Or was it just one great lie to deceive the people of the victorious
nations and to keep them quiet by golden promises which the liars knew
in their hearts could never be fulfilled? One is tempted sometimes to
think so. It is now so transparently clear that not even the richest
and most powerful nation in the world of commerce—the United States
of America—could pay one tenth of the sum expected from Germany after
her overwhelming defeat, and the ruin of her world trade, without
overwhelming financial disaster, that it is incredible that the
greatest statesmen of the Allies and all their experts and advisers
could ever have believed in such mad economics. Year after year there
were assemblies of financial gentlemen who solemnly sat round tables
estimating Germany’s capacity to pay. Year after year they reduced
their estimates until they were brought down to 6,600 millions, and
then by easy stages to 2,200 millions, while Europe sank deeper into
economic misery; while British trade declined; while Austria starved;
while France grew desperate for these payments; while Russia was
famine-stricken; while Germany poured out paper money which became
worthless, until her bankruptcy could no longer be concealed.
Future historians will be baffled by that psychology. They will hunt
desperately for some clue to the mystery of that amazing folly which
took possession of many people. They will call it perhaps the Great
Financial Hoax, and argue that it was a deliberate deception on the
part of the world’s leaders, afraid to confess to their nations that
after all their sacrifice there would be no “fruits of victory,” but
only heavy taxation, to pay for the costs of war which could not be
shifted on to enemy nations. I do not think it was quite as simple as
all that. I think in the beginning that sheer ignorance of the most
elementary economic laws led men like Clemenceau and Lloyd George
to over-estimate the power of a nation like Germany to transfer
wealth in money values to other nations. They did not understand
that all transferable wealth—or nearly all—can only be obtained
by a trade balance of exports and imports, and that the potential
energy of a nation, its factories and plant, its public buildings,
bridges, organisation and industry, are not transferable except by a
balance over exchange of goods. They were so hopelessly ignorant of
international finance that they actually did believe that they could
“squeeze” Germany of vast sums of money which could be divided among
the Allies for the settlement of their immense bill of costs, without
damaging their own trade or allowing Germany to trade unduly in the
markets of the world. One British statesman promised his people that
Germany should be squeezed like an orange until the pips squeaked.
French statesmen, like Poincaré, dazzled the eyes of their people with
golden visions. They balanced their budget by the simple method of
assuming that all that war debt would be paid by Germany when pressure
was firmly applied.
It was only later, when the politicians began to get a clear notion
of economic laws, by the painful lessons of reality and disillusion,
that they began to deceive their peoples and keep up the bluff. They
were afraid to tell the truth after all those falsities. In France,
long before the entry into the Ruhr, French economists, business men
and senators confessed privately that France could never hope to get
anything like her claims against Germany, and some of them, more candid
than others, shrugged their shoulders and said: “We dare not tell the
people—the shock would be too great.” The French Press kept up the
conspiracy of this deception, audaciously and persistently throwing the
blame of delay in getting German payments upon Great Britain who did
not stand by them in exerting “pressure.” In Great Britain, dependent
upon export trade for her main source of wealth, and seeing the deadly
stagnation of Europe and its increasing loss of purchasing power, the
truth of economic law was more quickly perceived, and its statesmen
shifted their policy and forgot their golden promises more rapidly and
with more public candour.