THE CONSORTIUM FOR FINANCING CHINA
1
If all goes well, the open shop in international finance is a thing of
the past; at least so far as China goes. On May 11, 1920, exactly
eighteen months after the signing of the armistice, Japan formally
declared her willingness to enter the new consortium for lending money
to China, and on October 15, following, representatives of the British,
French, Japanese, and American banking-groups met in New York and there
signed the provisions by which they are for the next five years going to
finance China under what is known as the Consortium Agreement.
For a full year after the signing of the armistice, Great Britain,
France, and America had been ready to act in consort in the matter of
future loans to China, but Japan insisted on excluding from the terms of
the agreement international activity in Manchuria and Eastern Inner
Mongolia. These two provinces have virtually become Japanese territory.
Into these she has extended her railroads or added to those built by
Russia, and over these she watched as a hen over ducklings. And because
she strenuously sought to manoeuver the Allies into admitting her
prior rights to these regions, the consummation of the Consortium
Agreement was delayed and delayed. Japan finally yielded, at the same
time claiming that the powers conceded her special interests; while
they, through their chief representative, Mr. Thomas W. Lamont, claimed
that Japan waived these interests. We shall presently see what happened,
but in the meantime it is obvious that both yielded and both won
out,--and that no nation is to-day sufficiently powerful and
self-contained to be able to stand apart from the rest of the world. The
closed shop in international finance has been ushered in, and the union
of world bankers is now known as the Consortium.
In a chapter it is hardly possible to make more than a hasty survey of
so intricate a stretch of history. China before the war with Japan was
free from debt, but in order to meet the indemnity demanded by Japan she
was compelled to raise money abroad. The scramble among the foreign
powers to advance this money gave China certain advantages. Her own
capitalists had money enough to pay off this indemnity immediately, but
they did not trust their government and hoarded their funds. They knew
that with the Oriental system of "squeeze" only a fraction of it would
succeed in freeing their country.
Another factor conspired to introduce alien domination over China,--her
lack of railroads and modern industries. She had wealth, man-power,
everything that an isolated nation could possibly desire, but she was no
longer an isolated nation, and she had nothing that an active nation
among nations needed for its very existence. Instantly, along with the
loans, came concessions for railroad-building, and the development of
China began. So deeply was China getting embroiled in alien machinations
that five years later, seeing that the young emperor himself, Huang-Hsu,
was head-over-heels in love with Western ways, the reactionaries
precipitated the Boxer Uprising in 1900. This only resulted in another
overwhelming indemnity, which China has not yet succeeded in paying off.
Consequently, more loans had to be made, and more urgent still became
the necessity for means of transportation and for the modernization of
industry.
The Russo-Japanese War, which ordinarily might have meant a modicum of
relief to China, only succeeded in entrenching her enemy much more
securely at her very door, and another period of alien scrambling over
Chinese loans set in. Coöperation among various groups of foreign
bankers regardless of nationality was not unknown, for absolute
competition would most likely have been fatal. But thoroughly
thought-out getting together was, in view of the existing jealousy among
nations, inconceivable. Still, to such a pass had this suicidal
competition come that by 1909 a consortium was proposed which aimed to
include Russia, Japan, Germany, France, England, and America. It began
to work, but Secretary of State Knox made a proposal for the
neutralization and internationalization of the Manchurian railway system
which met with a cold no from Japan. Shortly afterward Japan made an
agreement with Russia which completely frustrated Knox's proposals, and
the thing virtually fell through.
In 1913, President Wilson took the matter in hand. He refused to become
a party to a scheme which, in his estimation, instead of working for the
rehabilitation of China and the Open Door bound her helplessly. And ever
since China has been getting "the crumby side" of every deal. For the
plan as it then existed had no provisions against the pernicious
practice of marrying China to one power after another with concessions,
without giving any guaranty of the preservation of her dower
rights,--freedom in her industrial and political affairs.
Russia then was Japan's "natural" enemy. Russia was threatening the
"very existence" of Japan. Yet when Knox's proposal came up, Japan was
ready to unite with Russia in order to keep the others out of Manchuria.
She had to use that argument to save her face. Bear this in mind, for we
shall presently see that a second time Japan used this argument in order
to keep the consummation of the consortium in abeyance. It was more than
a plea for special interests because of propinquity; it was a plea that
the peace and safety of the empire demanded it.
