The Economic Position--Moratorium Extension--Great Britain's Oversea
Trade--Germany's Commerce--Question of Food Supplies--Importance of
the Balkans--"Petrograd."
IN the midst of military, diplomatic, and political turmoil, the
responsible departments of the Government paid very necessary attention
to finance. In the course of an interesting speech in the House of
Commons on August 26th, Mr. Lloyd George showed that he was looking
after the financial and commercial welfare of the country. His speech
ranged over a variety of subjects, and he indicated that the new £1
and 10s. notes would in time be regarded as a recognised part of the
regular currency, and that they would not be entirely supplanted by
the coming issue of certificates. As to the latter, the Chancellor of
the Exchequer stated that their object was really to create credit.
This might be considered, if taken literally, a somewhat dangerous
statement; but the hope was generally expressed that care would be
taken in granting these certificates and preventing their over issue.
As this speech was of considerable importance, a quotation from the
official reports is given below:
The Chancellor of the Exchequer said he did not know why there should
be any scarcity of silver. It was not due to any shortage of the issue
from the mint, and it looked as if there had been some hoarding, a very
stupid thing. When the public got more accustomed to the 10s. and £1
notes there would be less difficulty in getting silver. With regard to
the design of the new notes they would be totally different from the
designs of the Scottish notes, some of which were beautiful.
They had had to consider a good many things, such, for instance,
whether the notes would be easily forgeable. Then they must have a
watermark which could be easily seen. For these reasons they had had to
disregard the very artistic designs of the Scottish notes. It was much
more difficult to imitate simplicity. Therefore, they had decided in
favour of the simple note because once they had started this currency
it might very well become quite popular and part of the regular
currency.
With regard to the certificates the object was really that they should
rather create credit without issuing the actual notes. It was purely
a certificate that the banks were entitled to so much currency. They
need not draw upon it, although they could, and the knowledge that
they had got so much credit at the Treasury enabled them to make their
arrangements for financing the trade of the country.
A question raised by Sir A. Markham with regard to the clearing
of German notes touched a very difficult, dangerous, and delicate
operation. The real danger was that somehow or other bills which were
due for this country to Germany might be honoured. For that reason they
had to take very great care that the transaction was not one-sided. He
hoped to be able in the course of the next few days to set up some form
of machinery that would attempt the operation, but they must take very
good care that they were not financing the enemy. Certificates would
only cover the case of banks; they would not cover insurance companies.
Proceeding, Mr. Lloyd George said that with regard to the general
question it was certainly desirable that a statement should be made as
to the arrangements entered into by the Government with regard to the
finance of the country, and he hoped in the course of a few days to do
so.
There were two or three very special difficulties as to which he had
not, personally, been able to make up his mind. The first was with
regard to the moratorium. A number of hon. gentlemen thought it ought
to be brought to a speedy termination. (Cries of "No," and "Hear,
hear.") He would tell the House what had been done on the subject.
He had issued a questionaire to some of the leading traders of the
country; he had not merely consulted bankers in the City of London. Up
to three o'clock that day he had received something like 8,000 replies
to the question which he had put. They were in the proportion of
something like 4,500 in favour of bringing the moratorium to an end on
September 4th, to 3,500 in favour of extending it.
Bankers and financing houses were almost unanimously in favour of
extending it.
Retail traders were in favour of putting an end to it, but only by a
majority.
Manufacturers, he should say, were two to one in favour of bringing it
to an end, but the one-third represented very important interests in
the manufacturing world. They were very much afraid that if it were
brought to an end there might be a crash. It was therefore a thing that
could not be decided altogether by a majority.
Merchants, both in the foreign and home trades, were in favour of an
extension of the moratorium.
He was inclined to consider whether it was possible to get a limited
moratorium, which would protect those particular interests without
interfering with those who would rather have no moratorium at all.
While about 10,000 forms of inquiry had been issued, that did not
represent all that had been done. He had endeavoured to ascertain
the opinions of bakers, butchers, and other retailers through their
societies. The result was that they were hopelessly divided on the
subject. The Government would have to come to a decision within the
next few days.
