THE ANXIETIES OF THE VICTORS

We have seen the process by which the idea of the indemnity for

damages, which was not contained either in the peace declaration of

the Entente, nor in the manifestations of the various parliaments, nor

in the first armistice proposals, nor in the armistice between Italy

and Austria, was introduced in the armistice with Germany, out of pure

regard for France, without taking heed of the consequences. Three

words, said Clemenceau, only three words need be added, words which

compromise nothing and are an act of deference to France. The entire

construction of the treaties, after all, is based on those three

words.

And how fantastic the demands for compensation have become!

An old Italian proverb says, "In time of war there are more lies than

earth." Ancient and modern pottery reproduce the motto, which is

widespread, and whose truth was not understood until some years

ago. So many foolish things were said about the almost mysterious

manoeuvres of Germany, about her vast expansion, her great resources

and accumulated capital, that the reality tended to become lost to

sight.

These absurd legends, formed during the War, were not forgotten, and

there are even now many who believe in good faith that Germany can

pay, if not twenty or twenty-five milliards a year, at least eight or

nine without any difficulty.

France's shrewdest politicians, however, well knew that the demand

for an enormous and unlimited indemnity was only a means of putting

Germany under control and depressing her to the point of exhaustion.

But the others maintained this proposal more out of rancour and hatred

than from any actual political concept. It may be said that the

problem of the indemnity has never been seriously studied and that the

calculations, the valuations, the procedures, have all formed a series

of impulsive acts co-ordinated by a single error, the error of the

French politicians who had the one aim of holding Germany down.

The procedure was simple.

In the first phase the indemnities came into being from three words

inserted almost by chance into the armistice treaty on November 2,

1918, _réparation des dommages_. It was merely a matter of a simple

expression to content public feeling: _Je supplie le conseil de se

mettre dans l'esprit de la population française_.... It was a moral

concession, a moral satisfaction.

But afterwards, as things went on, all was altered when it came to

preparing the treaties.

For a while the idea, not only of a reparation of damages, but of the

payment of the cost of the War was entertained. It was maintained that

the practice of making the vanquished reimburse the cost of the War

was permitted by international law. Since Germany had provoked the War

and lost it, she must not only furnish an indemnity for the losses,

but also pay the cost.

The cost was calculated roughly at seven hundred milliards of francs

at par. Further, there was the damage to assess. In the aggregate, war

costs, damage to property, damage to persons, came to at least one

thousand milliards. But since it was impossible to demand immediate

payment and was necessary to spread the sum over fifty years, taking

into consideration sinking funds and interest the total came to three

thousand milliards. The amount was published by the illustrated papers

with the usual diagrams, drawings of golden globes, length of paper

money if stretched out, height of metal if all piled up together, etc.

etc.

These figures were discussed for the first few months by a public

accustomed to be surprised at nothing. They merely helped to

demonstrate that an indemnity of 350 milliards was a real sacrifice

for the Allies.

Thus a whole series of principles came to be established which were a

contradiction of reality.

A great share in the responsibility in this matter lies with Great

Britain, who not only followed France's error, but in certain ways

made it worse by a number of intemperate requests. Italy had no

influence on the proceedings owing to her indecisive policy. Only the

United States, notwithstanding the banality of some of her experts

(_lucus a non lucendo_), spoke an occasional word of reason.

When Lloyd George understood the mistake committed in the matter of

the indemnity it was too late.

The English public found itself face to face with the elections almost

the day after the conclusion of the War. In the existing state of

exaltation and hatred the candidates found a convenient "plank" in

promising the extermination of Germany, the trial of the Kaiser, as

well as of thousands of German officers accused of cruelty, and last,

but not least, the end of German competition.

The Prime Minister of Australia, William Morris Hughes, a

small-minded, insensitive, violent man, directed a furious campaign

in favour of a huge indemnity. Lord Northcliffe lent the aid of his

numerous papers to this campaign, which stirred up the electors.

Lloyd George, with his admirable intelligence, perceived the situation

clearly. He did not believe in the usefulness or even in the

possibility of trying the Kaiser and the German officers. He did not

believe in the possibility of an enormous indemnity or even a very

large one.

His first statements, like those of Bonar Law, a serious, honest,

well-balanced man, an idealist with the appearance of a practical

person, revealed nothing. On the eve of the dissolution of Parliament,

Lloyd George, speaking at Wolverhampton, November 24, 1918, did not

even hint at the question of the reparations or indemnity. He was

impelled along that track by the movement coming from France, by the

behaviour of the candidates, by Hughes's attitude, and by the Press

generally, especially that of Northcliffe.

A most vulgar spectacle was offered by many of the English candidates,

among whom were several members of the War Cabinet, who used language

worthy of raving dervishes before crowds hypnotized by promises of the

most impossible things.

To promise the electors that Germany should pay the cost of the War,

to announce to those who had lost their senses that the Kaiser was to

be hanged, to promise the arrest and punishment of the most guilty

German officers, to prophesy the reduction to slavery of a Germany

competing on sea and land, was certainly the easiest kind of

electoral programme. The numerous war-mutilated accepted it with much

enthusiasm, and the people listened, open-mouthed, to the endless

series of promises.

Hughes, who was at bottom in good faith, developed the thesis which he

afterwards upheld at Paris with logical precision. It was Germany's

duty to reimburse, without any limitation, the entire cost of the

War: damage to property, damage to persons, and war-cost. He who has

committed the wrong must make reparation for it to the extreme limits

of his resources, and this principle, recognized by the jurists,

requires that the total of the whole cost of the War fall upon the

enemy nations. Later on, Hughes, who was a sincere man, recognized

that it was not possible to go beyond asking for reparation of the

damages.

Lloyd George was dragged along by the necessity of not drawing away

the mass of the electors from the candidates of his party. Thus he was

obliged on December 11, in his final manifesto, to announce not only

the Kaiser's trial and that of all those responsible for atrocities,

but to promise the most extensive kind of indemnity from Germany and

the compensation of all who had suffered by the War. Speaking the

same evening at Bristol, he promised to uphold the principle of the

indemnity, and asserted the absolute right to demand from Germany

payment for the costs of the War.

In England, where the illusion soon passed away, in France, where it

has not yet been dissipated, the public has been allowed to believe

that Germany can pay the greater part, if not the entire cost, of the

War, or at least make compensation for the damage.

For many years I have studied the figures in relation to private

wealth and the wealth of nations, and I have written at length on

the subject. I know how difficult it is to obtain by means of even

approximate statistics results more or less near to the reality.

Nothing pained me more than to hear the facility with which

politicians of repute spoke of obtaining an indemnity of hundreds of

milliards. When Germany expressed her desire to pay an indemnity in

one agreed lump sum (_à forfait_) of one hundred milliards of gold

marks (an indemnity she could never pay, so enormous is it), I saw

statesmen, whom I imagined not deprived of intelligence, smile at

the paltriness of the offer. An indemnity of fifty milliards of

gold marks, such as that proposed by Keynes, appeared absurd in its

smallness.

When the Peace Conference reassembled in Paris the situation

concerning the indemnity was as follows. The Entente had never during

the War spoken of indemnity as a condition of peace. Wilson, in his

proposals, had spoken only of reconstruction of invaded territories.

The request for _réparation des dommages_ had been included in the

terms of the armistice merely to afford a moral satisfaction to

France. But the campaign waged in France and during the elections

in England had exaggerated the demands so as to include not only

reparation for damage but reimbursement of the cost of the War.

Only the United States maintained that the indemnity should be limited

to the reparation of the damages: a reparation which in later phases

included not only reconstruction of destroyed territories and damage

done to private property, but even pensions to the families of those

dead in the War and the sums in grant paid during it.

When Prussia beat France in 1870 she asked for an indemnity of five

milliards. The Entente could have demanded from the vanquished an

indemnity and then have reassumed relations with them provided it were

an indemnity which they could pay in a brief period of time.

Instead, it being impossible to demand an enormous sum of 300 or 400

milliards, a difficult figure to fix definitely, recourse was had to

another expedient.

From the moment that the phrase _réparation des dommages_ was included

in the armistice treaty as a claim that could be urged, it became

impossible to ask for a fixed sum. What was to be asked for was

neither more nor less than the amount of the damages. Hence a special

commission was required, and the Reparations Commission appears on

the scene to decide the sum to demand from Germany and to control

its payment. Also even after Germany was disarmed a portion of her

territory must remain in the Allies' hands as a guarantee for the

execution of the treaty.

The reason why France has always been opposed to a rapid conclusion of

the indemnity question is that she may continue to have the right, in

view of the question remaining still open, to occupy the left bank of

the Rhine and to keep the bridgeheads indicated in the treaty.