Propinquity! The pin in that word has pricked nearly every one who has
shown any interest in China, no matter where. Japan used propinquity as
a justification of her annexation of Korea, breaking her word to that
kingdom in so doing. Yet Japan contends that she never has broken her
word. Japan is a nation true to her word, but, like many another nation,
is loose in her wording. She has guaranteed the Open Door in Manchuria
and Mongolia,--and Korea. In Korea the door is shut, and Japan has made
entrance to the other spheres of little advantage. Ill-content with
penetration of these regions, she has, by means of her railroads there,
sought to divert the course of Chinese trade from Shanghai through
Manchuria and Korea and Japan. In this there is nothing intrinsically
wrong. But she goes farther and tries to exclude consortium activity in
other fields in these two provinces. But that these are not the only
slices of China she is after,--that they are, in fact, only
stepping-stones for the final domination of the great republic,--is
attested to by certain well-known facts in Far Eastern affairs.
Japan and her friends assert she never has broken her word; her enemies
declare she is sinister and not to be trusted. Neither statement is
correct. Her methods may sometimes be sinister, but no one who follows
events in the Far East is unaware of them, and Japan has taken no pains
to conceal them. Actions speak louder than words. But has Japan actually
never broken her word? We have already referred to Korea, whose
independence Japan has guaranteed by published treaty. During the war
Japan carried out the requirements of the Anglo-Japanese Alliance, but
Article V reads:
The High Contracting Parties agree that neither of them will,
without consulting the other, enter into separate arrangements with
another Power to the prejudice of the objects described in the
Preamble of this Agreement.
Notwithstanding this clear stipulation, Japan immediately after
capturing Kiao-chau from Germany, without consulting Great Britain as
herein provided, issued the Twenty-one Demands on China. Of these Group
V alone would have made a vassal state of China had she accepted them.
Knowledge of these were kept from Britain completely, but when they
finally leaked out, Japan vociferously denied them. Downing Street was
not pleased, but there was much to be done in Europe just then. In 1918,
Japan a second time made an arrangement with China without consulting
her ally, Great Britain. This time it was the Sino-Japanese Military
Agreement. At the moment Russia withdrew from the war and released the
German prisoners, and that was the excuse for imposing combined military
action under Japanese officers.
As though this were not enough, when the success of Germany on the
western front was at its height, Count Terauchi, Prime Minister and
arch-plotter in China, came out with a statement published by Mr.
Gregory Mason of the "Outlook" to the effect that it was not unlikely
that some understanding, if not alliance, might be effected between
Japan, Russia and Germany. And the rumors of such an understanding
having been actually arrived at, have since been shown to have had just
foundation.
Furthermore, since 1917, according to "Millard's Review" for April,
1920, Japan has lent China about 281,543,762 yen or thereabouts,
privately, for political and industrial purposes, for reorganization,
railway construction, munitions, canal improvements, flood relief,
wireless, forestry, war participation, and other undertakings.
These things must be recalled in considering the new consortium, as they
show what led up to its final consummation. These actions of Japan
indicate encroachment upon China to the extent of virtually closing the
Open Door. In this regard, the alliance has had a dual effect: while it
makes possible for Japan to go as far as Britain would dare go, and even
farther, on the other hand it tends to keep Japan in check. Hence, the
state of mind of the Japanese on the subject of the treaty has been
contradictory. They have regarded its renewal and its abrogation with
about equal anxiety. From a moral point of view, they dare not stand
alone in the world, being the only great autocracy remaining. Conscious
of their power and twitching under the restraint which the alliance
imposes, yet needing its support, they are trying to make it appear that
Great Britain needs it fully as much.
As far as Great Britain goes, the alliance was formed chiefly to
guarantee the interests of the empire, but also the Open Door and
China's integrity. That is, that Japanese Yen and British Sovereigns
should have full freedom to go to China to earn a living. Let us see
what the various treaties and understandings purport to accomplish.
The Anglo-Japanese Alliance assures "The preservation of the common
interests of all Powers in China by insuring the independence and
integrity of the Chinese Empire and the principle of equal opportunities
for the commerce and industry of all nations in China."
