CHAPTER II

FROM THE RATIFICATION OF THE TREATY OF VERSAILLES TO THE SECOND

ULTIMATUM OF LONDON

I. _The Execution of the Treaty and the Plebiscites_

The Treaty of Versailles was ratified on January 10, 1920, and except

in the plebiscite areas its territorial provisions came into force on

that date. The Slesvig plebiscite (February and March, 1920) awarded

the north to Denmark and the south to Germany, in each case by a

decisive majority. The East Prussian plebiscite (July, 1920) showed an

overwhelming vote for Germany. The Upper Silesian plebiscite (March,

1921) yielded a majority of nearly two to one in favor of Germany for

the province as a whole,[2] but a majority for Poland in certain areas

of the south and east. On the basis of this vote, and having regard to

the industrial unity of certain disputed areas, the principal Allies,

with the exception of France, were of opinion that, apart from the

southeastern districts of Pless and Rybnik which, although they contain

undeveloped coalfields of great importance, are at present agricultural

in character, nearly the whole of the province should be assigned to

Germany. Owing to the inability of France to accept this solution,

the whole problem was referred to the League of Nations for final

arbitration. This body bisected the industrial area in the interests of

racial or nationalistic justice; and introduced at the same time, in

the endeavor to avoid the consequences of this bisection, complicated

economic provisions of doubtful efficiency in the interests of material

prosperity. They limited these provisions to fifteen years, trusting

perhaps that something will have occurred to revise their decision

before the end of that time. Broadly speaking, the frontier has been

drawn, entirely irrespective of economic considerations, so as to

include as large as possible a proportion of German voters on one side

of it and Polish voters on the other (although to achieve this result

it has been thought necessary to assign two almost purely German towns,

Kattowitz and Königshütte to Poland). From this limited point of view

the work may have been done fairly. But the Treaty had directed that

economic and geographical considerations should be taken into account

also.

I do not intend to examine in detail the wisdom of this decision. It

is believed in Germany that subterranean influence brought to bear

by France contributed to the result. I doubt if this was a material

factor, except that the officials of the League were naturally anxious,

in the interests of the League itself, to produce a solution which

would not be a fiasco through the members of the Council of the

League failing to agree about it amongst themselves; which inevitably

imported a certain bias in favor of a solution acceptable to France.

The decision raises, I think, much more fundamental doubts about this

method of settling international affairs.

Difficulties do not arise in simple cases. The League of Nations

will be called in where there is a conflict between opposed and

incommensurable claims. A good decision can only result by impartial,

disinterested, very well–informed and authoritative persons taking

_everything_ into account. Since International Justice is dealing with

vast organic units and not with a multitude of small units of which

the individual particularities are best ignored and left to average

themselves out, it cannot be the same thing as the cut–and–dried

lawyer’s justice of the municipal court. It will be a dangerous

practice, therefore, to entrust the settlement of the ancient conflicts

now inherent in the tangled structure of Europe, to elderly gentlemen

from South America and the far Asiatic East, who will deem it their

duty to extract a strict legal interpretation from the available

signed documents,—who will, that is to say, take account of as _few_

things as possible, in an excusable search for a simplicity which is

not there. That would only give us more judgments of Solomon with the

ass’s ears, a Solomon with the bandaged eyes of law, who, when he says

“Divide ye the living child in twain,” means it.

The Wilsonian dogma, which exalts and dignifies the divisions of race

and nationality above the bonds of trade and culture, and guarantees

frontiers but not happiness, is deeply embedded in the conception of

the League of Nations as at present constituted. It yields us the

paradox that the first experiment in international government should

exert its influence in the direction of intensifying nationalism.

These parenthetic reflections have arisen from the fact that from a

certain limited point of view the Council of the League may be able to

advance a good case in favor of its decision. My criticism strikes more

deeply than would a mere allegation of partiality.

With the conclusion of the plebiscites the frontiers of Germany were

complete.

In January 1920 Holland was called on to surrender the Kaiser; and,

to the scarcely concealed relief of the Governments concerned, she

duly refused (January 23, 1920). In the same month the surrender of

some thousands of “war criminals” was claimed, but, in the face of a

passionate protest from Germany, was not insisted on. It was arranged

instead that, in the first instance at least, only a limited number of

cases should be pursued, not before Allied Courts, as provided by the

Treaty, but before the High Court of Leipzig. Some such cases have been

tried; and now, by tacit consent, we hear no more about it.

On March 13, 1920, an outbreak by the reactionaries in Berlin (the

Kapp “Putsch”) resulted in their holding the capital for five days

and in the flight of the Ebert Government to Dresden. The defeat of

this outbreak, largely by means of the weapon of the general strike

(the first success of which was, it is curious to note, in defense

of established order), was followed by Communist disturbances in

Westphalia and the Ruhr. In dealing with this second outbreak, the

German Government despatched more troops into the district than was

permissible under the Treaty, with the result that France seized the

opportunity, without the concurrence of her Allies, of occupying

Frankfurt (April 6, 1920) and Darmstadt, this being the immediate

occasion of the first of the series of Allied Conferences recorded

below—the Conference of San Remo.

These events, and also doubts as to the capacity of the Central German

Government to enforce its authority in Bavaria, led to successive

postponements of the completion of disarmament, due under the Treaty

for March 31, 1920, until its final enforcement by the London Ultimatum

of May 5, 1921.

There remains Reparation, the chief subject of the chronicle which

follows. In the course of 1920 Germany carried out certain specific

deliveries and restitutions prescribed by the Treaty. A vast quantity

of identifiable property, removed from France and Belgium, was duly

restored to its owners.[3] The Mercantile Marine was surrendered. Some

dyestuffs were delivered, and a certain quantity of coal. But Germany

paid no cash, and the real problem of Reparation was still postponed.[4]

With the Conferences of the spring and summer of 1920 there began the

long series of attempts to modify the impossibilities of the Treaty and

to mold it into workable form.

II. _The Conferences of San Remo_ (_April_ 19–26, 1920), _Hythe_ (_May_

15 _and June_ 19, 1920), _Boulogne_ (_June_ 21, 22, 1920), _Brussels_

(_July_ 2–3, 1920), _and Spa_ (_July_ 5–16, 1920)

It is difficult to keep distinct the series of a dozen discussions

between the Premiers of the Allied Powers which occupied the year from

April 1920 to April 1921. The result of each Conference was generally

abortive, but the total effect was cumulative; and by gradual stages

the project of revising the Treaty gained ground in every quarter. The

Conferences furnish an extraordinary example of Mr. Lloyd George’s

methods. At each of them he pushed the French as far as he could, but

not as far as he wanted; and then came home to acclaim the settlement

provisionally reached (and destined to be changed a month later) as an

expression of complete accord between himself and his French colleague,

as a nearly perfect embodiment of wisdom, and as a settlement which

Germany would be well advised to accept as final, adding about every

third time that, if she did not, he would support the invasion of

her territory. As time went on, his reputation with the French was

not improved; yet he steadily gained his object,—though this may be

ascribed not to the superiority of the method as such, but to facts

being implacably on his side.

The first of the series, the Conference of San Remo (April 19–26,

1920), was held under the presidency of the Italian Premier, Signor

Nitti, who did not conceal his desire to revise the Treaty. M.

Millerand stood, of course, for its integrity, whilst Mr. Lloyd George

(according to _The Times_ of that date) occupied a middle position.

Since it was evident that the French would not then accept any new

formula, Mr. Lloyd George concentrated his forces on arranging for a

discussion face to face between the Supreme Council and the German

Government, such a meeting, extraordinary to relate, having never yet

been arranged, neither during the Peace Conference nor afterwards.