As an instance of different points of view, he might mention that at a
meeting of traders at the Treasury last week, one gentleman said that
as a colliery proprietor he would like to bring the moratorium to an
end, but as a merchant he would like it to continue. He agreed that the
steps which had been taken with regard to the discontinuing of bills
involved risks, but this was a time when they must take risks; they
must keep up the credit of the country, so that they might not find
at the end of the war that the important business which they had been
transacting for the whole civilised world had passed away to some other
country.
A good deal depended on the banks. The Government had done for the
banks as much as they could have expected. But the Government did not
do it in order to strengthen the banks' finances or to increase their
business, but to enable them to finance the trade of the country. If
the Government and the country were prepared to take risks, the banks
must take risks. He agreed that a very considerable number of banks had
behaved admirably. He thought that the action of other banks had been
due to timidity and over-caution. They had to think about their own
depositors. He did not think they were considering their shareholders
or the price of their shares, but they considered themselves to be
trustees of their depositors.
The time had come, however, when the banks ought to make advances with
the credit of the State behind them. He had called the attention of
the banks to complaints he had received, and had said that unless the
traders received the usual and even greater facilities for carrying on
in this special emergency, he had no doubt the House of Commons would
take action which would place behind the trade of the country the
necessary credit. He was glad to be able to say that the banks had come
to the conclusion, after careful consideration, that they could finance
business much more liberally than they were able to do during the first
fortnight.
An hon. member had called attention to the fact that the foreign
exchanges had broken down, and that the bridge had not been quite
repaired. That was true. It had been a very sudden snap of
communications. He hoped every day for improvement, but if it was
necessary to take any further action in order to expedite matters, then
he might have to come to the House of Commons. But he did not think
it was. The discounting of bills would have the effect that the banks
would find it necessary in their own interest to use the liberated cash
for the purpose of financing trade.
* * * * *
Later, on September 8th, Mr. Lloyd George, replying to a deputation
from the Association of Municipal Corporations at the Treasury,
referred to the important part which finance would play in the war. In
the course of his speech he said:
In my judgment the last few hundred millions may win this war. This is
my opinion. The first hundred millions our enemies can stand just as
well as we can; but the last they cannot, thank God; and therefore I
think cash is going to count much more than we can possibly imagine at
the present moment. We are only at the beginning now. Of course if we
have great victories and smashing victories that is all right, but then
they may not come yet. We may have fluctuations, and things may last
long.
We are fighting a very tough enemy, who is very well prepared for the
fight, and he will probably fight to the very end before he will accept
the only conditions upon which we can possibly make peace, if we are
wise.
We financed Europe in the greatest war we ever fought, and that is what
won. Of course, British tenacity and British courage always come in,
and they always will; but let us remember that British cash told too.
When the others were absolutely exhausted we were getting our second
breath, and our third and our fourth, and we shall have to spend our
last before we are beaten. I want the municipalities to remember that.
Our trade is not going. The seas are ours, and they will remain
ours. We shall get not merely our own trade, except that of European
countries, but we shall get a good deal of the enemy's trade as well,
and, of course, there is always the business which is necessary in
order to keep the war going. So that there will be a great deal of
employment in the ordinary course of business.
* * * * *
While we are on this subject of finance and economics, it may be well
to refer briefly to Germany's position. It was known that Germany
alone among the European Powers kept a well filled war chest. It was
understood that up to 1913, the war reserve amounted to £6,000,000
in gold. Under the new Army Law of 1913, it was stipulated that
this reserve should be trebled. There was reason to believe that in
addition the German Government had put aside for the purposes of the
present war about £30,000,000 out of the £50,000,000 which it had been
hoped to raise by last year's special war levy. Although some of this
cash was spent on preparing the new Army Corps, and possibly also
in strengthening the fortresses, it was generally believed that the
greater part of it was kept in reserve to meet the initial expenses of
the present campaign.
In addition to this, of course, large sums were obtained from Belgium
in the form of war levies. The Province of Brabant, for example,
was mulcted to the extent of £18,000,000, Brussels to the extent
of £10,000,000, Liège £2,000,000, and smaller towns in proportion.
From the cities on the French border, as well as from various towns
in Belgium, large supplies of stores and food were also demanded,
sometimes in addition to money and sometimes as a substitute.
These amounts, large as they are, would not seem sufficient to carry on
the war for any great length of time. Some calculations were made by
Paris Correspondents of the _Daily Telegraph_ at the outbreak of the
campaign. The minimum cost was estimated there at £400,000,000.