The Root-Takahira Understanding declares: "The Policy of both
Governments [Japanese and American], uninfluenced by any aggressive
tendencies, is directed to the maintenance of the existing _status quo_
in the region above mentioned and to the defense of the principle of
equal opportunity for commerce and industry in China." In other words,
without an alliance, America has secured from Japan an understanding
guaranteeing the integrity of China and the Open Door for her pet, the
Dollar. Hence, except for the fact that it made no promises to the
effect, "My Ally, right or wrong, but still my ally," this agreement
says that the American Dollar has as much right to earn a living in
China as the Yen has.
But in the meantime the Yen has been having it all his own way, for the
Sovereign and the Franc and the Dollar were very busy doing things in
Europe. And in good Oriental fashion the Yen has been breeding, and
breeding rapidly. He was going to China, as we have seen, by the million
and keeping China's interests and integrity, which all had guaranteed,
in a very feverish state, notwithstanding alliances and agreements born
and in embryo.
This, at bottom, is what the whole Far Eastern problem is,--all of the
governments seeking opportunities in China and mutually binding and
barring one another from aggression and concessions. They have all
guaranteed China's "integrity," but none, except America, has actually
lived up to the agreement, and China's integrity is rapidly ceasing to
be an integer.
Now, if that were all there was to it, debate would be childish, but
integers, like the atom, are not easily divided without creating
something new. The atom becomes an electron; and the integer, when a
nation, becomes a source of international conflict. Hence, it is of the
utmost importance that China remain an integer. The Anglo-Japanese
Alliance has failed to maintain China's integrity. The Root-Takahira
Agreement seemed to cover the ground well enough, but that it was not
sufficient is proved by the later necessity on the part of Mr. Lansing
to supplement it by his so-called "understanding" with Viscount Ishii.
However, that the Ishii-Lansing Agreement is loose and inadequate was
obvious on the face of it and it was shown to be absurd when the
Consortium Agreement was being negotiated. It seems that
Secretary-of-State Lansing, realizing that his "agreement" with Ishii
was being translated into a Monroe Doctrine of Asia, as it was never
intended to be, fostered the new Consortium Agreement in order to throw
a ring round the Ishii-Lansing Agreement and define its limitations.
With the very first approach the promoters of the consortium made to
Japan, Japan, as we have seen, began eliminating from its scope
everything that propinquity permitted, threatening not only the
consortium but the various previous agreements. I state these facts not
to condemn Japan, but to delve into the psychology of the powers who, at
the Peace Conference at Versailles, came to the conclusion that the only
solution for the situation in the Far East was a coöperative scheme.
They must be borne in mind in order to understand why Japan withheld
from concurring, and finally yielded.
2
America was viewing all this with no little apprehension. Matters in the
Far East were extremely precarious at the time she entered the war. It
was in order to reassure Japan and merely as a restatement of issues
that the Ishii-Lansing Agreement was made. Japan's propinquity was
recognized. But it was also recognized that the Open Door was being
walled up. Hence, the American Government, which had withdrawn from the
Sextuple Consortium, suggested that a new consortium agreement be made
in which the four leading powers take equal part. These powers had been
drawn closer together during the war, and that concord was to be taken
advantage of before it had a chance to dissipate.
At the time that I wrote the article on "Lending Money to China" for the
"World's Work," August, 1920, the whole consortium scheme was shrouded
in mystery. Since then the correspondence that took place between the
powers has in part been published. The way it developed is worthy of
being outlined.
The American bankers had been asked by the Government to enter the
proposed consortium. They were not over-enthusiastic about it, for at
the time they felt they had enough demand at home and in Europe for
such funds as they could command. They realized that at that time (July,
1918) they would be expected to carry, with Japan, both England and
France, but they agreed that "such carrying should not diminish the
vitality of the membership in the four-Power group." But they did
stipulate that "One of the conditions of membership in such a four-Power
group should be that there should be a relinquishment by the members of
the group either to China or to the group of any options to make loans
which they now hold, and all loans to China by any of them should be
considered as a four-Power group business."
Lansing replied to the bankers, accepting their stipulations, obviously
his main intention in working for the consortium being, as I have said,
to encircle the problem with a view to defining its limitations so as to
make it impossible for Japan to interpret his agreement with Ishii too
broadly.