Defeated in a proposal to invite German representatives to San Remo

forthwith, he succeeded in carrying a decision to summon them to

visit Spa in the following month “for the discussion of the practical

application of the Reparation Clauses.” This was the first step; and

for the rest the Conference contented itself with a Declaration on

German Disarmament. Mr. Lloyd George had had to concede to M. Millerand

that the integrity of the Treaty should be maintained; but speaking in

the House of Commons on his return home, he admitted a preference for a

not “too literal” interpretation of it.

In May the Premiers met in privacy at Hythe to consider their course

at Spa. The notion of the sliding scale, which was to play a great

part in the Paris Decisions and the Second Ultimatum of London, now

came definitely on the carpet. A Committee of Experts was appointed to

prepare for examination a scheme by which Germany should pay a certain

minimum sum each year, supplemented by further sums in accordance with

her capacity. This opened the way for new ideas, but no agreement was

yet in sight as to actual figures. Meantime the Spa Conference was put

off for a month.

In the following month the Premiers met again at Boulogne (June 21,

1920), this meeting being preceded by an informal week–end at Hythe

(June 19, 1920). It was reported that on this occasion the Allies got

so far as definitely to agree on the principle of minimum annuities

extensible in accordance with Germany’s economic revival. Definite

figures even were mentioned, namely, a period of thirty–five years and

minimum annuities of three milliard gold marks. The Spa Conference was

again put off into the next month.

At last the Spa meeting was really due. Again the Premiers met

(Brussels, July 2, 3, 1920) to consider the course they would adopt.

They discussed many things, especially the proportions in which the

still hypothetical Reparation receipts were to be divided amongst

the claimants.[5] But no concrete scheme was adopted for Reparation

itself. Meanwhile a memorandum handed in by the German experts made

it plain that no plan politically possible in France was economically

possible in Germany. “The Note of the German economic experts,” wrote

_The Times_ on July 3, 1920, “is tantamount to a demand for a complete

revision of the Peace Treaty. The Allies have therefore to consider

whether they will call the Germans sharply to order under the menace of

definite sanctions, or whether they will risk creating the impression

of feebleness by dallying with German tergiversations.” This was a

good idea; if the Allies could not agree amongst themselves as to the

precise way of altering the Treaty, a “complete accord” between them

could be re–established by “calling the Germans sharply to order” for

venturing to suggest that the Treaty could be altered at all.

At last, on July 5, 1920, the long–heralded Conference met. But,

although it occupied twelve days, no time was found for reaching

the item on the agenda which it had been primarily summoned to

discuss—namely, Reparations. Before this dangerous topic could be

reached urgent engagements recalled M. Millerand to Paris. One of the

chief subjects actually dealt with, coal, is treated in Excursus I.

at the conclusion of this chapter. But the chief significance of the

meeting lay in the fact that then for the first time the responsible

ministers and experts of Germany and the Allied States met face to face

and used the methods of public conference and even private intimacy.

The Spa Conference produced no plan; but it was the outward sign of

some progress under the surface.

III. _The Brussels Conference_ (_December_ 16–22, 1920)

Whilst the Spa Conference made no attempt to discuss the general

question of the Reparation settlement, it was again agreed that the

latter should be tackled at an early date. But time passed by, and

nothing happened. On September 23, 1920, M. Millerand succeeded to

the Presidency of the French Republic, and his place as Premier was

taken by M. Leygues. French official opinion steadily receded from

the concessions, never fully admitted to the French public, which

Mr. Lloyd George had extracted at Boulogne. They now preferred to

let the machinery of the Reparation Commission run its appointed

course. At last, however, on November 6, 1920, after much diplomatic

correspondence, it was announced that once again the French and British

Governments were in “complete accord.” A conference of experts,

nominated by the Reparation Commission, was to sit with German experts

and report; then a conference of ministers was to meet the German

Government and report; with these two reports before it the Reparation

Commission was to fix the amount of Germany’s liability; and finally,

the heads of the Allied Governments were to meet and “take decisions.”

“Thus,” _The Times_ recorded, “after long wanderings in the wilderness

we are back once more at the Treaty of Versailles.” The re–perusal of

old files of newspapers, which the industrious author has undertaken,

corroborates, if nothing else does, the words of the Preacher and the

dustiness of fate.

The first stage of this long procedure was in fact undertaken, and

certain permanent officials of the Allied Governments[6] met German

representatives at Brussels, shortly before Christmas 1920, to

ascertain facts and to explore the situation generally. This was a

conference of “experts” as distinguished from the conferences of

“statesmen” which preceded and followed it.

The work of the Brussels experts was so largely ignored and overthrown

by the meetings of the statesmen at Paris shortly afterwards, that it

is not now worth while to review it in detail. It marked, however,

a new phase in our relations with Germany. The officials of the two

sides met in an informal fashion and talked together like rational

beings. They were representative of the pick of what might be called

“international officialdom,” cynical, humane, intelligent, with a

strong bias towards facts and a realistic treatment. Both sides

believed that progress was being made towards a solution; mutual

respect was fostered; and a sincere regret was shared at the early

abandonment of reasonable conversations.

The Brussels experts did not feel themselves free to consider an

average payment less than that contemplated at Boulogne. They

recommended to the Allied Governments, accordingly, (1) that during the

five years from 1921 to 1926 Germany should pay an _average_ annuity of

$750,000,000, but that this average annuity should be so spread over

the five years that less than this amount would be payable in the first

two years and more in the last two years, the question of the amount of

subsequent payments, after the expiry of five years, being postponed

for the present;

(2) That a substantial part of this sum should be paid in the form of

deliveries of material and not of cash;

(3) That the annual expenses of the Armies of Occupation should be

limited to $60,000,000, which payment need not be additional to the

above annuities but a first charge on them;

(4) That the Allies should waive their claim on Germany to build ships

for them and should perhaps relinquish, or postpone, the claim for the

delivery of a certain number of the existing German vessels;

(5) That Germany on her side should put her finances and her budget in

order and should agree to the Allies taking control of her customs in

the event of default under the above scheme.

IV. _The Decisions of Paris_ (_January_ 24–30, 1921)

The suggestions of the Brussels experts furnished no permanent

settlement of the question, but they represented, nevertheless, a

great advance from the ideas of the Treaty. In the meantime, however,

opinion in France was rising against the concessions contemplated.

M. Leygues, it appeared, would be unable to carry in the Chamber the

scheme discussed at Boulogne. Prolonged political intrigue ended in the

succession of M. Briand to the Premiership, with the extreme defenders

of the literal integrity of the Treaty of Versailles, M. Poincaré, M.

Tardieu, and M. Klotz, still in opposition. The projects of Boulogne

and Brussels were thrown into the melting–pot, and another conference

was summoned to meet at Paris at the end of January 1921.

It was at first doubtful whether the proceedings might not terminate

with a breach between the British and the French points of view. Mr.

Lloyd George was justifiably incensed at having to surrender most of

the ground which had seemed definitely gained at Boulogne; with these

fluctuations negotiation was a waste of time and progress impossible.

He was also disinclined to demand payments from Germany which _all_

the experts now thought impossible. For a few days he was entirely

unaccommodating to the French contentions; but as the business

proceeded he became aware that M. Briand was a kindred spirit, and

that, whatever nonsense he might talk in public, he was secretly quite

sensible. A breach in the conversations might mean the fall of Briand

and the entrance to office of the wild men, Poincaré and Tardieu,

who, if their utterances were to be taken seriously and were not

merely a ruse to obtain office, might very well disturb the peace of

Europe before they could be flung from authority. Was it not better

that Mr. Lloyd George and M. Briand, both secretly sensible, should

remain colleagues at the expense of a little nonsense in unison for a

short time? This view of the situation prevailed, and an ultimatum was

conveyed to Germany on the following lines.[7]

The Reparation payments, proposed to Germany by the Paris Conference,

were made up of a determinate part and an indeterminate part.