The thesis supported by Clemenceau at the Conference was a simple one:

Germany must recognize the total amount of her debt; it is not enough

to say that we recognize it.

I demand in the name of the French Government, and after having

consulted my colleagues, that the Peace Treaty fixes Germany's debt

to us and indicates the nature of the damages for which reparation is

due. We will fix a period of thirty years if you so wish it, and we

will give to the Commission, after it has reduced the debt to figures,

the mandate to make Germany pay within these thirty years all she owes

us. If the whole debt cannot be paid in thirty years the Commission

will have the right to extend the time for payment.

This scheme was agreed. And the thesis of the compensation of damages,

instead of that for the payment of the cost of the War, prevailed for

a very simple reason. If they proposed to demand for all integral

reparations, and therefore the reimbursement of the cost of the War,

the figures would have been enormous. It became necessary to reduce

all the credits proportionally, as in the case of a bankruptcy. Now,

since in the matter of the indemnities France occupied the first place

(to begin with, she asked sixty-five per cent. of all sums paid by

Germany), she took the greater part of the indemnities, while on the

sums paid for reimbursement of cost of war, she would only have got

less than twenty per cent.

Germany has therefore been put under control for all the time she will

be paying the indemnities--that is, for an indefinite time.

The valuation of the expenses for the reconstruction of the ruined

territories had to be carried out according to the regulations of

the treaty, and, the prices having increased, the French Government

presented in July, 1920, a first approximate valuation: damages, 152

milliards; pensions, 58 milliards; in all, 210 milliards. In November,

1920, the damages had increased to 218 milliards.

Even these figures represent something less absurd than the first

demands and figures.

On September 5, 1919, the French Minister of Finance, speaking in the

French Chamber, calculated the total of the German indemnities arising

from the treaty at 375 milliards, whose interest would accumulate

until 1921, after which date Germany would begin to pay her debt

in thirty-four annual rates of about 25 milliards each, and 13,750

milliards a year would go to France.

Again, in November, 1920, Ogier, Minister of the liberated regions,

put before the Reparations Commission in the name of France a detailed

memorial which made the value of the territories to be reconstructed

only for the cases of private individuals come to 140 milliards, not

including the pensions, damage to railways and mercantile marine,

which totalled 218 milliards, of which 77 milliards were for pensions

and 141 milliards for damages.

Of late the sense of reality has begun to diffuse itself. The Minister

Loucheur himself has laughed at the earlier figures, and has stated

that the damages do not exceed eighty milliards.

But the French public has been accustomed for some time to take the

figures of Klotz seriously, and to discuss indemnities of 150, 200

and 250 milliards. The public, however, is not yet aware of the real

position, and will not be able to arrive at a just realization of it

without passing through a serious moral crisis which will be the first

secure element of the real peace.

Setting aside all questions of indemnities from Austria-Hungary,

Turkey and Bulgaria (they have nothing to give, can give nothing; on

the contrary, they ask and merit assistance), it is clear that all the

indemnities must be paid by Germany.

The French totals of the material damage claims in the invaded

districts have been absolutely fantastic and more exaggerated than in

the case of Belgium, whose indemnity claims would lead one to suppose

the total destruction of at least the third part of her territory,

almost as if she had undergone the submersion of, say, ten thousand

square metres of her small territory.

This problem of the indemnities, limited to the reparation of damages,

and in accordance with the costs contemplated in the Treaty of

Versailles, has never been seriously tackled. One may even say it has

not been seriously examined. And it is deplorable that there has been

created among the public, or among a large part of it, the conviction

that Germany will repair the damage of the War by her own effort. This

idea, however, finds no acceptance in England among serious persons,

and in Italy no one believes in it. But in France and Belgium the idea

is widely diffused, and the wish to spread the belief is lively in

several sections of opinion, not because intelligent people believe

in the possibility of effective payment, but with the idea of putting

Germany in the light of not maintaining the clauses of the peace, thus

extending the right to prolong the military occupation and even to

aggravate it. Germany, thereby, is kept out of the League of Nations

and her dissolution facilitated.

John Maynard Keynes, ever since the end of 1919, has shown in his

admirable book the absurdity of asking for vast indemnities, Germany's

impossibility of paying them, and the risk for all Europe of following

a road leading to ruin, thus at the same time accentuating the work

of disintegration started by the treaty. That book had awakened a

wide-sounding echo, but it ought to have had a still wider one, and

would have done but for the fact that, unfortunately, the Press in

free countries is anything but free.

The great industrial syndicates, especially in the steel-making

industry, which control so large a part of the Press among the

majority of the States of Europe, and even beyond Europe, find

easy allies in the inadequate preparation of the major part of

the journalists to discuss the most important problems, and the

indisposition on the part of the public to examine those questions

which present difficulties, and are so rendered less convenient for

discussion.

I knew Keynes during the War, when he was attached to the British

Treasury and chief of the department charged to look after the foreign

exchanges and the financial relations between Great Britain and her

allies. A serious writer, a teacher of economics of considerable

value, he brought to his difficult task a scrupulousness and an

exactness that bordered on mistrust. Being at that time Chancellor of

the Exchequer in Italy, in the bitterest and most decisive period of

the War, I had frequent contact with Mr. Keynes, and I always admired

his exactness and his precision. I could not always find it in myself

to praise his friendly spirit. But he had an almost mystic force of

severity, and those enormous squanderings of wealth, that facile

assumption of liabilities that characterized this period of the War,

must have doubtless produced in him a sense of infinite disgust. This

state of mind often made him very exigent, and sometimes unjustifiably

suspicious. His word had a decisive effect on the actions of the

English Treasury.

When the War was finished, he took part as first delegate of the

English Treasury at the Peace Conference of Paris, and was substituted

by the Chancellor of the Exchequer in the Supreme Economic Council.

He quitted his office when he had come to the conclusion that it was

hopeless to look for any fundamental change of the peace treaties.

His book is not only a document of political uprightness but the first

appeal to a sense of reality which, after an orgy of mistakes, menaces

a succession of catastrophes. In my opinion it merits a serious

reconsideration as the expression of a new conscience, as well as an

expression of the truth, which is only disguised by the existing state

of exasperation and violence.

After two years we must recognize that all the forecasts of Keynes

have been borne out by the facts: that the exchange question has grown

worse in all the countries who have been in the War, that the absurd

indemnities imposed on the enemies cannot be paid, that the depressed

condition of the vanquished is harmful to the victors almost in equal

measure with the vanquished themselves, that it menaces their very

existence, that, in fine, the sense of dissolution is more widespread

than ever.

The moment has come to make an objective examination of the indemnity

question, and to discuss it without any hesitation.

Let us lay aside all sentiment and forget the undertakings of the

peace treaties. Let us suppose that the Entente's declarations

and Wilson's proposals never happened. Let us imagine that we are

examining a simple commercial proposition stripped of all sentiment

and moral ideas.

After a great war it is useless to invoke moral sentiments: men, while

they are blinded by hatred, recognize nothing save their passion. It

is the nature of war not only to kill or ruin a great number of men,

not only to cause considerable material damage, but also, necessarily,

to bring about states of mind full of hate which cannot be ended at

once and which are even refractory to the language of reason.

For a long time I myself have looked upon the Germans with the

profoundest hatred. When I think of all the persons of my race dead in

the War, when I look back upon the fifteen months of anguish when my

first-born son was a prisoner of war in Germany, I am quite able to

understand the state of mind of those who made the peace and the

mental condition in which it was made. What determined the atmosphere

of the peace treaties was the fact that there was a conference

presided over by Clemenceau, who remembered the Prussians in the

streets of Paris after the war of 1870, who desired but one thing: the

extermination of the Germans. What created this atmosphere, or helped

to create it, was the action of Marshal Foch, who had lost in the War

the two persons dearest to him in life, the persons who attached him

to existence.

But now we must examine the question not in the light of our

sentiments or even of our hatreds. We must see quite calmly if the

treaties are possible of application without causing the ruin of the

vanquished. Then we must ask ourselves if the ruin of the vanquished

does not bring in its train the ruin of the victors. Putting aside,

then, all moral considerations, let us examine and value the economic

facts.

There is no question that the reparation problem exists solely in

the case of Germany, who has still a powerful statal framework which

allows her to maintain great efforts, capable not only of providing

her with the means of subsistence, but also of paying a large

indemnity to the victors. The other vanquished States are more in need

of succour than anything else.

What are the reparations?