The figures given by military writers coincided and agreed that about
8,500,000 men were under arms for land warfare. To these must be added
340,000 seamen. If the Balkan War were taken as an example, the cost of
each man mobilised amounts to 10s. a day. This gives about £4,400,000
daily, or £132,000,000 monthly.
This figure is, however, considerably short of the mark, because it
does not take into account the maintenance of the armies and fleets.
The German Reichstag authorised extraordinary expenditure to the
extent of £250,000,000 to be obtained by a loan, and a further sum of
£14,000,000 to be drawn on the gold and silver reserve of the Empire.
It is now well known that the tax of 5 per cent. on the stock of notes
issued by the Reichsbank over and above its reserve in metal has been
suppressed. The German Government will therefore secure the loan
required by an issue of bank notes uncovered by a reserve of gold and
silver.
This issue reminds one of the assignats of the first French Revolution,
of which a few samples are kept as curious heirlooms in French
families.
It was stated in Paris that the Austrian army on a war footing cost
the Empire £800,000 a day, but the Austrian Treasury was emptied by
the mobilisation during the Balkan wars, which drained the financial
resources of the Empire for more than a year, and it is hard to see
where the Austrian Monarchy can find the large sums required to keep
the Imperial and Royal armies and navy during the present war.
There were many reasons that might be brought forward to show how Mr.
Lloyd George was justified in asserting that England could stand the
financial strain better than Germany. One great factor was responsible
for this, namely, the command of the sea. It is true that during the
war our trade with Germany, Russia, and France must be practically at a
standstill. There are even pessimists who say that our general European
trade must be severely crippled until the campaign is over. Even if we
assume this to be the case, however, there is, relatively speaking,
no cause for despondency. Our exports last year were valued at over
£525,000,000. If most of these exports had been sent to European
countries, there might possibly be some ground for concern. Of the huge
total, however, the countries with which we are at war, Germany and
Austria, took exports from us to the value of only £45,000,000; and
our exports to every European country, including Germany and Austria,
amounted to less than £180,000,000.
Expressed in other words, this means that roughly speaking, one-third
of our exports went to European countries, and two-thirds to countries
in other parts of the world. We have thus about two-thirds of our
ordinary export trade to come and go on--thanks to our command of the
sea--and, thanks to our command of the sea also, the oversea commerce
of Germany and Austria has for the time being completely broken down.
In view of this fact, the significance of which has hardly yet been
generally appreciated, it is possible for us at the present time
to capture, if not all, at least a large proportion of orders from
oversea countries which in the ordinary way would be given to German
or Austrian firms. It would be foolish to say, of course, that our
economic life can proceed as usual during a European war in which we
are involved; but it cannot be too emphatically pointed out that our
economical conditions here are, or can at least be made, infinitely
superior to those prevailing in the countries with which we are at war,
or even in Russia or France. German commerce is ruined; our commerce
can be made almost normal.
Take another point. We have a very large income from our investments
abroad, which are valued at rather more than £4,000,000,000. It is
estimated that our yearly income from this source is £200,000,000,
and, in addition, for services rendered internationally, our bankers,
brokers, shipping firms, and so on, receive an additional sum of
£150,000,000. That is to say, in exchange not for goods but for
services, we receive from various nations about £350,000,000 every
year. True, a large proportion of this sum is derived from investments
in countries affected by the war; and, on account of the war, many
of these normal returns have fallen off. It must nevertheless be
remembered that much of this large income comes to us from countries
which are only slightly, if at all, affected by the dislocation--from
India, for instance; Spain, the United States, all our own oversea
dominions, and South America. Our interests in Central and South
America alone are valued at £1,300,000,000.
There are other points to be remembered in connection with our position
as traders. At least ten million men in France, Russia, and Germany
have now been withdrawn from industry and are engaged in war. The
effect of this on the remainder of the adult population and on normal
production is naturally very considerable. In this country we have not
as yet found it necessary to withdraw such large numbers of men from
their ordinary work. Practically half a million men have joined the
second army, and another half-million are asked for. The withdrawal
of a million men from our industries is not likely to be seriously
felt, especially as many thousands of these men will be taken from
non-productive occupations. There is, therefore, no reason why we
should not continue our normal export trade as well as--though of
course to a smaller extent--our carrying trade.