The former consisted of $500,000,000 per annum for two years,

$750,000,000 for the next three, then $1,000,000,000 for three more,

and $1,250,000,000 for three after that, and, finally, $1,500,000,000

annually for 31 years. The latter (the indeterminate part) consisted of

an annual sum, additional to the above, equal in value to 12 per cent

of the German exports. The fixed payments under this scheme added up to

a gross total of $56,500,000,000 which was a little less than the gross

total contemplated at Boulogne but, with the export proportion added, a

far greater sum.

The indeterminate element renders impossible an exact calculation of

this burden, and it is no longer worth while to go into details. But

I calculated at the time, without contradiction, that these proposals

amounted for the normal period to a demand exceeding $2,000,000,000 per

annum, which is double the highest figure that any competent person in

Great Britain or in the United States has ever attempted to justify.

The Paris Decisions, however, coming as they did after the discussions

of Boulogne and Brussels, were not meant seriously, and were simply

another move in the game, to give M. Briand a breathing space. I wonder

if there has ever been anything quite like it—best diagnosed perhaps

as a consequence of the portentous development of “propaganda.”

The monster had escaped from the control of its authors, and the

extraordinary situation was produced in which the most powerful

statesmen in the world were compelled by forces, which they could not

evade, to meet together day after day to discuss detailed variations of

what they knew to be impossible.

Mr. Lloyd George successfully took care, however, that the bark should

have no immediate bite behind it. The consideration of effective

penalties was postponed, and the Germans were invited to attend in

London in a month’s time to convey their answer by word of mouth.

M. Briand duly secured his triumph in the Chamber. “Rarely,” _The

Times_ reported, “can M. Briand in all his long career as a speaker

and Parliamentarian have been in better form. The flaying of M.

Tardieu was intensely dramatic, even if at times almost a little

painful for the spectators as well as for the victim.” M. Tardieu

had overstated his case, and “roundly asserting that the policy of

France during the last year had been based on the conclusion that the

financial clauses of the Treaty of Versailles could not be executed,

had gained considerable applause by declaring that this was just the

thesis of the pacifist, Mr. Keynes, and of the German delegate, Count

Brockdorff–Rantzau,”—which was certainly rather unfair to the Paris

Decisions. But by that date, even in France, to praise the perfections

of the Treaty was to make oneself ridiculous. “I am an ingenuous man,”

said M. Briand as he mounted the tribune, “and when I received from M.

Tardieu news that he was going to interpellate me, I permitted myself

to feel a little pleased. I told myself that M. Tardieu was one of the

principal architects of the Treaty of Versailles, and that as such,

though he knew its good qualities, he would also know its blemishes,

and that he would, therefore, be indulgent to a man who had done

his best in fulfilling his duty of applying it—_mais voilà_ (with

a gesture)—I did not stop to remember that M. Tardieu had already

expended all his stock of indulgence upon his own handiwork.” The

monstrous offspring of propaganda was slowly dying.

V. _The First Conference of London_ (_March_ 1–7, 1921)

In Germany the Paris proposals were taken seriously and provoked

a considerable outcry. But Dr. Simons accepted the invitation to

London and his experts got to work at a counter–proposal. “I was

in agreement,” he said at Stuttgart on February 13, “with the

representatives of Britain and France at the Brussels Conference. The

Paris Conference shattered that. A catastrophe has occurred. German

public opinion will never forget these figures. Now it is impossible

to return to the Seydoux plan put forward at Brussels (_i.e._, a

provisional settlement for five years), for the German people would

always see enormous demands rising before them like a specter.... We

shall rather accept unjust dictation than sign undertakings we are not

firmly persuaded the German people can keep.”

On March 1, 1921, Dr. Simons presented his counter–proposal to the

Allies assembled in London. Like the original counter–proposal of

Brockdorff–Rantzau at Versailles, it was not clear–cut or entirely

intelligible; and it was rumored that the German experts were divided

in opinion amongst themselves. Instead of stating in plain language

what Germany thought she could perform, Dr. Simons started from the

figures of the Paris Decisions and then proceeded by transparent

and futile juggling to reduce them to a quite different figure. The

process was as follows. Take the gross total of the fixed annuities of

the Paris scheme (_i.e._, apart from the export proportion), namely

$56,500,000,000, and calculate its present value at _8 per cent

interest_, namely $12,500,000,000; deduct from this $5,000,000,000

as the alleged (but certainly not the actual) value of Germany’s

deliveries up to date, which leaves $7,500,000,000. This was the

utmost Germany could pay. If the Allies could raise an international

loan of $2,000,000,000, Germany would pay the interest and sinking

fund on this, and in addition $250,000,000 a year for five years,

towards the discharge of the capital sum remaining over and above the

$2,000,000,000, namely, $5,500,000,000, which capital sum, however,

would not carry interest pending repayment. At the end of five years

the rate of repayment would be reconsidered. The whole proposal was

contingent on the retention of Upper Silesia and the removal of all

impediments to German trade.

The actual substance of this proposal was not unreasonable and probably

as good as the Allies will ultimately secure. But the figures were far

below even those of the Brussels experts, and the mode of putting it

forward naturally provoked prejudice. It was summarily rejected.

Two days later Mr. Lloyd George read to the German Delegation a

lecture on the guilt of their country, described their proposals as

“an offense and an exasperation,” and alleged that their taxes were

“ridiculously low compared with Great Britain’s.” He then delivered

a formal declaration on behalf of the Allies that Germany was in

default in respect of “the delivery for trial of the criminals who have

offended against the laws of war, disarmament, and the payment in cash

or kind of $5,000,000,000”; and concluded with an ultimatum[8] to

the effect that unless he heard by Monday (March 7) “that Germany was

either prepared to accept the Paris Decisions or to submit proposals

which would be in other ways an equally satisfactory discharge of her

obligations under the Treaty of Versailles (subject to the concessions

made in the Paris proposals),” the Allies would proceed to (1) the

occupation of Duisberg, Ruhrort, and Düsseldorf on the right bank of

the Rhine, (2) a levy on all payments due to Germany on German goods

sent to Allied countries, (3) the establishment of a line of Customs

between the occupied area of Germany and the rest of Germany, and (4)

the retention of the Customs paid on goods entering or leaving the

occupied area.

During the next few days negotiations proceeded, to no purpose, behind

the scenes. At midnight on March 6, M. Loucheur and Lord D’Abernon

offered the Germans the alternative of a fixed payment of $750,000,000

for 30 years and an export proportion of 30 per cent.[9] The formal

Conference was resumed on March 7. “A crowd gathered outside Lancaster

House in the morning and cheered Marshal Foch and Mr. Lloyd George.