Let us follow the _précis_ of them which a representative of France

made at the signing of the Treaty of Versailles. They are as follows:

1. Germany is responsible for the total of the losses and damages

sustained by her victors inasmuch as she caused them.

2. Germany, in consideration of the permanent diminution of her

resources, resulting from the Peace Treaty, is only obliged (but is

obliged without restitutions or reserves) to reimburse the direct

damages and the pensions as precised in Schedule I of Clause viii of

the treaty.

3. Germany must pay before May 1, 1921, not less than twenty milliards

of gold marks or make equivalent payment in kind.

4. On May 1 the Reparations Commission will fix the total amount of

the German debt.

5. This debt must be liquidated by annual payments whose totals are to

be fixed by the Commission.

6. The payments will continue for a period of thirty years, or longer

if by that time the debt is not extinguished.

7. Germany will issue one hundred milliards of gold marks of bearer

bonds, and afterwards all such issues as the Reparations Commission

shall demand, until the amount of the debt be reached in order to

permit the stabilization of credit.

8. The payments will be made in money and in kind. The payments in

kind will be made in coal, live stock, chemical products, ships,

machines, furniture, etc. The payments _in specie_ consist of metal

money, of Germany's credits, public and private, abroad, and of a

first charge on all the effects and resources of the Empire and the

German States.

9. The Reparations Commission, charged with seeing to the execution of

this clause, shall have powers of control and decision. It will be

a commission for Germany's debt with wider powers. Called upon to

decide, according to equity, justice and good faith, without being

bound by any codex or special legislation, it has obtained from

Germany an irrevocable recognition of its authority. Its duty is to

supervise until the extinction of the debt Germany's situation, her

financial operations, her effects, her capacity for production, her

provisioning, her production. This commission must decide what Germany

can pay each year, and must see that her payments, added to the

budget, fall upon her taxpayers at least to the extent of the allied

country most heavily taxed. Its decisions shall be carried out

immediately and receive immediate application, without any other

formality. The commission can effect all the changes deemed necessary

in the German laws and regulations, as well as all the sanctions,

whether of a financial, economic or military nature arising from

established violations of the clauses put under its control. And

Germany is obliged not to consider these "sanctions" as hostile acts.

In order to guarantee the payments an inter-allied army--in reality

a Franco-Belgian army--occupies the left bank of the Rhine, and is

stationed at the bridgeheads. Germany is completely helpless, and has

lost all the features of a sovereign State inasmuch as she is subject

to "controls" in a way that Turkey never was. In modern history we can

find no parallel for this state of things. These are conditions

which alter the very bases of civilization and the relations between

peoples. Such procedure has been unknown in Europe for centuries.

The public has become accustomed in certain countries to consider

responsible for the War not the government that wished it or the

German people, but the future generations. Thus the indemnities are

to be paid--were such conditions possible--in thirty years and for at

least twenty years afterwards by people still unborn at the time of

the War. This cursing of the guilty people has no parallel in modern

history. We must go back to the early ages of humanity to find

anything of the kind.

But even the most inhuman policies, such as Germany has never adopted

in her victories, although she has been accused of every cruelty, can

find at least some justification if they had a useful effect on the

country which has wished and accepts responsibility for them. The

conqueror has his rights. Julius Caesar killed millions of Germans

and retarded perhaps for some centuries the invasion of Rome. But

the practices established by the Treaty of Versailles are in effect

equally harmful to victors and vanquished, though maybe in unequal

measure, and in any case prepare the dissolution of Europe.

I had my share in arranging at San Remo the Spa Conference, in the

hope and with the desire of discussing frankly with the Germans what

sum they could pay by way of indemnity without upsetting their economy

and damaging severely that of the Allies. But the ministerial crisis

which took place in June, 1920, prevented me from participating at

the Spa Conference; and the profitable action which Great Britain had

agreed to initiate in the common interest, ours as well as France's,

could not be proceeded with. The old mistakes continued to be

repeated, though many attenuations have come about and the truth

begins to appear even for those most responsible for past errors.

We shall have to examine with all fair-mindedness if Germany is in

a position to pay in whole or in part the indemnity established or

rather resulting from the treaty. France especially believes, or has

said on several occasions she believes, that Germany can pay without

difficulty 350 milliards.

After many stupidities and many exaggerations which have helped

considerably to confuse the public, in face of the new difficulties

which have arisen, new arrangements for the payment of the indemnity

have been established. On May 11, in face of the situation which had

arisen, the Allies proposed and Germany accepted a fresh scheme for

the payment of the reparations. Germany is constrained to pay every

year in cash and in kind the equivalent of 500 million dollars, plus

26 per cent. of the total of her exports.

The rest of the accord refers to the procedure for the issue of

bonds guaranteed on the indicated payments, to the constitution of a

guarantee committee, and to the date of payment. Probably Germany will

have been able to get through the year 1921 without insurmountable

difficulties.

At Spa, on April 27, 1921, the proportionate sums assessed for each of

the conquering powers were established on a total indemnity notably

reduced in comparison with the earlier absurd demands.

But leaving alone the idea of an indemnity of 250, 150, or even 100

milliards of gold marks, it will be well to see in a concrete form

what Germany can be made to pay, and whether the useless and elaborate

structure of the Reparations Commission which, with its powers of

regulating the internal life of Germany for thirty years or more,

ought not to be substituted by a simpler formula more in sympathy with

civilized notions.

Shortly before the War, according to successive statistics, the

private wealth of France did not amount to more than 250 milliards.

The wealth of France, according to successive valuations, was

calculated at 208 milliards of francs in 1905 (de Foville), at 214

milliards in 1908 (Turquan), at about 250 milliards according to other

authors. The wealth of Belgium, according to official statistics

published by the Belgian Ministry of Finance in 1913, amounted to

rather less than 30 milliards of francs. The estimate is perhaps a

trifle low. But this official figure must not be considered as being

a long way from the truth. At certain moments Belgium's demands have

surpassed even the total of her national wealth, while the damages

have not been more than some milliards.

The value of the land in France was calculated before the War at

between 62 and 78 milliards; the value of the buildings, according

to _l'Annuaire Statistique de la France_, at 59-1/2 milliards. The

territory occupied by the Germans is not more than a tenth of the

national territory. Even taking into consideration the loss of

industrial buildings it is very difficult to arrive at the figure of

15 milliards. At the same time it is true that the Minister Loucheur

declared on February 17, 1919, in the French Chamber that the

reconstruction of the devastated regions in France required 75

milliards--that is, very much more than double the private wealth of

all the inhabitants of all the occupied regions.

In all the demands for compensation of the various States we have seen

not so much a real and precise estimate of the damages as a kind of

fixing of credit in the largest measure possible in order that in the

successive reductions each State should still have proportionally an

advantageous position.

Making his calculation with a generosity which I assert to be

excessive (and I assert this as a result of an accurate study of

the question, which perhaps I may have occasion to publish), Keynes

maintains that the damages for which Germany should be made to pay

come to 53 milliards for all losses on land and sea and for the

effects of aerial bombardments--53 milliards of francs all told,

including the damages of France, Great Britain, Italy, Belgium,

Serbia, etc.! I do not believe that the damages reach 40 milliards of

gold marks, unless, of course, we calculate in them the pensions and

allowances.

But these figures have but small interest, since the demands have been

almost entirely purely arbitrary.

What we must see is if Germany can pay, and if, with a regime of

restrictions and violence, she can hand over, not the many milliards

which have been announced and which have been a deplorable speculation

on the ignorance of the public, but a considerable sum, such as is

that which many folk still delude themselves it is possible to have.

Germany has already consigned all her transferable wealth; the gold in

her banks, her colonies, her commercial fleet, a large and even the

best part of her railway material, her submarine cables, her foreign

credits, the property of her private citizens in the victorious

countries, etc. Everything that could be handed over, even in

opposition to the rights of nations as such are known in modern

civilized States, Germany has given. She has also hypothecated all her

national goods. What can she give now?

Germany can pay in three ways only:

1. Merchandise and food products on account of the indemnity: coal,

machines, chemical products, etc.

2. Credits abroad coming from the sale of merchandise. If Germany

exports, that is sells eight milliard marks' worth of goods abroad,

she pays two milliards to the Reparations Commission.

3. Property of private citizens. Germany can enslave herself, ceding

the property of her private citizens to foreign States or citizens to

be disposed of as they wish.

Excluding this last form, which would constitute slavery pure and

simple, as useless, as impossible, and calculated to parallel the

methods in use among barbarous peoples, there only remain the first

two methods of payment which we will examine briefly.

It must be remembered that Germany, even before the War, was in

difficulties for insufficient avenues of development, given the

restricted nature of her territory and the exuberance of her

population. Her territory, smaller than that of France and much less

fertile, must now nourish a population which stands to that of France

as three to two.