And now for a glance at Germany's exports. In 1912 they amounted
to £440,000,000, and of this figure £106,000,000 represented raw
material, and no less than £295,000,000 manufactured articles. Such
things as clocks, toys, musical instruments, paints, paper, glassware,
iron and steel goods, gloves, hardware, and cutlery were poured into
every country in the world. We ourselves took £70,000,000 worth of
this stuff; India £6,000,000 worth; Australia £7,000,000; and Canada
and South Africa about £3,000,000 worth each. To Argentina, in 1912,
went German goods valued at nearly £13,000,000, and to the United
States manufactured articles worth nearly £12,000,000. These are a
few instances; the consular reports and Board of Trade statistics
will furnish several others. A determined attempt must now be made to
secure this trade. We shall, of course, have to compete with the United
States, where for two or three years past eager attention has been paid
to the possibilities of developing the South American market.
Germany, it must be remembered, did not enter upon this campaign
without taking into consideration her own economic position, and
especially her food supplies. Whether she was able to carry out the
plans she knew she ought to carry out is another matter. The advanced
state of her mobilisation at the time she declared war on Russia and
France made it quite clear that her decision to put her fortunes to the
test of the sword had not been taken in a day. Not even the perfect
Prussian military machine could have thrown so many troops against the
frontiers of France and Belgium at short notice, and it is certain
that the Berlin Government, in addition to giving its attention to the
organisation of the fighting forces, must have seriously considered the
question of the nation's food supply. Yet the circumstantial reports
which have filtered through relating to "food riots" in the capital and
other large towns indicate that this important matter--perhaps because
it is civil rather than military--has not had the consideration to
which it is entitled.
Germany is, indeed, in an unfortunate position if her food supply is
running short at this early stage of the campaign. So seldom in the
history of our own country have our trade routes been blocked for even
a short time that it is not easy for us to realise the situation of a
country which is dependent for a large proportion of its daily bread
upon foreign countries and happens to be cut off from communication
with them.
The latest figures show that Germany imported agricultural products
and foodstuffs in 1913 to the value of £351,836,900. These figures
show but a slight deviation from those of 1912 and 1911, a deviation
which changes in the population easily explain. Even when we make every
allowance for wines and various luxuries which are classified under
this heading, we shall be on the safe side in saying that Germany
must import necessary foodstuffs every year to the value of not less
than £180,000,000. This is a huge total, and it is accounted for by
the fact, which has caused some concern already to German statesmen,
that from an almost purely agricultural country Germany has, since the
Franco-German War, developed at a remarkable rate into an industrial
country. The producer has left the farm for the factory, and though one
result has been a vast increase in the wealth of the German Empire,
another has been to leave the Empire more and more dependent upon
foreign countries for its supplies of the necessaries of life.
Germany obtains a great deal of her meat, wheat, eggs, barley, coffee,
maize, butter, etc., from beyond her borders. In 1913, for example,
Russia sent her grain and cereals to the extent of 3,600,000 tons,
valued approximately at £30,000,000. In 1912 Argentina exported to her
grain and livestock products worth nearly £11,000,000. From Hungary
she received last year cereals valued at £4,000,000; and even little
Roumania contributed £1,000,000 worth of wheat to the total.
* * * * *
The following short table, giving the import figures for 1911 and 1913,
will show to what extent Germany is indebted to foreign countries for
some common grain and cereal products:
---------------+-------------+-------------
| 1911. | 1913.
---------------+-------------+-------------
|
|(£ sterling.)|(£ sterling.)
Wheat | 19,943,750| 21,472,850
Barley | 23,105,250| 20,347,750
Maize | 4,336,000| 5,309,600
Rye | 3,800,600| 4,100,200
Oats | 3,742,800| 3,946,300
Rice | 4,408,200| 3,926,000
Cocoa | 2,775,300| 2,796,000
Coffee | 12,578,450| 12,450,500
Eggs | 8,567,900| 4,504,800
---------------+-------------+-------------
With her coast blockaded by the British Fleet; France, Belgium, and
Russia hostile; and squadrons of the Navy alert for prizes in the
Mediterranean and the Atlantic, it is not likely that Germany can rely
upon any imports of food until the war is over. Austria-Hungary, at
grips with Servia, will require for her own use all the food she can
get, even if the Straits of Otranto were open. The hostility of Servia
prevents any possibility of food being imported via Greece.