Shouts of ‘Make them pay, Lloyd George!’ were general. The German

delegates were regarded with curiosity. General von Seeckt wore uniform

with a sword. He wore also an eyeglass in the approved manner of the

Prussian officer and bore himself as the incarnation of Prussian

militarism. Marshal Foch, Field–Marshal Sir Henry Wilson, and the other

Allied soldiers also wore uniform.”[10]

Dr. Simons communicated his formal reply. He would accept the _régime_

of the Paris Decisions as fixed for the first five years, provided

Germany was helped to pay by means of a loan and retained Upper

Silesia. At the end of five years the Treaty of Versailles would

resume its authority, the provisions of which he preferred, as he was

entitled to do, to the proposals of Paris. “The question of war guilt

is to be decided neither by the Treaty, nor by acknowledgment, nor by

Sanctions; only history will be able to decide the question as to who

was responsible for the world war. We are all of us still too near to

the event.” The Sanctions threatened were, he pointed out, all of them

illegal. Germany could not be technically in default in respect of

Reparation until the Reparation Commission had made the pronouncements

due from them on May 1. The occupation of further German territory was

not lawful under the Treaty. The retention of part of the value of

German goods was contrary to undertakings given by the British and

Belgian Governments. The erection of a special Customs tariff in the

Rhineland was only permissible under Article 270 of the Treaty for

the protection of the economic interests of the Rhineland population

and not for the punishment of the whole German people in respect of

unfulfilled Treaty obligations. The arguments as to the illegality of

the Sanctions were indisputable, and Mr. Lloyd George made no attempt

to answer them. He announced that the Sanctions would be put into

operation immediately.

The rupture of the negotiations was received in Paris “with a sigh of

relief,”[11] and orders were telegraphed by Marshal Foch for his troops

to march at 7 A.M. next morning.

No new Reparation scheme, therefore, emerged from the Conference of

London. Mr. Lloyd George’s acquiescence in the Decisions of Paris had

led him too far. Some measure of personal annoyance at the demeanor of

the German representatives and the failure of what, in its inception,

may have been intended as bluff, had ended in his agreeing to an

attempt to enforce the Decisions by the invasion of Germany. The

economic penalties, whether they were legal or not, were so obviously

ineffective for the purpose of collecting money, that they can hardly

have been intended for that purpose, and were rather designed to

frighten Germany into putting her name to what she could not, and did

not intend to perform, by threatening a serious step in the direction

of the policy, openly advocated in certain French quarters, of

permanently detaching the Rhine provinces from the German Commonwealth.

The grave feature of the Conference of London lay partly in Great

Britain’s lending herself to a furtherance of this policy, and partly

in contempt for the due form and processes of law.

For it was impossible to defend the legality of the occupation

of the three towns under the Treaty of Versailles.[12] Mr. Lloyd

George endeavored to do so in the House of Commons, but at a later

stage of the debate the contention was virtually abandoned by the

Attorney–General.

The object of the Allies was to compel Germany to accept the Decisions

of Paris. But Germany’s refusal to accept these proposals was within

her rights and not contrary to the Treaty, since they lay outside the

Treaty and included features unauthorized by the Treaty which Germany

was at liberty either to accept or to reject. It was necessary,

therefore, for the Allies to find some other pretext. Their effort in

this direction was perfunctory, and consisted, as already recorded, in

a vague reference to war criminals, disarmament, and the payment of 20

milliard gold marks.

The allegation of default in paying the 20 milliard gold marks was

manifestly untenable at that date (March 7, 1921); for according to

the Treaty, Germany had to pay this sum by May 1, 1921, “in such

instalments and in such manner as the Reparation Commission may fix,”

and in March 1921 the Reparation Commission had not yet demanded these

cash payments.[13] But assuming that there had been technical default

in respect of the war criminals and disarmament (and the original

provisions of the Treaty had been so constantly modified that it was

very difficult to say to what extent this was the case), it was our

duty to state our charges precisely, and, if penalties were threatened,

to make these penalties dependent on a failure to meet our charges. We

were not entitled to make vague charges, and then threaten penalties

unless Germany agreed to something which had nothing to do with the

charges. The Ultimatum of March 7 substituted for the Treaty the

intermittent application of force in exaction of varying demands. For

whenever Germany was involved in a technical breach of any one part

of the Treaty, the Allies were, apparently, to consider themselves

entitled to make any changes they saw fit in any other part of the

Treaty.

In any case the invasion of Germany beyond the Rhine was not a lawful

act under the Treaty. This question became of even greater importance

in the following month, when the French announced their intention of

occupying the Ruhr. The legal issue is discussed in Excursus II. at the

conclusion of this Chapter.

VI. _The Second Conference of London_ (_April_ 29–_May_ 5, 1921)

The next two months were stormy. The Sanctions embittered the situation

in Germany without producing any symptoms of surrender in the German

Government. Towards the end of March the latter sought the intervention

of the United States and transmitted a new counter–proposal through the

Government of that country. In addition to being straightforward and

more precise, this offer was materially better than that of Dr. Simons

in London at the beginning of the month. The chief provisions[14] were

as follows:

1. The German liability to be fixed at $12,500,000,000 present value.

2. As much of this as possible to be raised immediately by an

international loan, issued on attractive terms, of which the proceeds

would be handed over to the Allies, and the interest and sinking fund

on which Germany would bind herself to meet.

3. Germany to pay interest on the balance at 4 per cent for the present.

4. The sinking fund on the balance to vary with the rate of Germany’s

recovery.

5. Germany, in part discharge of the above, to take upon herself the

actual reconstruction of the devastated areas on any lines agreeable to

the Allies, and in addition to make deliveries in kind on commercial

lines.

6. Germany is prepared, “up to her powers of performance,” to assume

the obligations of the Allies to America.

7. As an earnest of her good intentions, she offers $250,000,000 in

cash immediately.

If this is compared with Dr. Simons’s first offer, it will be seen that

it is at least 50 per cent better, because there is no longer any talk

of deducting from the total of $12,500,000,000 an alleged (and in fact

imaginary) sum of $5,000,000,000 in respect of deliveries prior to May

1, 1921. If we assume an international loan of $1,250,000,000, costing

8 per cent for interest and sinking fund,[15] the German offer amounted

to an immediate payment of $550,000,000 per annum, with a possibility

of an increase later in proportion to the rate of Germany’s economic

recovery.

The United States Government, having first ascertained privately that

this offer would not be acceptable to the Allies, refrained from its

formal transmission.[16] On this account, and also because it was

overshadowed shortly afterwards by the Second Conference of London,

this very straightforward proposal has never received the attention

it deserves. It was carefully and precisely drawn up, and probably

represented the full maximum that Germany could have performed, if not

more.

But the offer, as I have said, made very little impression; it was

largely ignored in the press, and scarcely commented on anywhere.

For in the two months which elapsed between the First and Second

Conferences of London there were two events of great importance, which

modified the situation materially.[17]

The first of these was the result of the Silesian plebiscite held

in March 1921. The earlier German Reparation offers had all been

contingent on her retention of Upper Silesia; and this condition was

one which, in advance of the plebiscite, the Allies were unable to

accept. But it now appeared that Germany was in fact entitled to most

of the country, and, possibly, to the greater part of the industrial

area. But this result also brought to a head the acute divergence

between the policy of France and the policy of the other Allies towards

this question.

The second event was the decision of the Reparation Commission,

communicated to Germany on April 27, 1921, as to her aggregate

liabilities under the Treaty. Allied Finance Ministers had foreshadowed

300 milliard gold marks; at the time of the Decisions of Paris,

responsible opinion expected 160–200 milliards;[18] and the author

of _The Economic Consequences of the Peace_ had suffered widespread

calumny for fixing on the figure of 137 milliards,[19] as being the

nearest estimate he could make. The public, and the Government also,

were, therefore, taken by surprise when the Reparation Commission

announced that they unanimously assessed the figure at 132 milliards

(_i.e._, $33,000,000,000).[20] It now turned out that the Decisions

of Paris, which had been represented as a material amelioration of the

Treaty which Germany was ungrateful not to accept, were no such thing;

and that Germany was at that moment suffering from an invasion of her

territory for a refusal to subscribe to terms which were severer in

some respects than the Treaty itself. I shall examine the decision of

the Reparation Commission in detail in Chapter IV. It put the question

on a new basis and the Decisions of London could hardly have been

possible otherwise.