If we have had gigantic war losses, Germany, who fought on all the

fronts, has had losses certainly not inferior to ours. She too has

had, in larger or smaller proportion, her dead and her mutilated.

She has known the most atrocious sufferings from hunger. Thus her

productive power is much diminished, not only on account of the grave

difficulties in which her people find themselves (and the development

of tuberculosis is a terrible index), but also for the lowered

productive capacity of her working classes.

The statistics published by the Office of Public Health of the Empire

(_Reichsgesundheitsamt_) and those given in England by Professor

Starling and laid before the British Parliament, leave no doubt in the

matter.

Germany has had more than 1,800,000 dead and many more than 4,000,000

of wounded. She has her mass of orphans, widows and invalids. Taken

altogether the structure of her people has become much worse.

What constituted the great productive force of the German people was

not only its capacity to work, but the industrial organization which

she had created with fifty years of effort at home and abroad with

many sacrifices. Now Germany has not only lost 8 per cent. of her

population, but _25_ per cent. of her territory, from which cereals

and potatoes were produced, and 10 to 12 per cent. of her live stock,

etc. We have already seen the enormous losses sustained by Germany in

coal, iron and potash.

The most intelligent and able working classes, created by the

most patient efforts, have been reduced to the state of becoming

revolutionary elements. By taking away from Germany at a stroke her

mercantile marine, about 60,000 sailors have been thrown on the

streets and their skill made useless.

Germany, therefore, impoverished in her agricultural territory,

deprived of a good part of her raw materials, with a population

weakened in its productive qualities, has lost a good part of her

productive capacity because all her organization abroad has been

broken, and everything which served as a means of exchange of

products, such as her mercantile fleet, has been destroyed. Moreover,

Germany encounters everywhere obstacles and diffidence. Impeded from

developing herself on the seas, held up to ridicule by the absurd

corridor of Danzig, whereby there is a Polish State in German

territory, she cannot help seeking life and raw materials in Russia.

In these conditions she must not only nourish her vast population, not

only produce sufficient to prevent her from falling into misery,

but must also pay an indemnity which fertile fantasies have made a

deceived Europe believe should amount even to 350 milliards of gold

marks, and which even now is supposed by seemingly reasonable people

to be able to surpass easily the sum of a hundred milliards.

Could France or Italy, by any kind of sacrifice, have paid any

indemnities after ending the War? Germany has not only to live and

make reparation, but to maintain an inter-allied army of occupation

and the heavy machinery of the Reparations Commission, and must

prepare to pay an indemnity for thirty years. France and Italy have

preserved their colonies (Italy's do not amount to much), their

mercantile fleets (which have much increased), their foreign

organization. Germany, without any of these things, is to find herself

able to pay an indemnity which a brazen-faced and ignorant Press

deceived the public into believing could amount to twenty or

twenty-five milliards a year.

Taking by chance Helferich's book, which valued the annual

capitalization at ten milliards, the difference between an annual

production of forty-three milliards and a consumption of thirty-three

milliards, inexpert persons have said that Germany can pay without

difficulty ten milliards, plus a premium on her exports, plus a

sufficient quantity of goods and products.

One becomes humiliated when one sees newspapers of serious reputation

and politicians deemed not to be unimportant reasoning in language so

false.

The estimates of private wealth, about which the economists make

experiments, and on which I myself have written much in the past, have

a relative value. It may be argued that before the War the total of

all private patrimony in Germany surpassed but by little three hundred

milliards of marks; and this is a valuation made upon generous

criteria.

But when it is said that the annual capitalization of Germany was

ten milliards, that is not to say that ten milliards of capital is

deposited in the banks ready to be transferred at will. Capitalization

means the creation of instruments of production. The national capital

increases in proportion as these are increased. Therefore the best way

of examining the annual capitalization of a country is to see how many

new industries have arisen, to what extent the old ones have been

improved, what improvements have been introduced into agriculture,

what new investments have been made, etc.

If the capitalization of Germany before the War was scarcely ten

milliards of marks, it was too small for an Empire of some 67,000,000

persons. I believe that in reality it was larger. But even if it came

to fifteen milliards, it represented a very small figure.

The population in the progressive countries augments every year. In

Germany, before the War, in the period 1908-1913, the population

increased on an average by 843,000 persons a year, the difference

between the people born alive and the dead. In other words, the annual

increase of the population per annum was at the rate of 13.0 per

thousand.

As in certain districts of Italy the peasants plant a row of trees on

the birth of every son, so among nations it is necessary to increase

the national wealth at least in proportion to the newly arrived.

Supposing that the private wealth of the German citizens was from 300

to 350 milliards of marks (an exaggeration, doubtless), it would mean

that the wealth increased each year by a thirteenth part or rather

more. The difference between the increase in population and the

increase in wealth constituted the effective increase in wealth, but

always in a form not capable of being immediately handled. To plant

trees, build workshops, utilize water-power: all this stands for the

output of so much force. One may undertake such works or not, but in

any case the result cannot immediately be given to the enemy.

This is so obvious as to be banal.

To seek to propagate the idea that Germany can give that which

constitutes her annual capitalization either wholly or in great part

is an example of extreme ignorance of economic facts.

It is positively painful to listen to certain types of argument.

A French Minister has said that the success of the war loans for 151

milliards in Germany, and the increase of bank deposits for a sum of

28 milliards, coinciding with an increase of capital of 45 milliards

in limited companies, demonstrate that Germany has saved at least 180

milliards in four years. Leaving aside the exactness of these figures,

it is really sad to observe reasoning of this type. How can the public

have an idea of the reality?

Let us apply the same reasoning to France. We must say that inasmuch

as France before the War had a public debt of 32 milliards, and now

has a debt of 265 milliards, without calculating what she owes to

Great Britain and the United States, France, by reason of the War, has

immensely enriched herself, since, leaving aside the debt contracted

abroad and the previous debt, she has saved during the War 200

milliards, quite apart from the increase in bank deposits and the

increase in capital of limited companies. The War has therefore

immensely enriched her. In reality we are face to face with one of the

phenomena of the intoxication brought about by paper money, by means

of which it has been possible at certain times for the public to

believe that the War had increased wealth. Other features of this

phenomenon we have in the wretched example of the capitalist classes,

after which it was not unnatural that the people should give way to

a great increase in consumption, should demand high wages and offer

little work in return at the very time when it was most necessary

to work more and consume less. There is small cause for wonder that

certain erroneous ideas are diffused among the public when they have

their being in those very sophisms according to which the indemnity to

be paid by the beaten enemy will pay all the debts and losses of the

conquering nations.

We are told that Germany, being responsible for the War, must impose

on herself a regime of restrictions and organize herself as an

exporting nation for the payment of the reparation debts.

Here again the question can be considered in two ways, according as

it is proposed to allow Germany a free commerce or to impose on her a

series of forced cessions of goods in payment of the reparations. Both

hypotheses can be entertained, but both, as we shall see, lead to

economic disorder in the conquering States, if these relations are to

be regulated by violence.

It is useless to dilate on the other aphorisms, or rather sophisms,

which were seriously discussed at the Paris Conference, and which had

even the honour of being sustained by the technical experts:

1. That it is not important to know what Germany can pay, but it is

sufficient to know what she ought to pay.

2. That no one can foresee what immense resources Germany will develop

within thirty or forty years, and what Germany will not be able to pay

will be paid by the Allies.

3. That Germany, under the stimulus of a military occupation, will

increase her production in an unheard-of manner.

4. The obligation arising from the treaty is an absolute one; the

capacity to pay can only be taken into consideration to establish the

number and amount of the annual payments; the total must in any case

be paid within thirty years or more.

5. _Elle ou nous_. Germany must pay; if she doesn't the Allies must

pay. It is not necessary that Germany free herself by a certain date;

it is only necessary that she pay all.

6. Germany has not to discuss, only to pay. Let time illustrate what

is at present unforeseeable, etc. etc.

If we exclude the third means of payment Germany has two ways open to

her. First of all she can give goods. What goods? When we speak of

goods we really mean coal. Now, as we have seen, according to the

treaty Germany must furnish for ten years to Belgium, Italy, and

France especially quantities of coal, which in the first five years

run from 39-1/2 to 42 millions of tons, and in the following five

years come to a maximum of about 32 millions. And all this when

she has lost the Saar coalfields and is faced with the threatening

situation in Upper Silesia.

Germany's exports reached their maximum in 1913, when the figures

touched 10,097 millions of marks, excluding precious metals. Grouping

exports and imports in categories, the millions of marks were

distributed as follows:

Imports. Exports.