These communications were transmitted to the British Foreign Office,
prompting a reply from Mr. Balfour on August 14, 1918, wherein he
inquired whether it was the intention of the American Government to
enter the $100,000,000 loan to China for currency reform which was then
under consideration and toward which Japan had already made two separate
advancements; and whether it was the intention of the United States to
confine activities to administrative loans or to include industrial and
railway enterprises as well. Lord Reading made inquiry of the State
Department and determined that both types of loans had been considered.
It is obvious from these communications that both Japan and Great
Britain wished to retain their special interests in regard to the
existing railway and industrial loans, and balked at their being pooled
with those of the consortium. But England was ready enough from the
beginning to forego these. The United States held "that industrial as
well as administrative loans should be included in the new arrangement,
for the reason that, in practice, the line of demarcation between those
various classes of loans often is not easy to draw."
Everything went along smoothly until Japan was consulted, and then it
was found that while she was willing enough to enter into a consortium
for the whole of China, she was emphatically unwilling to have Manchuria
and Mongolia included. From the very beginning, the American, British,
and French banking-groups and governments most decidedly refused to
accede to Japan's demands in this matter, declaring that such a
rendering would simply open up the sores of spheres-of-interests and
concession-hunting, and completely nullify the purposes and intentions
of the consortium. The Japanese argument is amusing. When Japan first
encroached upon Manchuria and Mongolia, it was because of danger to her
safety from Czarist Russia. Now she was face to face with Bolshevist
Russia, and she trembled for her safety in these terms:
Furthermore, the recent development of the Russian situation,
exercising as it does an unwholesome influence upon the Far East,
is a matter of grave concern to Japan; in fact, the conditions in
Siberia, which have been developing with such alarming precipitancy
of late, are by no means far from giving rise to a most serious
situation, which may at any time take a turn threatening the safety
of Japan and the peace of the Far East, and ultimately place the
entire Eastern Asia at the mercy of the dangerous activities of
extremist forces. Having regard to these signals of the imminent
character of the situation, the Japanese Government all the more
keenly feel the need of adopting measures calculated to avert any
such danger in the interest of the Far East as well as of Japan.
Now, South Manchuria and Mongolia are the gate by which this
direful influence may effect its penetration into Japan and the Far
East to the instant menace of their security. The Japanese
Government are convinced that, having regard to the vital interests
which Japan, as distinct from the other Powers, has in the regions
of South Manchuria and Mongolia, the British Government will
appreciate the circumstances which compelled the Japanese
Government to make a special and legitimate reservation
indispensable to the existence of the state and its people....
The utter fallacy of this is obvious. The consortium was not a
miracle-worker. Its efforts would necessarily extend over a series of
years; its principals were as opposed to Bolshevism as Japan was. But
there was Japan,--bureaucratic, imperialistic Japan,--shedding tears
over the prospect of what might happen to her people from Bolshevism if
the consortium were permitted to take a share in the development of
Manchuria and Mongolia,--to which she has no right other than that of
her might.
No pressure such as could be said to be in the nature of an ultimatum to
join the consortium was exerted, of course, but it was obvious that
unless Japan withdrew her objections the consortium would not
materialize. Japan made an effort to get the other powers to make some
written statement or accept her formula securing to her these special
rights; but the others were adamant. Japan specified just what she
feared,--the construction of other railroads.
The United States replied:
The American Government cannot but acknowledge, however, its grave
disappointment that the formula proffered by the Japanese
Government is in terms so exceedingly ambiguous and in character so
irrevocable that it might be held to indicate a continued desire on
the part of the Japanese Government to exclude the American,
British, and French banking groups from participation in the
development, for the benefit of China, of important parts of that
republic, a construction which could not be reconciled with the
principle of the independence and territorial integrity of China.
It is interesting to note that in all these communications, the Japanese
Government is constantly referring to its own special interests and
dangers, whereas the others repeat and repeat their concern for the
integrity of China. It may be, after all, that the Japanese Government
is the more honest, though America's stand is unchallengeable.
I have dwelt sufficiently, I believe, with the emanations from behind
departmental doors. The human elements are much more interesting.