The decision of the Reparation Commission and the arrival of the date,

May 1, 1921, fixed in the Treaty for the promulgation of a definite

Reparation scheme, provided a sufficient ground for reopening the whole

question. Germany had refused the Decisions of Paris; the Sanctions had

failed to move her; the régime of the Treaty was therefore reinstated;

and under the Treaty it was for the Reparation Commission to propose a

scheme.

In these circumstances the Allies met once more in London in the

closing days of April 1921. The scheme there concerted was really

the work of the Supreme Council, but the forms of the Treaty were

preserved, and the Reparation Commission were summoned from Paris to

adopt and promulgate as their own the decree of the Supreme Council.

The Conference met in circumstances of great tension. M. Briand had

found it necessary to placate his Chamber by announcing that he

intended to occupy the Ruhr on May 1. The policy of violence and

illegality, which began with the Conference of Paris, had always

included hitherto just a sufficient ingredient of make–believe to

prevent its being as dangerous as it pretended to the peace and

prosperity of Europe. But a point had now been reached when something

definite, whether good or bad, seemed bound to happen; and there was

every reason for anxiety. Mr. Lloyd George and M. Briand had walked

hand–in–hand to the edge of a precipice; Mr. Lloyd George had looked

over the edge; and M. Briand had praised the beauties of the prospect

below and the exhilarating sensations of a descent. Mr. Lloyd George,

having indulged to the full his habitual morbid taste for looking over,

would certainly end in drawing back, explaining at the same time how

much he sympathized with M. Briand’s standpoint. But would M. Briand?

In this atmosphere the Conference met, and, considering all the

circumstances, including the past commitments of the principals,

the result was, on the whole, a victory for good sense, not least

because the Allies there decided to return to the pathway of legality

within the ambit of the Treaty. The new proposals, concerted at this

Conference, were, whether they were practicable or not in execution,

a lawful development of the Treaty, and in this respect sharply

distinguished from the Decisions of Paris in the January preceding.

However bad the Treaty might be, the London scheme provided a way of

escape from a policy worse even than that of the Treaty,—acts, that

is, of arbitrary lawlessness based on the mere possession of superior

force.

In one respect the Second Ultimatum of London was lawless; for it

included an illegal threat to occupy the Ruhr Valley if Germany

refused its terms. But this was for the sake of M. Briand, whose

minimum requirement was that he should at least be able to go home

in a position to use, for conversational purposes, the charms of the

precipice from which he was hurrying away. And the Ultimatum made

no demand on Germany to which she was not already committed by her

signature to the Treaty.

For this reason the German Government was right, in my judgment,

to accept the Ultimatum unqualified, even though it still included

demands impossible of fulfilment. For good or ill Germany had signed

the Treaty. The new scheme added nothing to the Treaty’s burdens,

and, although a reasonable permanent settlement was left where it

was before,—in the future,—in some respects it abated them. Its

ratification, in May 1921, was in conformity with the Treaty, and

merely carried into effect what Germany had had reason to anticipate

for two years past. It did not call on her to do immediately—that is

to say, in the course of the next six months—anything incapable of

performance. It wiped out the impossible liability under which she lay

of paying forthwith a balance of $3,000,000,000 due under the Treaty

on May 1. And, above all, it obviated the occupation of the Ruhr and

preserved the peace of Europe.

There were those in Germany who held that it must be wrong that Germany

should under threats profess insincerely what she could not perform.

But the submissive acceptance by Germany of a lawful notice under a

Treaty she had already signed committed her to no such profession,

and involved no recantation of her recent communication through the

President of the United States as to what would eventually prove in her

sincere belief to be the limits of practicable performance.

In the existence of such sentiments, however, Germany’s chief

difficulty lay. It has not been understood in England or in America how

deep a wound has been inflicted on Germany’s self–respect by compelling

her, not merely to perform acts, but to subscribe to beliefs which she

did not in fact accept. It is not usual in civilized countries to use

force to compel wrongdoers to confess, even when we are convinced of

their guilt; it is still more barbarous to use force, after the fashion

of inquisitors, to compel adherence to an article of belief because we

ourselves believe it. Yet towards Germany the Allies had appeared to

adopt this base and injurious practice, and had enforced on this people

at the point of the bayonet the final humiliation of reciting, through

the mouths of their representatives, what they believed to be untrue.

But in the Second Ultimatum of London the Allies were no longer in

this fanatical mood, and no such requirement was intended. I hoped,

therefore, at the time that Germany would accept the notification of

the Allies and do her best to obey it, trusting that the whole world

is not unreasonable and unjust, whatever the newspapers may say; that

Time is a healer and an illuminator; and that we had still to wait a

little before Europe and the United States could accomplish in wisdom

and mercy the economic settlement of the war.

EXCURSUS I

COAL

The question of coal has always considerable importance for Reparation,

both because (in spite of the exaggerations of the Treaty) it is a form

in which Germany can make important payments, and also because of the

reaction of coal deliveries on Germany’s internal economy. Up to the

middle of 1921 Germany’s payments for Reparation were almost entirely

in the form of coal. And coal was the main topic of the Spa Conference,

where for the first time the Governments of the Allies and of Germany

met face to face.

Under the terms of the Treaty Germany was to deliver 3,400,000 tons

of coal per month. For reasons explained in detail in _The Economic

Consequences of the Peace_ (pp. 74–89) this total was a figure of

rhetoric and not capable of realization. Accordingly for the first

quarter of 1920 the Reparation Commission reduced their demand to

1,660,000 tons per month, and in the second quarter to 1,500,000 tons

per month; whilst in the second quarter Germany actually delivered

at the rate of 770,000 tons per month. This last figure was unduly

low, and by the latter date coal was in short supply throughout the

world and very dear. The main object of the Spa Coal Agreement was,

therefore, to secure for France an increased supply of German coal.

The Conference was successful in obtaining coal, but on terms not

unfavorable to Germany. After much bargaining the deliveries were

fixed at 2,000,000 tons a month for six months from August 1920. But

the German representatives succeeded in persuading the Allies that

they could not deliver this amount unless their miners were better

fed and that this meant foreign credit. The Allies agreed, therefore,

to _pay_ Germany something substantial for this coal, the sums thus

received to be utilized in purchasing from abroad additional food

for the miners. In form, the greater part of the sum thus paid was a

loan; but, since it was set off as a prior charge against the value of

Reparation deliveries (_e.g._, the ships), it really amounted to paying

back to Germany the value of a part of these deliveries. Germany’s

total cash receipts[21] under these arrangements actually came to about

360,000,000 gold marks,[22] which worked out at about 40s. per ton

averaged over the whole of the deliveries. As at this time the German

internal price was from 25s. to 30s. per ton, the German Government

received in foreign currency substantially more than they had to pay

for the coal to the home producers. The high figure of 2,000,000 tons

per month involved short supplies to German transport and industry.

But the money was badly wanted, and was of the utmost assistance

in paying for the German food program (and also in meeting German

liabilities in respect of pre–war debts) during the autumn and winter

of 1920.