Foodstuffs 2,759 1,035

Live animals 289 7.4

Raw materials 5,003 1,518

Semi-manufactured goods 5,003 1,139

Manufactured goods 1,478 6,395

About one-fifth of the entire exports was in iron and machine products

(1,337 [mil.] articles in iron, 680 machines); 722 millions from

coal (as against imports of other qualities of 289), 658 millions

of chemical products and drugs, 446 from cotton, 298 paint, 290

techno-electrical productions, etc.

What goods can Germany give in payment of the indemnity? We have seen

how she has lost a very large part of her iron and a considerable

quantity of her coal.

All the economic force of Germany was based upon:

(a) The proper use of her reserves of coal and iron, which allowed

her to develop enormously those industries which are based on these

two elements.

(b) On her transport and tariff system, which enabled her to fight any

competition.

(c) On her potent overseas commercial organization.

Now, by effect of the treaty, these three great forces have been

entirely or in part destroyed.

What goods can Germany give in payment of the indemnity, and what

goods can she offer without ruining the internal production of the

Entente countries? Let us suppose that Germany gives machines,

colours, wagons, locomotives, etc. Then for this very fact the

countries of the Entente, already suffering by unemployment, would

soon see their factories obliged to shut down. Germany must therefore,

above all, give raw materials; but since she is herself a country that

imports raw materials, and has an enormous and dense population, she

is herself obliged to import raw materials for the fundamental needs

of her existence.

If we examine Germany's commerce in the five years prior to the

War--that is, in the five years of her greatest boom--we shall find

that the imports always exceeded the exports. In the two years before

the War, 1912 and 1913, the imports were respectively 10,691 and

10,770 millions, and the exports 8,956 and 10,097 millions. In some

years the difference even exceeded two milliards, and was compensated

by credits abroad, with the payment of freights and with the

remittances (always considerable) of the German emigrants. All this is

lost.

Exported goods can yield to the exporter a profit of, let us suppose,

ten, twelve, or twenty per cent. For the Allies to take an income from

the Custom returns means in practice reducing the exports. In fact,

in Germany production must be carried on at such low prices as to

compensate for the difference, or the exports must be reduced.

In the first case (which is not likely, since Germany succeeds only

with difficulty, owing to her exchange, in obtaining raw materials,

and must encounter worse difficulties in this respect than other

countries), Germany would be preparing the ruin of the other countries

in organizing forms of production which are superior to those of

all her rivals. Germany would therefore damage all her creditors,

especially in the foreign markets.

In the second case--the reduction of exports, one would have

the exactly opposite effect to that imagined in the programme

proposed--that is, the indemnities would become unpayable.

In terms of francs or lire at par with the dollar, Germany's

exportations in 1920 have amounted to 7,250 millions. In 1921 an

increase may be foreseen.

If Germany has to pay in cash and kind 2,500 millions of marks at

par, plus 26 per cent. of the total of her exports, then supposing an

export trade of eight milliards, she will have to give 1,840 millions,

or in all 4,540 millions of marks. Thus we arrive by stages at less

hyperbolical figures, coming down from the twenty-five milliards

a year to something less than a fifth. But to come to grips with

reality, Germany in all ways, it must be admitted, cannot give more

than two milliards a year, if, indeed, it is desired that an indemnity

be paid.

Notwithstanding her great resources, France would not be in a

condition to pay abroad two milliards a year without ruining her

exchange, which would drop at once to the level of Germany's. Italy

with difficulty could pay one milliard.

France and Italy are honest countries, yet they cannot pay their war

creditors, and have not been able, and are not able, to pay any share

of their debt either to the United States of America or to Great

Britain. As a matter of fact, up till now they have paid nothing, and

the interest continues to accumulate with the capital.

Why have neither France nor Italy yet started to pay some of their

debt? Having won the War, France has had all she could have--fertile

territories, new colonies, an abundance of raw material, and above all

iron and potash. The simple explanation is that which I have given

above.

Can, then, Germany, who is in a terrible condition, whose circulation

promises ruin, who has no longer credits nor organization abroad, who

has a great shortage in raw materials; can Germany pay four or five

milliards a year?

We must also remember that Germany, in addition to the indemnity, must

pay the cost of the Army of Occupation, which up to now has amounted

to twenty-five milliards of paper marks a year, or more than 1,600

millions of francs at par. That is, Germany has to bear for the

support of the Allied troops a charge equal to the cost of maintaining

the armies of France, Italy and Belgium before the War.

No financier seriously believes that the issue of bonds authorized by

the treaty for the credit of the Reparations Commission has now any

probability of success. Germany's monetary circulation system is

falling to the stage of _assignats_, and the time is not distant

when, if intelligent provision is not made, Germany will not be in a

position to pay any indemnity.

Obliged to pay only one milliard of gold marks, Germany has not been

able to find this modest sum (modest, that is, in comparison with all

the dreams about the indemnity) without contracting new foreign debts

and increasing her already enormous paper circulation. Each new

indemnity payment, each new debt incurred, will only place Germany in

the position of being unable to make payments abroad.

Many capitalists, even in Italy, inspire their Press to state that

Germany derives an advantage from the depreciation of her mark, or,

in other words, is content with its low level. But the high exchanges

(and in the case of Germany it amounts to ruin) render almost

impossible the purchase of raw materials, of which Germany has need.

With what means must she carry out her payments if she is obliged to

cede a large part of her customs receipts, that is of her best form of

monetary value, and if she has no longer either credits or freights

abroad?

If what is happening injured Germany only, it would be more possible

to explain it, if not to justify it. But, on the contrary, Germany's

fall, which is also the decadence of Europe, profoundly disturbs not

only the European continent, but many other producing countries.

Though the United States and Great Britain partially escape the

effect, they too feel the influence of it, not only in their political

serenity, but in the market of goods and values. Germany's position

is bound up with that of Europe; her conquerors cannot escape dire

consequences if the erstwhile enemy collapses.

We must not forget that before the War, in the years 1912 and 1913,

the larger part of Germany's commerce was with the United States,

with Great Britain, with Russia and with Austria-Hungary. In 1913 her

commerce with the United States represented alone little less than

two milliards and a half of marks according to the statistics of the

German Empire, and 520 millions of dollars according to the figures

of America. If we except Canada, which we may consider a territorial

continuation, the two best customers of the United States were Great

Britain and Germany. They were, moreover, the two customers whose

imports largely exceeded the exports. The downfall of Germany will

bring about inevitably a formidable crisis in the Anglo-Saxon

countries and consequent ruin in other countries.

Up to now Germany has given all she could; any further payment will

cause a downfall without changing the actual monetary position.

Germany, after a certain point, will not pay, but will drag down in

her fall the economic edifices of the victorious countries of the

Continent.

All attempts at force are useless, all impositions are sterile.

All this is true and cannot be denied, but at the same time it must

be recognized that in the first move for the indemnity there was a

reasonable cause for anxiety on the part of the Allies.

If Germany had had to pay no indemnity this absurd situation would

have come about, that although exhausted, Germany would have issued

from the War without debts abroad and could easily have got into her

stride again, while France, Italy, and in much less degree Great

Britain, would have come out of the War with heavy debts.

This anxiety was not only just and well founded, but it is easy to see

why it gave ground for a feeling of grave disquiet.

France and Italy, the two big victor States of the Continent, were

only able to carry on the War through the assistance of Great Britain

and the United States. The War would not have lasted long without the

aid of the Anglo-Saxons, which had a decisive effect.

France has obtained all she asked for, and, indeed, more than all her

previsions warranted. Italy has found herself in a difficult position.

She too has realized her territorial aspirations, though not

completely, and the assistance of her Allies has not always been

cordial.

I have had, as head of the Government, to oppose all the agitations,

and especially the Adriatic adventures, which have caused an acute

party division in Italy. From a sense of duty I have also assumed all

responsibility. But the rigidness of Wilson in the Fiume and Adriatic

questions and the behaviour of some of the European Allies have been

perfectly unjustifiable. In certain messages to Wilson during my term

of government I did not fail to bring this fact forward. Certainly,

Jugo-Slavia's demands must be considered with a sense of justice, and

it would have been an error and an injustice to attribute to Italy

large tracts of territory in Dalmatia; but it would have been possible

to find a more reasonable settlement for a country which has had such

sufferings and known such losses during the War. In any case, when

by the absurd system followed in the treaties so many millions of

Germans, Magyars, Turks and Bulgarians have been handed over to States

like Serbia, whose intemperate behaviour precipitated the War, or to

States like Greece, which took only a small and obligatory part in it,

when States like Poland have won their unity and independence without

making war, when Germany has been dismembered in order to give Poland

an access to the sea and the ridiculous situation of Danzig has been

created, when the moral paradox of the Saar, which now becomes a

German Alsace-Lorraine, has been set up, when so many millions of men

have been parcelled out without any criteria, it was particularly

invidious to contest so bitterly Italy's claims. I can freely affirm

this inasmuch as, risking all popularity, I have always done my duty

as a statesman, pointing out that solution which time has proved to be

inevitable.