On this point a remarkable article, obviously inspired, and showing
clearly enough why the Teutonic Powers were paying so much attention
to the Balkans, appeared in the _Frankfurter Zeitung_ so far back as
January 7th, 1914. The writer said:
The countries comprising the Triple Alliance are changing daily from
agricultural States to industrial States; and they are more and more
compelled to depend upon the uninterrupted importation of their raw
materials. A war with England, France, and Russia at the same time
appears, fortunately, to be ever more improbable; but the possibility
of such a conflict cannot be excluded, and far-seeing statesmen must
reckon with it. The Triple Alliance countries, which are compelled to
have recourse to large armies, cannot hope to compete successfully
with the fleets of England and France on the high seas. In the event
of a struggle, therefore, our oversea imports would, in a short time,
be done away with, and our industries would languish for want of raw
material. As things stand to-day, it is not merely the lack of wheat
and meat that would drive the country to destruction. Coal and iron and
heaven knows what else have also become essential to us. Where, then,
shall the Triple Alliance countries look for their raw material if the
sea routes are cut off? There is only one means of land communication,
and it leads through Roumania, Bulgaria, and Turkey into Asia Minor.
It follows that the Triple Alliance can never see this route barricaded
by hostile States; the Triplice must keep this route open at all
costs.... The German military mission in Constantinople is not merely
helping to reorganise the Turkish army out of pure joy; it must, at the
same time, serve both Turkey and the German Empire. One should also
take notice of the determination of Germany and Austria not to consent
to the proposal for the inter-nationalisation of the stretch of the
Orient Railway between Adrianople and Constantinople. The States lying
between the eastern border of Hungary and Asia Minor have, indeed, no
choice; they must be the friends and allies of the Triple Alliance; or
they must reckon with the unflinching hostility of the Triple Alliance
in any conflict which threatens their independence. Austria, too,
has no choice. Either the countries on the Lower Danube must be her
friends, or she must seek to annihilate them. It is as Napoleon said:
"the Power that commands Constantinople can command the whole world,
provided that it can maintain itself there." And when Bismarck said
that the whole Balkan Peninsula was not worth the bones of a Pomeranian
grenadier, he could not have foreseen that this territory would one
day become so essential a route for German imports that we should not,
if necessary, shirk a conflict with Russia to maintain our freedom of
trade there.
* * * * *
Servia, in this astonishing declaration, was not mentioned by name;
but the hint to both her and Russia was sufficiently broad. Germany
and Austria are cut off completely by the hostility of Servia; and,
if Russia had not intervened, it is clear that this "means of land
communication" would have been kept free from a "barricade," if any
Power had thought of putting one up. In this connection it may be
recalled that the White Paper relating to the European Crisis (Cd.
7,467) contains a significant telegram from Mr. H.D. Beaumont, of the
International Financial Commission, to Sir Edward Grey:
Constantinople,
_July 29th, 1914._
I understand that the designs of Austria may extend considerably
beyond the Sanjak and a punitive occupation of Servian territory. I
gathered this from a remark let fall by the Austrian Ambassador here,
who spoke of the deplorable economic situation of Salonika under Greek
administration, and of the assistance on which the Austrian army could
count from Mussulman population discontented with Servian rule.
The reference in the telegram was, of course, to the Bagdad concession;
for Germany expected to be able to develop Asia Minor with the object
of making it a country capable of furnishing the large proportion of
foodstuffs and raw material which now enter Germany, from Russia,
Argentina, Canada, France, and Great Britain. All the treaties
and conventions relating to the concession specify this almost in
so many words. Hence the desperate anxiety of Germany and Austria
to secure Salonika as a port and to bring the Balkan States under
Teutonic influence; since a single unfriendly nation--Servia, for
instance--would have been an effective "barricade." The plan has failed
and the failure has trebled the price of food in Austria and doubled it
in Germany. Neither Government reckoned with a stern resistance; and
the failure to do so has already led both countries well on the way to
starvation.
Two instance of the bitterness with which the campaign was waged on
both sides may be mentioned as a fitting conclusion to this volume.