This is a convenient point at which to record the subsequent history

of the coal deliveries. During the next six months Germany very nearly

fulfilled the Spa Agreement, her deliveries towards the 2,000,000 tons

per month being 2,055,227 tons in August, 2,008,470 tons in September,

2,288,049 tons in October, 1,912,696 tons in November, 1,791,828 tons

in December, and 1,678,675 tons in January 1921. At the end of January

1921 the Spa Agreement lapsed, and since that time Germany has had to

continue her coal deliveries without any payment or advance of cash

in return for them. To make up for the accumulated deficit under the

Spa Agreement, the Reparation Commission called for 2,200,000 tons per

month in February and March, and continued to demand this figure in

subsequent months. Like so much else, however, this demand was only

on paper. Germany was not able to fulfil it, her actual deliveries

during the next six months amounting to 1,885,051 tons in February

1921, 1,419,654 tons in March, 1,510,332 tons in April, 1,549,768 tons

in May, 1,453,761 tons in June, and 1,399,132 tons in July. And the

Reparation Commission, not really wanting the coal, tacitly acquiesced

in these quantities. During the first half of 1921 there was, in fact,

a remarkable reversal of the situation six months earlier. In spite of

the British Coal Strike, France and Belgium, having replenished their

stocks and suffering from a depression in the iron and steel trades,

were in risk of being glutted with coal. If Germany had complied with

the full demands of the Reparation Commission the recipients would not

have known what to do with the deliveries. Even as it was, some of the

coal received was sold to exporters, and the coal miners of France and

Belgium were in danger of short employment.

The statistics of the aggregate German output of pit coal are now as

follows, exclusive of Alsace–Lorraine, the Saar, and the Palatinate, in

million tons:

─────────────────┬──────┬──────┬──────┬──────┬──────┬────────────

│ 1913.│ 1917.│ 1918.│ 1919.│ 1920.│ 1921 (first

│ │ │ │ │ │nine months)

─────────────────┼──────┼──────┼──────┼──────┼──────┼────────────

Germany exclusive│ │ │ │ │ │

of Upper Silesia│130.19│111.66│109.54│ 92.76│ 99.66│ 76.06

Germany inclusive│ │ │ │ │ │

of Upper Silesia│173.62│154.41│148.19│117.69│131.35│ 100.60

Per cent of 1913 │ │ │ │ │ │

output │100.00│ 88.90│ 85.40│ 67.80│ 75.70│ 77.20

─────────────────┴──────┴──────┴──────┴──────┴──────┴────────────

The production of rough lignite (I will not risk controversy by

attempting to convert this into its pit–coal equivalent) rose from 87.1

million tons in 1913 to 93.8 in 1919, 111.6 in 1920, and 90.8 in the

first three–quarters of 1921.

The Spa Agreement supplied a temporary palliative of the anomalous

conditions governing the _price_ at which these coal deliveries are

credited to Germany. But with the termination of this Agreement they

again require attention. Under the Treaty Germany is credited in the

case of coal delivered _overland_ with “the German pithead price to

German nationals” plus the freight to the frontier; and in the case

of coal delivered _by sea_ with the export price; provided in each

case this price is not in excess of the British export price. Now for

various internal reasons the German Government have thought fit to

maintain the pithead price to German nationals far below the world

price, with the result that she gets credited with much less than its

real value for her deliveries of Reparation coal. During the year

ending June 1921 the average legal maximum price of the different

kinds of coal was about 270 marks a ton, inclusive of a tax of 20 per

cent on the price,[23] which at the exchange then prevailing was about

20s., _i.e._, between a third and a half of the British price at that

date. The fall in the mark exchange in the autumn of 1921 increased the

discrepancy. For although the price of German coal was substantially

increased in terms of paper marks, and although the price of British

coal had fallen sharply, the movements of exchange so out–distanced the

other factors, that in November 1921 the price of British coal worked

out at about three and half times the price of the best bituminous coal

from the Ruhr. Thus not only were the German iron–masters placed in an

advantageous position for competing with British producers, but the

Belgian and French industries also benefited artificially through the

receipt by their Governments of very low–priced coal.

The German Government is in rather a dilemma in this matter. An

increase in the coal tax is one of the most obvious sources for an

increased revenue, and such a tax would be, from the standpoint of

the exchequer, twice blessed, since it would increase correspondingly

the Reparation credits. But on the other hand, such a proposal unites

two groups against them, the industrialists, who want cheap coal for

industry and the Socialists who want cheap coal for the domestic stove.

From the revenue standpoint the tax would probably stand an increase

from 20 per cent to 60 per cent; but from the political standpoint an

increase from 20 per cent to 30 per cent is the highest contemplated at

present, with a differential price in favor of domestic consumers.[24]

I take this opportunity of making a few corrections or amplifications

of the passages in _The Economic Consequences of the Peace_ which deal

with coal.

1. The fate of Upper Silesia is highly relevant to some of the

conclusions about coal in Chapter IV of _The Economic Consequences

of the Peace_ (pp. 77–84). I there stated that “German authorities

claim, not without contradiction, that to judge from the votes cast

at elections, one–third of the population would elect in the Polish

interest, and two–thirds in the German,” which forecast turned out to

be in almost exact accordance with the facts. I also urged that, unless

the plebiscite went in a way which I did not expect, the industrial

districts ought to be assigned to Germany. But I felt no confidence,

having regard to the policy of France, that this would be done; and

I allowed, therefore, in my figures for the possibility that Germany

would lose this area.

The actual decision of the Allies, acting on the advice of the Council

of the League of Nations to whom the matter had been referred, which

we have discussed briefly above (pp. 12–14), divides the industrial

triangle between the two claimants to it. According to an estimate

of the Prussian Ministry of Trade 86 per cent of the total coal

deposits of Upper Silesia fall to Poland, leaving 14 per cent to

Germany. Germany retains a somewhat larger proportion of pits in actual

operation, 64 per cent of the current production of coal falling to

Poland and 36 per cent to Germany.[25]

The figure of 100,000,000 tons, given in _The Economic Consequences

of the Peace_ for the _net_ German production (_i.e._, deducting

consumption at the mines themselves) in the near future _excluding_

Upper Silesia, should, therefore, be replaced by the figure of (say)

115,000,000 tons, _including_ such part of Upper Silesia as Germany is

now to retain.