No one can deny that Italy is passing through a period of crisis and

political ill-health. Such states of public psychology are for peoples

what neurasthenia is for individuals. On what does it depend? Often

enough on reasons which cannot be isolated or defined. It is a state

of mind which may come to an end at any minute, and is consequent upon

the after-effects of the War. Rather than coming from the economic

disorder, it derives from a malady of the temperament.

I have never believed, in spite of the agitations which have been seen

at certain periods, in the possibility of a revolutionary movement in

Italy. Italy is the only country which has never had religious wars,

the only country which in twenty centuries has never had a real

revolution. Land of an ancient civilization, prone to sudden bursts of

enthusiasm, susceptible to rapid moods of discouragement, Italy, with

all the infinite resources of the Latin spirit, has always overcome

the most difficult crises by her wonderful adaptive power. In

human history she is, perhaps, the only country where three great

civilizations have risen up one after another in her limited soil.

If Italy can have the minimum of coal, cereals and raw materials

necessary to her existence and her economic revival, the traditional

good sense of the Italian people will easily overcome a crisis which

is grave, but which affects in various measure all the victors, and is

especially temperamental.

It cannot be denied that if all Europe is sick, Italy has its own

special state of mind. Those who wished the War and those who were

against it are both dissatisfied: the former because, after the

War, Italy has not had the compensations she expected, and has had

sufferings far greater than could have been imagined; the latter

because they attribute to the War and the conduct of the War the great

trials which the nation has now to face. This sickness of the spirit

is the greatest cause of disorder, since malcontent is always the

worst kind of leaven.

Four great countries decided the War: Great Britain, France, Italy,

and the United States of America. Russia fell to pieces soon, and

fell rather on account of her own internal conditions than from enemy

pressure. The action of the United States arrived late, but was

decisive. Each country, however, acted from a different state of mind.

France had of necessity to make war. Her territory was invaded, and

all hope of salvation lay in moral resistance alone. Great Britain

had to wage the War out of sense of duty. She had guaranteed the

neutrality of Belgium, and could not fail to keep her word of honour.

Two countries alone chose freely the sorrowful way of the War: Italy

and the United States. But their sacrifices, sufferings and losses

have been very different. During the War the United States have been

able to develop their immense resources, and, notwithstanding some

crises, they have come out of it much richer than before. From being

debtors to Europe they have become creditors. They had few losses

in men, and a great development in wealth. Italy, who after many

difficulties had developed in her famous but too narrow territory the

germs of a greater fortune, has had, together with very heavy losses

in men, heavy losses in her wealth.

Italy saved the destinies of France for the first time by declaring

her neutrality on August 2, 1914, and letting the certainty of it be

known from July 30, as the diplomatic documents have shown.

It was that sudden and unexpected declaration of neutrality which

rendered it possible for France to concentrate all her forces in the

north and to win the battle of the Marne. Italy for a second time

saved the destinies of the Entente by entering into the War (too

precipitately and unprepared), in May, 1915, thus preventing the

Austrian army, which was formidable for its technical organization and

for its valour, from obtaining the advantages it expected.

Why did Italy go to war?

The diplomatic documents, which are not all documents of political

wisdom, demonstrate the anxiety of the Italian Government to

realize its Adriatic programme and to gain secure frontiers against

Austria-Hungary and its successors. But this was not the _cause_

of the War; it was rather a means of explaining to the people the

necessity for the War. Italy had been for nearly thirty-four years

ally of Austria-Hungary, and the aspirations of Italy's Adriatic

policy had never disturbed the relations between the two countries.

The real cause of Italy's war was a sentimental movement, a form of

extraordinary agitation of the spirits, brought about by the invasion

of Belgium and the danger of France. The intellectual movement

especially, the world of culture, partook largely in fomenting the

state of exaltation which determined the War.

During the progress of the War, which was long and bitter, Italy

passed through some terrible hours. Her privations during the War, and

immediately after, surpassed all expectations. Italy found herself

face to face with an enemy who enjoyed a superior geographical

situation, a numerical superiority, as well as a superiority in

artillery. After the downfall of Russia she had to support a terrible

campaign. Even in 1917, after the military disaster, when allied

troops came to Italy, she sent abroad more men than there came allied

troops to her aid. According to some statistics which I had compiled,

and which I communicated to the Allies, Italy was shown, in relation

to her demographic structure, to have more men in the front line than

any other country. The economic sufferings were, and are, greater

than those endured by others. France is only in part a Mediterranean

country, while Italy is entirely so. During the War the action of the

submarines rendered the victualling of Italy a very difficult matter.

Many provinces, for months on end, had to content themselves with

the most wretched kind of food. Taking population and wealth into

proportion, if the United States had made the effort of Italy they

would have had to arm sixteen millions of men, to have lost a million

and a half to two million soldiers, and to have spent at least four

hundred milliards. In order to work up popular enthusiasm (and it was

perhaps necessary), the importance of the country's Adriatic claims

was exaggerated. Thus many Italians believe even to-day in good faith

that the War may be considered as lost if some of these aspirations

have not been realized or will not be realized.

But, after the War, Italy's situation suddenly changed. The War had

aroused in the minds of all Europeans a certain sentiment of violence,

a longing for expansion and conquest. The proclamations of the

Entente, the declarations of Wilson's principles, or points, became so

contorted that no trace of them could be found in the treaties, save

for that ironic _covenant_ of the League of Nations, which is always

repeated on the front page, as Dante said of the rule of St. Benedict,

_at the expense of the paper_.

For Italy a very curious situation came about. France had but one

enemy: Germany. She united all her forces against this enemy in

a coherent and single action which culminated in the Treaty of

Versailles. France had but one idea: to make the Entente abandon the

principles it had proclaimed, and try to suffocate Germany, dismember

her, humiliate her by means of a military occupation, by controlling

her transports, confiscating all her available wealth, by raising

to the dignity of elevated and highly civilized States inferior

populations without national dignity.

Austria-Hungary was composed of eleven peoples. It was split up into

a series of States. Austria and Hungary were reduced to small

territories and shut up in narrow confines. All the other countries

were given to Rumania, to Serbia, or more exactly to the S.H.S.

State, to Poland, or else were formed into new States, such as

Czeko-Slovakia. These countries were considered by the Entente as

allies, and, to further good relations, the most important of the

Entente nations protected their aspirations even against the wishes of

Italy. The Italians had found themselves in their difficult theatre of

war against Galatians, Bosnians, Croats, Transylvanians, etc. But

by the simple fact of their having changed names, and having called

themselves Poles, Jugo-Slavs, Rumanians, they became friends. In order

to favour some of these new friends, it has happened that not only

have Italy's sentiments been offended, but even justice itself.

Montenegro was always mentioned in the declarations of the Entente.

On January 10, 1917, Briand, speaking in the name of all the Allies,

united at that time _pour la défense et la liberté des peuples_, put

forward as a fundamental programme the restoration of Belgium, Serbia

and Montenegro: Montenegro was in this on an equality with Belgium.

Just a year afterwards, January 8, 1918, Wilson, when formulating his

fourteen points, had included in the eleventh proposition the duty

of evacuating the territories of Rumania, Serbia and Montenegro, and

restoring them. The exact reason for which it was established that

Montenegro should be absorbed (even without plebiscite) by the S.H.S.

State, thus offending also Italy's sentiments, will remain one of the

most melancholy pages of the New Holy Alliance that the Entente has

become, along with that poor prestigeless organism, the League of

Nations. But let us hope this latter will find a means of renovating

itself.

While France was ruining the German people's sources of life, the

peoples who had fought most ferociously against Italy became, through

the War, friendly nations, and every aspiration of Italy appeared

directed to lessen the prestige of the new friends and allies.

The territories annexed to Italy have a small economic value.

For more than thirty years Italy had sold a large part of her richest

agricultural produce to Germany and had imported a considerable share

of her raw materials from Russia. Since the War she has found herself

in a state of regular isolation. A large part of the Italian Press,

which repeats at haphazard the commonest themes of the French Press

instead of wishing for a more intense revival of commercial relations

with Germany, frightens the ignorant public with stories of German

penetration; and the very plutocracy in France and Italy--though not

to the same extent in Italy--abandons itself to the identical error.