While the war was responsible for a good deal, one would hardly have
expected it to affect the text of a Wagnerian music-drama. Yet the
_Vossische Zeitung_ gravely stated that "having regard to the fact that
our ally, Austria-Hungary, and especially Hungary, is fighting so
bravely by our side, Wagner's text to 'Lohengrin' was slightly altered
at the opening performance in the Royal Opera House." In Wagner's own
version Henry the Fowler sings, "Herr Gott, bewahr uns vor dem Ungarn
Wut" ("Lord God, protect us from Hungaria's rage"). Knüpfer, who
undertook the rôle, deleted the word "Ungarn" and substituted "Feinde"
("enemy")! The alteration is said to have been wildly applauded.
To balance this there is a Russian step to be referred to. On September
2nd the _Telegraph's_ correspondent in the Russian capital announced
that St. Petersburg was no more. An Imperial decree made it known that
in future the Russian capital was to be called Petrograd. The change
was in the air for some time. The German-sounding name of the city had
long been a strange anomaly, and with the outbreak of war there was a
widespread demand that it should be altered.
Among the Slav alternatives proposed were Petrogorod, Petrovsk,
Petroff, and Sviato Petrovsk. The appellation actually selected is by
no means novel in its use. There was a time when old-fashioned people
pretty generally spoke of Petrograd, and not of Petersburg. The name
now officially adopted for the capital is also applied to it in the
works of Pushkin, Lermontoff, Alexei, Tolstoi, and Nekrasoff.
Dr. Dillon, commenting on the telegram, added:
What's in a name? The Russians hold that there is a good deal in it,
else they would not have chosen the present moment to reconsider a
proposal made many times during the past thirty-five years to change
that of their capital on the Neva. The city heretofore known as
St. Petersburg is in future to be called Petrograd. This apparent
innovation is in reality a return to the old name which Peter the
Great's second capital had borne from the beginning. All the old
books published in that city during the latter part of Peter's reign
and those of his immediate successors bear the word Petrograd on the
title-pages. Grad and Gorod are two forms of the same word which means
city or town. Etymologically it connotes an enclosed space, and belongs
to the same root as the English word garden. It occurs in hundreds
of Slav geographical names, as, for instance, in Novgorod--"new
town"--Ivangorod, Elizabetgrad, Euxinograd. Constantinople itself is
often called in Russian the "Emperor's city," Tsaregrad.
During the reigns of the Empresses Catherine, Anna, and Elizabeth the
mania for adopting foreign names was rife in Russia, and on many
places known in old Russian history German names were bestowed, most of
which remain to this day.
After the Treaty of Berlin, when Count Ignatieff, who had been Russia's
Ambassador in Constantinople, became at first Minister of the Interior
and then President of the Slavonic Society, he, Komaroff, and a number
of other Slavophiles inaugurated a movement in favour of altering those
German names to their Russian equivalents, or to the original Slav
appellations wherever there were any such. Before making the suggestion
public Count Ignatieff asked me to draw up a list of those towns and
cities, and to open a Press campaign in favour of the movement in
the columns of the Press organ of the Imperial Russian Academy, the
_Peterburgskya Vedomosti_, on the staff of which I was then a leader
writer. I did so. But this attempt to Russify geographical names met
with little support and encountered fierce opposition. The comic papers
in particular made fun of it, and asked whether we would not include
Oranienbaum--a summer residence near St. Petersburg--in our list, and
call it Apelsinsk, or, say, in English "Orange-insk," and a number
of other absurd translations were suggested for the benefit of the
Slavophile reformers.
But the campaign was not wholly unsuccessful. The Emperor Alexander
III., when he heard of it, is said to have remarked: "There is no need
of going to extremes. But the cities which played a part in Russian
history and had purely Russian names ought to have those names restored
to them. And in this list we should include the university city of
Dorpat and the city of Dunaburg. Henceforth they shall be known as
Yurevo and Dvinsk." Among Russian Germans there was a great outcry
at this "profanation," and most German prints and books--even those
published in the Russian Empire--continued to refer to those towns
as Dorpat and Dunaburg. But to-day they are known only as Yurevo and
Dvinsk.
And now St. Petersburg has been added to the list.
In time, no doubt, Peterhof, Oranienbaum, Yekaterinburg, Orenburg, and
a host of other places will also be rechristened, and Count Ignatieff's
proposal will be fully carried out.
_Wyman & Sons Ltd., Printers, London and Reading._