Suffice it to say that Japan held out for a long, long time, and things
seemed hopeless. At last, after an understanding with all those
concerned outside Japan, Mr. Thomas W. Lamont went to the Far East as
spokesman for the other powers, to carry on negotiations with Japan.
Unfortunately--whether by design or not I have no way of telling--an
American business mission also went to Japan at that time, upon the
invitation of Baron Shibusawa, popularly known as the "Schwab of Japan."
Everybody got these two parties mixed, but I have since been very
earnestly assured that Mr. Frank A. Vanderlip, who headed the business
mission, had nothing whatever to do with Mr. Lamont's mission. Be that
as it may, it was certain even from the twin-reports that while the
business mission was being lavishly entertained, Mr. Lamont was seeing
all that he wanted to see, and saying all that he wanted to say. The
mission was discussing with Junnosuke Inouye, Governor of the Bank of
Japan, and Baron Shibusawa, and others such questions as Japanese
immigration, the Shantung situation, the invasion of Siberia, and the
submarine cables. All that the world at large got as to the decisions
arrived at was the fact that views were exchanged in a friendly manner,
and some delightfully amusing articles from the pen of Julian Street who
was the scribe of the occasion.
In the meantime, Lamont, who seems to be a man for whom a dinner has
little attraction, left the impression on the Japanese Government that
Japan and Japan alone would lose by holding back. When he left Japan, to
go to China, the Japanese Government was still determined on securing
from the powers exemption for Manchuria and Mongolia.
But a series of subsequent events helped Japan to make up her mind.
First and foremost among these was the financial slump in Japan, which
was seriously embarrassing. This was followed by financial stringency in
Manchuria and the eagerness of the directors of the South Manchurian
Railway,--who are at present involved in a far-reaching scandal for a
loan which could not be floated in Japan and which was sought in
America. Third, as either cause or effect, was the situation in China.
China, on account of Japan's courtship of the Peking militarists and the
rape of Shantung, had instituted a boycott of Japanese goods the
bitterness and force of which Japan had learned to respect. These
circumstances alone might have been enough to drive a nation to
desperation; but a sensitive nation like Japan would suffer these things
a thousand times over in silence. One thing Japan cannot stand, and that
is the distrust of the world.
And the Lamont party found from the moment it left Nagasaki for China
until the moment it set foot again in Shimonoseki on its return that
there was not a white man nor a yellow man who had a good word to say
for Japan. Japan was an isolated country socially,--isolated a thousand
times more definitely than she is geographically. And the good sense of
the Japanese has brought them to a realization that that does not pay.
Japan wants the good-will of the world, and she wants it sorely.
When Mr. Lamont arrived in China he did not find the same atmosphere he
had found in Japan. The fact that he had been in Japan first added to
the suspicions of the Chinese. They had many things to ponder over and
be suspicious about. China remembered the processes of westernization
which she had had to answer with the Boxer Uprising in 1900. But China
has never forgotten the return of the Boxer indemnity by the United
States.
In Peking some students threatened to stone the hotel at which Mr.
Lamont stopped. A few came as special representatives of the student
body, according to one report, and quizzed Mr. Lamont for two hours.
They left apparently satisfied. Their strong plea was that no loans be
made to the Government until peace between North and South was
established.
The press of China and the people of China were divided. Some of the
Japanese, who owned papers in China, sought to alienate the sympathy of
the Chinese for America; some tried other tactics. The Chinese
militarists in Peking who had tasted of the flesh-pots of Nippon were
not over-anxious to put themselves on a diet. Chinese patriots saw in
the new consortium a rope of a different fiber. The consortium party
found itself double-crossed by obvious agencies.
In a measure this was justified all the way round, for the undertaking
was shrouded in secrecy on many points which could not but discredit it
in the eyes of many. Perhaps this was unavoidable, but it was none the
less natural that China should be wary. In her own sort of way, China
was taking inventory. The last loan of $125,000,000 only arrived in
China as $104,851,840 after deductions for underwriting had been paid.
And before the sum can be paid off, it will have cost China $235,768,105
by way of interest and commissions. And China knows that only a small
part of this tremendous sum had gone into actual constructive work.