So to-day we find spread throughout the peninsula a sense of

lively discontent which is conducive to a wider acceptance of the

exaggerations of the Socialists and the Fascists. But the phenomenon

is a transitory one.

Italy had no feeling of rancour against the German people. She

entered the War against German Imperialism, and cannot now follow

any imperialistic policy. Indeed, in the face of the imperialistic

competitions which have followed the War, Italy finds herself in a

state of profound psychological uneasiness.

France worries herself about one people only, since as a matter of

fact she has only one warlike race at her frontiers: Germany. Italy's

frontiers touch France, the German peoples, the Slav races. It is,

therefore, her interest to approve a democratic policy which allows no

one of the group of combatants to take up a position of superiority.

The true Italian nationalist policy consists in being against all

excessive nationalisms, and nothing is more harmful to Italy's policy

than the abandonment of those democratic principles in the name of

which she arose and by which she lives. If the policy of justice is

a moral duty for the other nations, for Italy it is a necessity of

existence. The Italian people has a clear vision of these facts,

notwithstanding a certain section of her Press and notwithstanding the

exaggerations of certain excited parties arisen from the ashes of the

War. And therefore her uneasiness is great. While other countries have

an economic crisis, Italy experiences, in addition, a mental crisis,

but one with which she will be able to cope.

France, however, is in a much more difficult situation, and her policy

is still a result of her anxieties. All the violences against Germany

were, until the day before yesterday, an effect of hatred; to-day they

derive from dread. Moral ideas have for nations a still greater value

than wealth. France had until the other day the prestige of her

democratic institutions. All of us who detested the Hohenzollern

dynasty and the insolent fatuity of William II loved France, heir of

the bourgeois revolution and champion of democracy. So, when the War

came, all the democracies felt a lively pang: the crushing of France

meant the crushing of democracy and liberty. All the old bonds are

broken, all the organization which Germany had abroad is smashed up,

and France has been saved, not by arms alone, but by the potent life

of free peoples.

Yet victory has taken away from France her greatest prestige, her

fascination as a democratic country. Now all the democratic races of

the world look at France with an eye of diffidence--some, indeed, with

rancour; others with hate. France has comported herself much more

crudely toward Germany than a victorious Germany would have comported

herself toward France. In the case of Russia, she has followed purely

plutocratic tendencies. She has on foot the largest army in the world

in front of a helpless Germany. She sends coloured troops to occupy

the most cultured and progressive cities of Germany, abusing the

fruits of victory. She shows no respect for the principle of

nationality or for the right of self-determination.

Germany is in a helpless and broken condition to-day; she will not

make war; she cannot. But if to-morrow she should make war, how many

peoples would come to France's aid?

The policy which has set the people of Italy against one another, the

diffusion of nationalist violence, the crude persecutions of enemies,

excluded even from the League of Nations, have created an atmosphere

of distrust of France. Admirable in her political perceptiveness,

France, by reason of an error of exaltation, has lost almost all the

benefit of her victorious action.

A situation hedged with difficulties has been brought about. The

United States and Great Britain have no longer any treaty of alliance

of guarantee with France. The Anglo-Saxons, conquerors of the War and

the peace, have drawn themselves aside. Italy has no alliance and

cannot have any. No Italian politician could pledge his country, and

Parliament only desires that Italy follow a democratic, peaceful

policy, maintaining herself in Europe as a force for equilibrium and

life.

France, apart from her military alliance with Belgium, has a whole

system of alliances based largely on the newly formed States: shifting

sands like Poland, Russia's and Germany's enemy, whose fate no one can

prophesy when Germany is reconstructed and Russia risen again, unless

she finds a way of remedying her present mistakes, which are much more

numerous than her past misfortunes. Thus the more France increases her

army, the more she corners raw materials and increases her measures

against Germany, the more unquiet she becomes.

She has seen that Germany, mistress on land, and to a large extent on

the seas, after having carried everywhere her victorious flag, after

having organized her commerce and, by means of her bankers, merchants

and capitalists, made vast expansions and placed a regular network of

relations and intrigue round the earth, fell when she attempted her

act of imperialistic violence. France, when in difficulties, appealed

to the sentiment of the nations and found arms everywhere to help her.

What then is able organization worth to-day?

The fluctuations of fortune in Europe show for all her peoples a

succession of victories and defeats. There are no peoples always

victorious. After having, under Napoleon I, humiliated Germany, France

saw the end of her imperialistic dream, and later witnessed the ruin

of Napoleon III. She has suffered two great defeats, and then, when

she stood diminished in stature before a Germany at the top of her

fortune, she, together with the Allies, has had a victory over an

enemy who seemed invincible.

But no one can foresee the future. To have conveyed great nuclei of

German populations to the Slav States, and especially to Poland; to

have divided the Magyars, without any consideration for their fine

race, among the Rumanians, Czeko-Slovaks and the Jugo-Slavs; to have

used every kind of violence with the Bulgars; to have offended Turkey

on any and every pretext; to have done this is not to have guaranteed

the victory and the peace.

Russia sooner or later will recover. It is an illusion to suppose that

Great Britain, France and Italy can form an agreement to regulate the

new State or new States that will arise in Russia. There are too many

tendencies and diverse interests. Germany, too, will reconstruct

herself after a series of sorrows and privations, and no one can say

how the Germans will behave. Unless a policy of peace and social

renovation be shaped and followed, our sons will witness scenes much

more terrible than those which have horrified our generation and upset

our minds even more than our interests.

Meanwhile, in spite of the frightful increase of scrofula, rickets

and tuberculosis, from which the conquered peoples are principally

suffering, the march of the nations will proceed according to the laws

which have hitherto ruled them and on which our limited action can

only for brief periods cause small modifications or alterations.

Demographic forecasts, like all forecasts of social events, have but

a comparative value. It is true that demographic movements are

especially biological manifestations, but it is also true that

economic and social factors exercise a profound influence in limiting

their regularity and can disturb them very considerably. It is better

therefore not to make long prophecies.

What is certain is that the French population has increased almost

imperceptibly while the population of Germany augmented very rapidly.

The annual average of births in the five years before the War,

1908-13, was 762,000 in France and 176,000 in Belgium. In Germany it

was 1,916,000. The average of deaths was 729,000 in France, 117,000 in

Belgium, and 1,073,000 in Germany. Thus, per thousand, the excess of

births in France was 0.9, in Belgium 7.7, in Germany 13. The War

has terribly aggravated the situation in France, whose demographic

structure is far from being a healthy one. From statistics published

giving the first results of the French census of 1921--without the new

territory of Alsace-Lorraine--France, in the interval between the

two census periods, has decreased by 2,102,864; from 39,602,258 to

37,499,394 (1921). The deaths in the War do not represent a half of

this decrease, when is deducted the losses among the coloured troops

and those from French colonies who fought for France. The new

territories annexed to France do not compensate for the War-mortality

and the decrease in births.

We may presume that if normal conditions of life return, the

population of Germany and German-Austria will be more than one hundred

millions, that the population of Belgium altogether little less than

fifty millions, that Italy will have a population much greater than

that of France, of at least forty-five million inhabitants, and that

Great Britain will have about sixty million inhabitants. In the case

of the Germans we have mentioned one hundred million persons, taking

into consideration Germany and German-Austria. But the Germans of

Poland, of Czeko-Slovakia and the Baltic States will amount to at

least twenty millions of inhabitants. No one can make forecasts, even

of an approximate nature, on Russia, whose fecundity is always the

highest in Europe, and whose losses are rapidly replaced by a high

birth-rate even after the greatest catastrophes. And then there are

the Germans spread about the world, great aggregations of populations

as in the United States of America and in a lesser degree in Brazil.

Up to now these people have been silent, not only because they were

surrounded by hostile populations, but because the accusation of being

sons of the Huns weighed down upon them more than any danger of the

War. But the Treaty of Versailles, and more still the manner in

which it has been applied, is to dissipate, and soon will entirely

dissipate, the atmosphere of antipathy that existed against the

Germans. In Great Britain the situation has changed profoundly in

three years. The United States have made their separate peace and want

no responsibility. In Italy there scarcely exists any hatred for the

Germans, and apart from certain capitalists who paint in lurid colours

the danger of German penetration in their papers because they want

higher tariff protection and to be able to speculate on government

orders, there is no one who does not desire peace with all peoples.

The great majority of the Italian people only desire to reconstruct

the economic and social life of the nation.