2. I beg leave to correct a misleading passage in a footnote to p. 79

of _The Economic Consequences of the Peace_. I there spoke of “Poland’s

pre–war annual demand” for coal, where I should have said “pre–war

Poland’s pre–war annual demand.” The mistake was not material, as I

allowed for Germany’s diminished requirements for coal, due to loss of

territory, in the body of the text. But I confess that the footnote,

as published, might be deemed misleading. At the same time it is, I

think, a tribute to the general accuracy of _The Economic Consequences_

that partizan critics should have fastened so greedily on the omission

of the word “pre–war” before the word “Poland” in the footnote in

question. Quite a considerable literature has grown up round it. The

Polish Diet devoted January 20, 1921, to the discussion and patriotic

analysis of this footnote, and concluded with a Resolution ordering

the chief speech of the occasion (that of Deputy A. Wierzlicki) to be

published throughout the world in several languages at the expense of

the State. I apologize for any depreciation in the Polish mark for

which I may have been so inadvertently responsible. Mr. Wierzlicki

begins: “A book appeared by Keynes ... the author of a well–known work

on India, that pearl of the English crown, that land which is a beloved

subject of study to the English. Through such studies a man may win

himself name and fame,”—which was certainly a little unscrupulous of

me. And he concludes: “But England too must believe in facts! And if

Keynes, whose book is impregnated with a humanitarian spirit and with

understanding of the necessity to get up beyond selfish interests,

if Keynes is convinced by actual data that he has done a wrong, that

he has wrought confusion in the ideas of statesmen and politicians

as regards Upper Silesia, then he too will see with his eyes and

must become the friend of Poland, of Poland as an active factor in

the development of the natural wealth of Silesia.” I owe it to so

generous and eloquent a critic to quote the corrected figures, which

are as follows: the Polish lands, united by the Peace Treaty into the

new Polish State, consumed in 1913 19,445,000 tons of coal, of which

8,989,000 tons were produced within that area and 7,370,000 tons were

imported from Upper Silesia (the total production of Upper Silesia in

that year being 43,800,000 tons).[26] The Silesian Plebiscite has been

preceded and followed by a mass of propagandist literature on both

sides. For the economic questions involved see, particularly, on the

Polish side: Wierzlicki, _The Truth about Upper Silesia_; Olszewski,

_Upper Silesia, Her Influence on the Solvability and on the Economic

Life of Germany_, and _The Economic Value of Upper Silesia for Poland

and Germany respectively_; and on the German side: Sidney Osborne, _The

Upper Silesian Question and Germany’s Coal Problem, The Problem of

Upper Silesia_ (papers by various authors, not all on the German side,

with excellent maps, edited by Sidney Osborne), various pamphlets by

Professor Schulz–Gavernitz, and documents circulated by the Breslau

Chamber of Commerce.

3. My observations on Germany’s capacity to deliver reparation coal

have been criticized in some quarters[27] on the ground that I made

insufficient allowance for the compensation which is available to

her by the more intensive exploitation of her deposits of lignite

or brown coal. This criticism is scarcely fair, because I was the

first in popular controversy to call attention to the factor of

lignite, and because I was careful from the outset to disclaim expert

knowledge of the subject.[28] I still find it difficult, in the face

of conflicting expert opinions, to know how much importance to attach

to this material. Since the Armistice there has been a substantial

increase in output, which was 36 per cent higher in the first half

of 1921 than in 1913.[29] In view of the acute shortage of coal this

output must have been of material assistance towards meeting the

situation. The deposits are near the surface, and no great amount

of capital or machinery is needed for its production. But lignite

briquette is a substitute for coal for certain purposes only, and the

evidence is conflicting as to whether any further material expansion is

economically practicable.[30]

The process of briquetting the rough lignite is probably a wasteful

one, and it is doubtful whether it would be worth while to set up _new_

plant with a view to production on a larger scale. Some authorities

hold that the real future of lignite and its value as an element in the

future wealth of Germany lie in improved methods of _distillation_ (the

chief obstacle to which, as also to other uses, lies in its high water

content), by which the various oils, ammonia and benzine, latent in it

can be released for commercial uses.

It is certainly the case that the future possibilities of lignite

should not be overlooked. But there is a tendency at present, just

as was the case with potash some little time ago, to exaggerate its

importance greatly as a decisive factor in the wealth–producing

capacity of Germany.

EXCURSUS II

THE LEGALITY OF OCCUPYING GERMANY EAST OF THE RHINE

The years 1920 and 1921 have been filled with excursions and with

threats of excursions by the French Army into Germany east of the

Rhine. In March 1920 France, without the approval of her Allies,

occupied Frankfort and Darmstadt. In July 1920 a threat to invade

Germany by the Allies as a whole was successful in enforcing the Spa

Agreement. In March 1921 a similar threat was unsuccessful in securing

assent to the Paris Decisions, and Duisberg, Ruhrort, and Düsseldorf

were occupied accordingly. In spite of the objections of her Allies

France continued this occupation when, by the acceptance of the second

Ultimatum of London, the original occasion for it had disappeared, on

the ground that so long as the Upper Silesian question was unsettled,

it was in the opinion of Marshal Foch just as well to retain this

hold.[31] In April 1921 the French Government announced their intention

of occupying the Ruhr, though they were prevented from carrying this

out by the pressure of the other Allies. In May 1921 the Second

Ultimatum of London was successfully enforced by a threat to occupy

the Ruhr Valley. Thus, within the space of little more than a year the

invasion of Germany, beyond the Rhine, was threatened five times and

actually carried out twice.

We are supposed to be at peace with Germany, and the invasion of a

country in time of peace is an irregular act, even when the invaded

country is not in a position to resist. We are also bound by our

adhesion to the League of Nations to avoid such action. It is,

however, the contention of France, and apparently, from time to time,

that of the British Government also, that these acts are in some way

permissible under the Treaty of Versailles, whenever Germany is in

technical default in regard to any part of the Treaty, that is to say,

since some parts of the Treaty are incapable of literal fulfilment, at

any time. In particular the French Government maintained in April 1921

that so long as Germany possessed any tangible assets capable of being

handed over, she was in voluntary default in respect of Reparation,

and that if she was in voluntary default any Ally was entitled to

invade and pillage her territory without being guilty of an act of war.

In the previous month the Allies as a whole had argued that default

under Chapters of the Treaty, other than the Reparation Chapter, also

justified invasion.

Though the respect shown for legality is now very small, the legal

position under the Treaty deserves nevertheless an exact examination.

The Treaty of Versailles expressly provides for breaches by Germany of

the _Reparation_ Chapter. It contains no special provision for breaches

of other Chapters, and such breaches are, therefore, in exactly the

same position as breaches of any other Treaty. Accordingly, I will

discuss separately default in respect of Reparation, and other defaults.

Sections 17 and 18 of the Reparation Chapter, Annex II. run as follows:

“(17) In case of default by Germany in the performance of any

obligation under this part of the present Treaty, the Commission will

forthwith give notice of such default to each of the interested Powers,

and will make such recommendations as to the action to be taken in

consequence of such default as it may think necessary.

“(18) The measures which the Allied and Associated Powers shall have

the right to take in case of voluntary default by Germany, and which

Germany agrees not to regard as acts of war, may include economic

and financial prohibitions and reprisals, and in general such other

measures as the respective Governments may determine to be necessary in

the circumstances.”

There is also a provision in Article 430 of the Treaty, by which any

part of the occupied area which has been evacuated may be reoccupied if

Germany fails to observe her obligations with regard to Reparation.

The French Government base their contention on the words “and in

general such other measures” in § 18, arguing that this gives them

an entirely free hand. The sentence taken as a whole, however,

supports, on the principle of _ejusdem generis_, the interpretation

that the other measures contemplated are of the nature of economic

and financial reprisals. This view is confirmed by the fact that the

rest of the Treaty narrowly limits the rights of occupying German

territory, which, as M. Tardieu’s book shows, was the subject of an

acute difference of opinion between France and her Associates at the

Peace Conference. There is _no_ provision for occupying territory on

the _right_ bank of the Rhine; and the only provision for occupation in

the event of default is that contained in Article 430. This Article,

which provides for _reoccupation_ of the _left_ bank in the event of

default, would have been entirely pointless and otiose if the French

view were correct. Indeed the theory, that at any time during the next

thirty years any Ally can invade any part of Germany on the ground that

Germany has not fulfilled every letter of the Treaty, is on the face of

it unreasonable.

In any case, however, §§ 17, 18 of Annex II. of the Reparation Chapter

only operate after a specific procedure has been set on foot by the

Reparation Commission. It is the duty of the Reparation Commission to

give notice of the default to each of the interested Powers, including

presumably the United States, and to recommend action. If the default

is voluntary—there is no provision as to who is to decide this—then

the paragraphs in question become operative. There is no warrant

here for isolated action by a single Ally. And indeed the Reparation

Commission have never so far put this procedure in operation.