Yet China needs assistance. Railroads are the world's salvation and
China's crying need. But for lack of railroads, China would to-day be
the most powerful nation on earth, financially and politically. And the
fact that her railroads are short while those of other countries are
long makes of her a prey to those tentacles of trade against which she
is helpless. China has to-day only about 6,500 miles of railroad: she
needs 100,000. She who built the rambling wall has still only
foot-paths. She needs 100,000 miles of highway. Her canals, which a
thousand years ago kept the country open to trade and partially free
from famine, have fallen into disrepair. She needs telegraphs,
telephones, wireless. If only the money she borrowed went into such
enterprises China would repay the world a thousandfold.
It was therefore natural that China should be suspicious, and likewise
natural that she should be willing to be convinced. What young China
wanted most was definite and outspoken assurance that her integrity as a
nation would not be jeopardized.
The leading Chinese newspapers expressed their gratitude at repeated,
assurances of due respect being given to Chinese public opinion and
promises to refrain from interfering in her internal affairs. But
others, like the China "Times," said:
The British plan to control our railroads jointly, and the American
plan is to monopolize our industries jointly, while the Japanese
plan to monopolize all our railroads, mines, forestry, and
industries. Any one of these plans will put our destiny in their
hands.
It also declared: "Although it has been reported that Japan will make
certain compromises, it is hard to say to what extent these will go."
To this Mr. Lamont said: "It now remains for the Japanese Government
formally to confirm this desire [of the bankers to join]. If they fail
to do so and if Japan remains outside the consortium, I should think
that Japan might prove to be the chief loser." He next made it clear to
China that she would first have to establish peace if she is to be
helped. Aside from the reorganization of the currency, the consortium is
going to see to it that a sufficiently safe audit system is established,
so that it will be sure that all loan expenditures go as far as they
should into the properties themselves. Further, the Chinese Government,
in order to save some cash, refused to pay on certain bearer bonds which
had come back rather curiously. These were formerly German property
bonds on the Hukuan Railway loan which Germany had evidently sold off
before the war. They had now come back by way of England and America.
The Chinese Government wanted proof of transference on bearer bonds. Mr.
Lamont pointed out to them that this action would totally discredit them
and that the ability to secure further investments would be very slim
unless these were redeemed. Mr. Lamont then returned to Japan.
Then it became known that the Japanese Government had finally given its
consent. In Japan, opinion ranged from imperialistic chauvinism to
liberal recognition of the consortium as a way out of the mess. On May
11 things came to a head. Mr. Lamont stated on his return to America
that:
The fact that Japan has come into the Consortium for China without
reservations should be made clear. The agreement that the Japanese
banking group with the approval of its government, signed at Tokio,
leaves nothing to be desired on this point; but in Japan, while
there was perfect readiness by all authorities to announce that an
understanding had been reached, there seems to be some reluctance
to make public any statement that the Japanese Government had
withdrawn its reservations as to Manchuria and Mongolia. It is only
fair, therefore, that every member of the American banking group
and American investors generally should clearly understand the
facts.
Still Viscount Uchida, the Foreign Minister, insisted:
While other powers can afford to regard the new Consortium solely
as a business matter Japan is otherwise situated, since her vital
national interests, such as national defense and economic
existence, are apt to be involved in enterprises near her border.
When the three other governments expressly declared to Japan that
they not only did not contemplate acts inimical to her vital
interests but were ready to give assurance sufficiently
safeguarding them, the Japanese Government decided to confirm the
Paris agreement.
What Japan expected the powers to say other than just that is a matter
for diplomats to play with. To the common person this statement is
absolutely meaningless. It is a generalization which leaves the door
open for Japan to object to loans for any work which she feels will
jeopardize her national life or vitally affect her "sovereignty." Any
railroad scheme which might become a competitor by diverting freight
from Manchurian lines owned by Japan would be a menace to Japan's
sovereignty.
For instance, it seems understood that among these vital interests are
certain loans to Chinese capitalists and corporations. And doubtless
Japan would right now much rather have the millions which she has sunk
in China in her own hands. But if these loans are recognized, what
guarantee is there that even under the nose of the consortium further
"loans" will not be made?