Certain tendencies in France's policy depend perhaps on her great

anxiety for the future, an anxiety, in fact, not unjustified by the

lessons of the past. Germany, notwithstanding her fallen state, her

anguish and the torment she has to go through, is so strong and vital

that everybody is certain of seeing her once again potent, indeed more

potent and formidable than ever.

Everyone in France is convinced that the Treaty of Versailles has lost

all foundation since the United States of America abandoned it, and

since Great Britain and Italy, persuaded of the impossibility of

putting certain clauses into effect, have shown by their attitude that

they are not disposed to entertain coercive measures which are as

useless as they are damaging.

In France the very authors of the Treaty of Versailles recognize that

it is weakened by a series of successive attenuations. Tardieu has

asserted that the Treaty of Versailles tends to be abandoned on all

sides: "_Cette faillite a des causes allemandes, des causes alliés,

des causes françaises_" (p. 489). The United States has asked itself,

after the trouble that has followed the treaty, if wisdom did not lie

in the old time isolation, in Washington's testament, in the Monroe

doctrine: _Keep off_. But in America they have not understood, says

Tardieu, that to assist Europe the same solidarity was necessary that

existed during the War (p. 493).

Great Britain, according to Tardieu, tends now also to stand aside.

The English are inclined to say, "_N'en parlons plus_" (p. 493). No

Frenchman will accept with calm the manner in which Lloyd George has

conceived the execution of the peace treaty. The campaign for the

revision of the treaties sprang up in lower spheres and from popular

associations and workmen's groups, has surprised and saddened the

French spirit (p. 495). In the new developments "_était-ce une autre

Angleterre, était-ce un autre Lloyd George_?" (p. 496). Even in France

herself Tardieu recognizes sadly the language has altered: "_les

gouvernements français, qui se sont succédé au pouvoir depuis le_ 10

_janvier_, 1920," that is, after the fall of Clemenceau, accused in

turn by Poincaré of being weak and feeble in asserting his demands,

"_ont compromis les droits que leur prédecesseur avait fait

reconnaître à la France_" (p. 503).

Taking into consideration Germany's financial downfall, which

threatens to upset not only all the indemnity schemes but the entire

economy of continental Europe, the state of mind which is prevalent is

not much different from that which Tardieu indicates.

It is already more than a year ago since I left the direction of the

Italian Government, and the French Press no longer accused me of being

in perfect agreement with Lloyd George, yet Poincaré wrote on August

1, 1920:

_L'autre jour M. Asquith déclarait au parlement britannique: "Quelque

forme de langage qu'on emploie, la conférence de Spa a bien été, en

fait, une conférence pour la révision des conditions du traité."

"Chut!" a répondu M. Lloyd George: "c'est là une déclaration très

grave par l'effet qu'elle peut produire en France. Je ne puis la

laisser passer sans la contredire." Contradiction de pure forme, faite

pour courtoisie vis-à-vis de nous, mais qui malheureusement ne change

rien au fond des choses. Chaque fois que le Conseil Suprême s'est

réuni, il a laissé sur la table des delibérations quelques morceaux

épars du traité_.

No kind of high-handedness, no combined effort, will ever be able to

keep afloat absurdities like the dream of the vast indemnity, the

Polish programme, the hope of annexing the Saar, etc. As things go

there is almost more danger for the victors than for the vanquished.

He who has lost all has nothing to lose. It is rather the victorious

nations who risk all in this disorganized Europe of ours. The

conquerors arm themselves in the ratio by which the vanquished disarm,

and the worse the situation of our old enemies becomes, so much

the worse become the exchanges and the credits of the victorious

continental countries.

Yet, in some of the exaggerated ideas of France and other countries of

the Entente, there is not only the rancour and anxiety for the future,

but a sentiment of well-founded diffidence. After the War the European

States belonging to the Entente have been embarrassed not only on

account of the enormous internal debts, but also for the huge debts

contracted abroad.

If Germany had not had to pay any indemnity and had not lost her

colonies and mercantile marine we should have been confronted with the

absurd paradox that the victorious nations would have issued from

the War worn out, with their territories destroyed, and with a huge

foreign debt; Germany would have had her territory quite intact, her

industries ready to begin work again, herself anxious to start

again her productive force, and in addition with no foreign debt,

consequently ample credit abroad. In the mad struggle to break

up Germany there has had part not only hatred, but also a quite

reasonable anxiety which, after all, must be taken into consideration.

Even to-day, three years after the War, Great Britain has not paid her

debt to America, and France and Italy have not paid their debts to

America and Great Britain. Great Britain could pay with a great

effort; France and Italy cannot pay anyhow.

According to the accounts of the American Treasury the Allies' War

debt is 9,587 millions of dollars: 4,277 millions owing from Great

Britain, 2,977 millions from France, 1,648 millions from Italy, 349

millions from Belgium, 187 millions from Russia, 61 millions from

Czeko-Slovakia, 26 millions from Serbia, 25 millions from Rumania, and

15 millions from Greece. Up to last July Great Britain had paid back

110 millions of dollars. Since the spring of 1919 the payment of

the interest on the amounts due to the American Treasury has been

suspended by some European States. Between October and November, 1919,

the amount of the capitalizing and unpaid interests of the European

States came to 236 million dollars. The figure has considerably

increased since then.

According to the _Statist_ (August 6, 1921) the Allies' debt to the

United States on March 31, 1921, amounted to ten milliards and 959

million dollars, including the interests, in which sum Great Britain

was interested to the sum of 4,775 million dollars and France for

3,351 million dollars. But the _Statist's_ figures, in variance to the

official figures, include other debts than strictly war debts.

The debts of the various allied countries' to Great Britain on March

31, 1921, according to a schedule annexed to the financial

statement for 1921-22, published by the British Treasury, came to

£1,777,900,000, distributed as follows: France 557 millions, Italy

476 millions, Russia 561 millions, Belgium 94 millions, Serbia 22

millions, Portugal, Rumania, Greece and other Allies 66 millions. This

sum represents War debts. But to it must be added the £9,900,000 given

by Great Britain for the reconstruction of Belgium and the loans

granted by her for relief to an amount of £16,000,000. So, altogether,

Great Britain's credit to the Allies on March 31, 1921, was

£1,803,600,000, and has since been increased by the interests. Great

Britain had also at the same date a credit of £144,000,000 to her

dominions.

France has credit of little less than nine milliard francs, of which

875 millions is from Italy, four milliards from Russia, 2,250 millions

from Belgium, 500 millions from the Jugo-Slavs, and 1,250 millions

from other Allies. Italy has only small credits of no account.

Now this situation, by reason of which the victorious countries of

Europe are heavy debtors (France has a foreign debt of nearly 30

milliards, and Italy a debt of more than 20 milliards) in comparison

with Germany, which came out of the War without any debt, has created

a certain amount of bad feeling. Germany would have got on her feet

again quicker than the victors if she had no indemnity to pay and had

no foreign debts to settle.

France's anxieties in this matter are perfectly legitimate and must be

most seriously considered without, however, producing the enormities

of the Treaty of Versailles.

Assuming this, the situation may be stated in the following terms:

1. All the illusions as to the capacity of Germany being able to pay

have fallen to pieces, and the indemnities, after the absurd demands

which tended to consider as inadequate the figure of 350 milliards

and an annual payment of from ten to fifteen milliards have become

an anxious unknown quantity, as troublesome to the victors as to the

vanquished. The German circulation has lost all control under the

force of internal needs, and Germany is threatened with failure.

The other debtors--Austria-Hungary, Turkey, Bulgaria--have need

of succour, and can pay nothing. Austria has need of the most

indispensable objects of existence, and everything is lacking.

2. The indemnity which Germany can pay annually in her present

condition cannot, calculating goods and cash payments altogether,

represent more than two or three milliards at the most.

3. The victorious countries, such as France, have won immense

territories and great benefits, yet they have not been able to pay the

War debts contracted abroad, and not even the interests. France and

Italy, being countries of good faith, have demonstrated that, if they

cannot pay, it is absurd to demand the payment of much higher sums

from countries like Germany, which has lost almost all her best

resources: mercantile fleet, colonies and foreign organization, etc.

4. The danger exists that with the aggravation of the situation in the

vanquished countries and the weakening of the economic structure of

Europe, the vanquished countries will drag the victors down with

them to ruin, while the Anglo-Saxon peoples, standing apart from

Continental Europe, will detach themselves more and more from its

policy.

5. The situation which has come about is a reason for everyone to be

anxious, and threatens both the downfall of the vanquished and the

almost inevitable ruin of the victors, unless a way is found of

reconstructing the moral unity of Europe and the solidarity of

economic life.