If, on the other hand, Germany is alleged to be in default under some

other Chapter of the Treaty, then the Allies have no recourse except

to the League of Nations; and they are bound to bring into operation

Article 17 of the Covenant, which provides for the case of a dispute

between a member of the League and a non–member. That is to say,

apart from procedure by the Reparation Commission as set forth above,

breaches or alleged breaches of this Treaty are in precisely the same

position as breaches of any other treaty between two Powers which are

at peace.

According to Article 17, in the event of a dispute between a member

of the League and a State which is not a member of the League, the

latter “shall be invited to accept the obligations of membership in

the League for the purposes of such dispute, upon such conditions

as the Council may deem just. If such invitation is accepted, the

provisions of Articles 12 to 16 inclusive shall be applied, with such

modifications as may be deemed necessary by the Council. Upon such

invitation being given, the Council shall immediately institute an

inquiry into the circumstances of the dispute, and recommend such

action as may seem best and most effectual in the circumstances.”

Articles 12 to 16 provide, amongst other things, for arbitration in

any case of “disputes as to the interpretation of a Treaty; as to

any question of international law; as to the existence of any fact

which, if established, would constitute a breach of any international

obligation; or as to the extent and nature of the reparation to be made

for any such breach.”

The Allies as signatories of the Treaty and of the Covenant are

therefore absolutely precluded in the event of a breach or alleged

breach by Germany of the Treaty, from proceeding except under the power

given to the Reparation Commission as stated above, or under Article 17

of the Covenant. Any other act on their part is illegal.

In any case it is _obligatory_ on the Council of the League, under

Article 17, to invite Germany, in the event of a dispute between

Germany and the Allies, to accept the obligations of membership in the

League for the purposes of such dispute, and to institute immediately

an inquiry into the circumstances of the dispute.

In my opinion the protest addressed by the German Government to the

Council of the League of Nations in March 1921 was correctly argued.

But, as with the inclusion of pensions in the Reparation Bill, we

reserve the whole stock of our indignation over illegality between

nations for the occasions when it is the fault of others. I am told

that to object to this is to overlook “the human element” and is

therefore both wrong and foolish.

FOOTNOTES:

[2] More exactly, out of 1,220,000 entitled to vote and 1,186,000

actual voters, 707,000 votes or seven–elevenths were cast for Germany,

and 479,000 votes or four–elevenths for Poland. Out of 1522 communes,

844 showed a majority for Germany and 678 for Poland. The Polish voters

were mainly rural, as is shown by the fact that in 36 towns Germany

polled 267,000 votes against 70,000 for Poland, and in the country

440,000 votes against 409,000 for Poland.

[3] Up to May 31, 1920, securities and other identifiable assets to

the value of 8300 million francs and 500,000 tons of machinery and raw

material had been restored to France (_Report of Finance Commission of

French Chamber_, June 14, 1920), also 445,000 head of live stock.

[4] Up to May, 1921, the _cash_ receipts of the Reparation Commission

amounted to no more than 124,000,000 gold marks.

[5] See Excursus VI.

[6] Lord D’Abernon and Sir John Bradbury for Great Britain, Seydoux and

Cheysson for France, d’Amelio and Giannini for Italy, Delacroix and

Lepreux for Belgium, and, in accordance with custom, two Japanese. The

German representatives included Bergmann, Havenstein, Cuno, Melchior,

von Stauss, Bonn, and Schroeder.

[7] The text of these Decisions is given in Appendix No. 2.

[8] The full text is given in Appendix No. 4.

[9] Compare this with the fixed payment of $500,000,000 and an export

proportion of 26 per cent proposed in the second Ultimatum of London,

only two months later.

[10] _The Times_, March 8, 1921.

[11] _The Times_, March 8, 1921.

[12] A week or two later the German Government made a formal appeal to

the League of Nations against the legality of this act; but I am not

aware that the League took any action on it.

[13] A few weeks later the Reparation Commission endeavored to put the

action of the Supreme Council in order, by demanding one milliard marks

in gold ($250,000,000), that is to say, the greater part of the reserve

of the Reichsbank against its note issue. This demand was afterwards

dropped.

[14] The full text is given in Appendix No. 5.

[15] The practicability of such a loan on a large scale is of course

more than doubtful.

[16] The German Government is reported also to have offered,

alternatively, to accept any sum which the President of the United

States might fix.

[17] After the enforcement of the Sanctions and the failure of the

counter–proposals, the Cabinet of Herr Fehrenbach and Dr. Simons was

succeeded by that of Dr. Wirth.

[18] As late as January 26, 1921, M. Doumer gave a forecast of 240

milliards.

[19] Exclusive of sums due in repayment of war loans made to Belgium.

[20] Exclusive of sums due in repayment of war loans made to Belgium.

[21] Under the Spa Agreement (see Appendix No. 1) Germany was to be

paid in cash 5 gold marks per ton for _all_ coal delivered, and, in

the case of coal delivered _overland_, “lent” (_i.e._, advanced out

of Reparation receipts) the difference between the German inland

price and the British export price. At the date of the Spa Conference

this difference was about 70s. per ton (100s. less 30s.), but this

sum was not to be advanced in the case of the undetermined amount of

coal delivered _by sea_. The advances were made by the Allies in the

proportions, 61 per cent by France, 24 per cent by Great Britain, and

15 per cent by Belgium and Italy.

[22] For details of these payments see p. 133.

[23] This very valuable tax, first imposed in 1917, yielded in 1920–21

mks. 4½ milliards.

[24] Dr. Wirth’s first Government prepared a Bill to raise the tax to

30 per cent, with power, however, to reduce the rate temporarily to 25

per cent. It was estimated that the 30 per cent tax would bring in a

revenue of 9.2 milliard marks.

[25] The same authority estimates that 85.6 of Upper Silesia’s zinc

ore production and all the zinc smelting works fall to Poland. This is

of some importance, since before the war Upper Silesia was responsible

for 17 per cent of the total world production of zinc. Of the iron and

steel production of the area 63 per cent falls to Poland. I am not in

a position to check any of these figures. Some authorities ascribe a

higher proportion of the coal to Poland.

[26] These are the figures according to the Polish authorities. But it

is difficult to obtain accurate pre–war figures for an area which was

not coterminous with any then existing State; and these totals have

been questioned in detail by Dr. W. Schotte.

[27] See _e.g._, my controversy with M. Brenier in _The Times_.

[28] In _The Economic Consequences of the Peace_, p. 92 _n._, I wrote

as follows: “The reader must be reminded in particular that the above

calculations take no account of the German production of lignite....

I am not competent to speak on the extent to which the loss of coal

can be made good by the extended use of lignite or by economies in

its present employment; but some authorities believe that Germany may

obtain substantial compensation for her loss of coal by paying more

attention to her deposits of lignite.”

[29] That is to say, production in the middle of 1921 was at the rate

of about 120,000,000 tons per annum. At that time the legal maximum

price was 60 paper marks per ton (_i.e._, 5s. or less); so that the

national _profit_ on the output in terms of money cannot have been a

very material amount.

[30] In order to secure the increased output the number of miners was

increased much more than in proportion, namely from 59,000 in 1913 to

171,000 in the first half of 1921. As a result, the cost of production

of lignite rose much faster than that of coal. Also since its calorific

value is much less than that of coal per unit of weight (even when it

is briquetted), it can only compete with coal, unless it is assisted by

preferential freight rates, within a limited area in the neighborhood

of the mines.

[31] At the Paris Conference of August 1921 Lord Curzon tried

unavailingly to persuade France to abandon this illegal occupation.

The so–called “Economic Sanctions” were raised on October 1, 1921. The

occupation still continues, though both the above pretexts have now

disappeared.

A Revision of the Treaty Being a Sequel to The Economic Consequence of the Peace · 第 2 / 7 章