Is it likely that Japan will relinquish her hold on the South Manchurian
Railroad, which in her opinion is of strategic importance? If the
consortium is to have no say in such vested interests, obtained before
its conclusion, how is it going to secure itself against these very
interests being used as a means of breaking up the unity of the
cooperative enterprises? How is so sweeping a clause going to be kept
within bonds? If Japan is left in full control of the Manchurian
railways, if the consortium has not really dissolved the Sino-Japanese
Military Agreement, if Japan is to control the German-built railways in
Shantung, how is the consortium going to better things in the Far East?
There is altogether too much silence on many points in the consortium
project for the world to have any real assurance. Secret diplomacy
having been discredited, it seems that bankers have themselves broken
into diplomacy. Of course, individuals have a perfect right in this
modern world to discuss whatever matters they like,--and governments,
too, for that matter,--but it should seem that the people as a whole
whose money, whose happiness, and whose lives are involved have a right
to know to the last detail what has been traded off in the making of the
consortium. China evidently was placated by Lamont with full
explanations of what the consortium intended. In brief it was this:
The agreement calls for the pooling of all such interests of the several
powers in China as had not been already developed separately, in a "full
and free partnership." In this way it is hoped that future spheres of
influence will be eliminated, jealousies between the powers be done away
with, and Chinese grafters be prevented from pitting one power against
the other for their own selfish ends. Chinese complain that now they
will not be able to secure loans on a competitive basis and that
therefore they are being more surely strangled. That is partially true.
But it is also true that corrupt Chinese officials have been keeping
China and the world in turmoil for their own greedy ends. Both of these
things must be stopped if peace is to obtain in the Pacific.
The guarantees given to China were to the effect that in no
circumstances would the consortium undertake such private enterprises as
banking, manufacturing, or commerce, but would devote itself entirely to
the construction of railroads, the laying of highways, and the
reorganization of China's currency. The consortium was to make loans to
the central or provincial government only, but as a condition of their
advancement, peace between the North and South was urged. The consortium
was not to interfere in the domestic affairs of China. Loans were to be
made only with the approval of the governments behind the bankers. Nor,
of course, can you compel any one to borrow money from you, wherein
China has the whip hand. Herein lies a very important possibility.
China has plenty of money. Its bankers hoard enough to clean up the
country's debts in no time. But they cannot trust their governmental
officials; they never have trusted them. But just lately these bankers
have been awakening to the wisdom of foreign financial methods, and are
adopting them. This may be the first good result of the consortium.
On the other hand, should the terms of the Anglo-Japanese Alliance
displease China, she may refuse to recognize the consortium. What then?
China has set out to strangle the alliance, which was formed without
consulting her. But we speculated enough in the last chapter to show
that should the consortium really work, the Anglo-Japanese Alliance
would cease to have any functional value.
But there are dangers in the consortium,--and even in the coöperative
development of China. If Japan joins whole-heartedly in the consortium,
she may be the greatest gainer. For here are all the powers mutually
developing China, laying railways, and opening up the resources of the
country. Who, more than Japan, is going to tap China's unlimited raw
supplies,--the coal in Shansi, for instance, which is enough to supply
the world's needs for a thousand years? And should Japan in the end
still seek the hegemony of the East, she could utilize these railroads
and resources for her own aggrandizement. Who could stop her? Have not
the separate governments given Japan their assurance that she "need have
no reason to apprehend that the consortium would direct any activities
affecting the security of the economic life and national defense of
Japan?"
There is, it is said, only little left to be told, but that little may
be more than enough. But if China is really helped to strength and
independence, then the greatest menace that has ever faced mankind will
have been averted, and China, a country with the oldest culture in the
world, will have been won back to civilization. Not in emasculated
alliances but in a healthy cooperation will the peace of the Pacific be
preserved. And the consortium, as things are in the world, is the first
example of international good sense known to modern history.
Now, the Consortium Agreement is not an idealistic scheme. The powers
recognize that the future peace of the world depends on how they manage
their affairs in China. If the consortium throws all secrecy to the
winds and comes out openly and at all times for the principles on which
it was formed and for which the several governments have guaranteed
their protection to these banking-groups, what use is there going to be
for the alliance? Perhaps, to paraphrase President Wilson's statement
when he went across the Atlantic with his challenge for the freedom of
the seas, Great Britain and Japan may now have to say to the world:
"Gentlemen, the joke's on us. Why, if the consortium works in China
there is going to be no need of an alliance!"