--I do not believe that any responsible statesman had in mind the exaction from Germany of an indemnity for the general costs of the war. They sought only to make it clear (a point of considerable importance to Great Britain) that reparation for damage done to non-combatants and their property was not limited to invaded territory (as it would have been by the Fourteen Points unqualified), but applied equally to _all_ such damage, whether "by land, by sea, or from the air" It was only at a later stage that a general popular demand for an indemnity, covering the full costs of the war, made it politically desirable to practise dishonesty and to try to discover in the written word what was not there.

What damages, then, can be claimed from the enemy on a strict interpretation of our engagements?[77] In the case of the United Kingdom the bill would cover the following items:--

(a) Damage to civilian life and property by the acts of an enemy Government including damage by air raids, naval bombardments, submarine warfare, and mines.

(b) Compensation for improper treatment of interned civilians.

It would not include the general costs of the war, or (_e.g._) indirect damage due to loss of trade.

The French claim would include, as well as items corresponding to the above:--

(c) Damage done to the property and persons of civilians in the war area, and by aerial warfare behind the enemy lines.

(d) Compensation for loot of food, raw materials, live-stock, machinery, household effects, timber, and the like by the enemy Governments or their nationals in territory occupied by them.

(e) Repayment of fines and requisitions levied by the enemy Governments or their officers on French munic.i.p.alities or nationals.

(f) Compensation to French nationals deported or compelled to do forced labor.

In addition to the above there is a further item of more doubtful character, namely--

(g) The expenses of the Relief Commission in providing necessary food and clothing to maintain the civilian French population in the enemy-occupied districts.

The Belgian claim would include similar items.[78] If it were argued that in the case of Belgium something more nearly resembling an indemnity for general war costs can be justified, this could only be on the ground of the breach of International Law involved in the invasion of Belgium, whereas, as we have seen, the Fourteen Points include no special demands on this ground.[79] As the cost of Belgian Belief under (g), as well as her general war costs, has been met already by advances from the British, French, and United States Governments, Belgium would presumably employ any repayment of them by Germany in part discharge of her debt to these Governments, so that any such demands are, in effect, an addition to the claims of the three lending Governments.

The claims of the other Allies would be compiled on similar lines. But in their case the question arises more acutely how far Germany can be made contingently liable for damage done, not by herself, but by her co-belligerents, Austria-Hungary, Bulgaria, and Turkey. This is one of the many questions to which the Fourteen Points give no clear answer; on the one hand, they cover explicitly in Point 11 damage done to Roumania, Serbia, and Montenegro, without qualification as to the nationality of the troops inflicting the damage; on the other hand, the Note of the Allies speaks of "German" aggression when it might have spoken of the aggression of "Germany and her allies." On a strict and literal interpretation, I doubt if claims lie against Germany for damage done,--_e.g._ by the Turks to the Suez Ca.n.a.l, or by Austrian submarines in the Adriatic. But it is a case where, if the Allies wished to strain a point, they could impose contingent liability on Germany without running seriously contrary to the general intention of their engagements.

As between the Allies themselves the case is quite different. It would be an act of gross unfairness and infidelity if France and Great Britain were to take what Germany could pay and leave Italy and Serbia to get what they could out of the remains of Austria-Hungary. As amongst the Allies themselves it is clear that a.s.sets should be pooled and shared out in proportion to aggregate claims.

In this event, and if my estimate is accepted, as given below, that Germany's capacity to pay will be exhausted by the direct and legitimate claims which the Allies hold against her, the question of her contingent liability for her allies becomes academic. Prudent and honorable statesmans.h.i.+p would therefore have given her the benefit of the doubt, and claimed against her nothing but the damage she had herself caused.

What, on the above basis of claims, would the aggregate demand amount to? No figures exist on which to base any scientific or exact estimate, and I give my own guess for what it is worth, prefacing it with the following observations.

The amount of the material damage done in the invaded districts has been the subject of enormous, if natural, exaggeration A journey through the devastated areas of France is impressive to the eye and the imagination beyond description. During the winter of 1918-19, before Nature had cast over the scene her ameliorating mantle, the horror and desolation of war was made visible to sight on an extraordinary scale of blasted grandeur. The completeness of the destruction was evident. For mile after mile nothing was left. No building was habitable and no field fit for the plow. The sameness was also striking. One devastated area was exactly like another--a heap of rubble, a mora.s.s of sh.e.l.l-holes, and a tangle of wire.[80] The amount of human labor which would be required to restore such a countryside seemed incalculable; and to the returned traveler any number of milliards of dollars was inadequate to express in matter the destruction thus impressed upon his spirit. Some Governments for a variety of intelligible reasons have not been ashamed to exploit these feelings a little.

Popular sentiment is most at fault, I think, in the case of Belgium. In any event Belgium is a small country, and in its case the actual area of devastation is a small proportion of the whole. The first onrush of the Germans in 1914 did some damage locally; after that the battle-line in Belgium did not sway backwards and forwards, as in France, over a deep belt of country. It was practically stationary, and hostilities were confined to a small corner of the country, much of which in recent times was backward, poor, and sleepy, and did not include the active industry of the country. There remains some injury in the small flooded area, the deliberate damage done by the retreating Germans to buildings, plant, and transport, and the loot of machinery, cattle, and other movable property. But Brussels, Antwerp, and even Ostend are substantially intact, and the great bulk of the land, which is Belgium's chief wealth, is nearly as well cultivated as before. The traveler by motor can pa.s.s through and from end to end of the devastated area of Belgium almost before he knows it; whereas the destruction in France is on a different kind of scale altogether. Industrially, the loot has been serious and for the moment paralyzing; but the actual money cost of replacing machinery mounts up slowly, and a few tens of millions would have covered the value of every machine of every possible description that Belgium ever possessed. Besides, the cold statistician must not overlook the fact that the Belgian people possess the instinct of individual self-protection unusually well developed; and the great ma.s.s of German bank-notes[81] held in the country at the date of the Armistice, shows that certain cla.s.ses of them at least found a way, in spite of all the severities and barbarities of German rule, to profit at the expense of the invader. Belgian claims against Germany such as I have seen, amounting to a sum in excess of the total estimated pre-war wealth of the whole country, are simply irresponsible.[82]