announces that the British government have accepted the American debt
terms.
The details which I have received are not sufficient to enable me
to form an opinion regarding the character of those terms, or their
bearing on Allied indebtedness to Britain as to the terms of payment.
I know nothing of the steps taken by Mr. Baldwin and the government
of which he is a member to make this the first step in an all-round
settlement of inter-Allied debts. That is a matter of infinite moment
to us, and I assume that this is somewhere--and effectively--in the
arrangement.
As to the payment of our own debt, the government represent the real
sentiment of the nation as a whole. The British taxpayer is no doubt
fully alive to the fact that this heavy debt was incurred by him
during the war in the main in order to finance American supplies to
our Allies. We could have paid for all the supplies we required for
our own use without resort to any loan from the American government.
Nevertheless, the money was advanced by the lender on our credit and
our signature.
Our credit as a nation, therefore, demands that we should pay. Whether
we can collect enough money from our own debtors to meet this charge
becomes increasingly doubtful, as it is becoming increasingly needful.
Britain is alone in thinking she is under any moral obligation to pay
the external liabilities incurred for the effective prosecution of
the war. The attitude of the late and of the present government is
identical in this respect.
Why have the British public taken a different view of their national
obligations towards external war debts from that adopted by other
Allies? In giving the answer I do not wish to dwell on obvious ethical
considerations which must weigh whenever you consider whether you will
carry out an engagement which you have entered into with another who
has already performed his part of the engagement on the strength of
your promise.
These ought to be conclusive; but to urge them might be deemed to be
an unworthy reflection on the honour of those who take a different view
of their national duty.
I have no desire to offer censure or criticism upon their decision.
They, no doubt, have their reasons for the course they are adopting. We
have certainly overwhelming reasons for showing an honest readiness to
pay our debts.
The settling up of accounts is always an unpleasant business,
especially amongst friends. Strangers expect it and prepare for it--and
there is no resentment when the bill arrives. But a man hates reminding
his friend at the end of a business in which both have been engaged
in warm amity that there is "a little balance" to be paid up. He has
been expecting the friend to mention the matter to him. So he puts off
introducing the unpleasant topic from year to year. But the friend
disappoints his expectations. Not a hint comes from that quarter of any
realisation that there is anything due. It soon looks as if it had been
forgotten altogether.
The friend is most insistent on collecting the business accounts due
to himself. He is angry at all delays in payment of his own bills.
But his conscience is blind on the side of the debts he himself owes.
It is not an uncommon experience, and we are suffering from it to-day.
The war left us a creditor nation to the extent of over 2,000 million
pounds, and a debtor nation to the extent of about half that amount.
We readily accepted an invitation from our creditor to discuss the
repayment of the debt we owe. Our debtors have displayed an invincible
reluctance to enter into a similar discussion with us.
That ought not to influence our final decision. Britain is the greatest
of all international traders, and her credit rests on the reputation
she has well earned--that her bond is a sacred trust which her people
always honour and redeem without counting the cost in toil and
treasure. I remember when war broke out the panic which seized bankers
and brokers as they contemplated the obligations incurred by British
firms with their support to finance world trade. These liabilities ran
into hundreds of millions sterling, and the only security for repayment
was represented by a bundle of flimsy paper, criss-crossed with the
signatures of men most of whom no British banker had ever seen, many
of them dwelling in countries with whom we were actually at war.
There was one signature, however, on each paper which was known to
bankers and carried with it the good name of Britain throughout the
world; and it was that of some well-known British firm. Traders in
far-distant lands parted with their produce on the credit of that
signature and of the country with which it was associated.
It is true that the government had no responsibility for any of these
transactions; but the honour of Britain was involved in seeing that the
foreign merchants should not suffer ruin because they put their trust
in British commercial integrity. For that reason the British government
of the day shouldered the burden, took all the risk, and although it
meant a liability of between four hundred and five hundred millions
sterling, not a voice was raised in protest.
The action then taken, though quite unprecedented, was not only
honourable; it was wise. It saved British pride from a reproach; it
also saved British credit from a blow from which it would not have
recovered for a generation. During that generation this lucrative
business would have passed into other hands.
As soon as the war was over the people of Britain, with an instinctive
impulse that required no persuasion to stimulate its activity, set
about the task of restoring their war-battered credit. Government,
bankers, merchants, brokers, manufacturers, and workers of all kinds
were of one mind; borrowing must come to an end; Britain must pay her
way--whatever the sacrifice. Expenditure was ruthlessly cut down. The
army and navy were reduced below pre-war dimensions. Other services
were curtailed. Heavy taxation was imposed--taxation such as no
other country bears. The budget at home must balance. Debts to other
countries must be paid off. Already large sums have been paid abroad.
It required courage and constancy to pursue such a policy; but the
endurance of the nation was beyond praise. It is now calmly facing the
liquidation of this heavy debt to the United States of America; but no
party has yet arisen, or is likely to arise, to demand that the hand of
the negotiators should be arrested. Britain means to pay the last of
her debts without a murmur.
We are already reaping some of the reward. The purchasing value of our
currency has already risen under its burdens, and, as a consequence,
the cost of living has fallen steadily, while other countries who have
pursued a different policy find the cost of living for their people
ascending month by month.
A short time ago we were taunted in the French Chamber of Deputies by
the president of the council that our unsound financial policy had
been responsible for our unemployment. It is true that if we had gone
on borrowing instead of paying our way--if we had defied our foreign
creditors instead of paying them--we also, like many other European
countries, might have fostered an artificial prosperity by means of a
discredited currency. But British credit would have rapidly disappeared
beyond recovery and British trade would soon have followed. Meanwhile,
the cost of living in Great Britain would have been double what it is
to-day. We all therefore dismissed that policy from our minds without
paying it the tribute of a discussion.
Trust is the only soil in which credit flourishes. Had that trust been
forfeited British buyers and consequently British consumers would
to-day have been paying more for their wheat, their meat, their
cotton, and their wool. The burden of repayment to the United States
will be infinitely less than that of the indirect burden involved in
large purchases with a discredited currency.
The government are therefore right in arranging with the American
treasury without loss of time for the liquidation of a debt incurred by
this country. I am taking for granted that they have made every effort
to see that the agreement shall form a part of an all-round settlement
of inter-Allied debts. But as to our own debt the moral obligation
must remain whatever our Allies do or fail to do. Why it was incurred,
the circumstances in which it was entered into, the purposes for which
the money was advanced, were open to the consideration of the American
government in arranging terms. That, however, was their privilege; ours
is to honour our signature.
XXII
INTER-ALLIED DEBTS
A cold shiver ran down the back of England when it was announced
officially that the British government had definitely agreed to pay
over £30,000,000 a year for sixty years to the United States in respect
of debts incurred by us on behalf of our Allies without seeking a
contribution from our debtors to protect the taxpayers of this country.
It is not that anyone dreamt the evil dream of repudiation. That was
never woven into the texture even of the worst nightmare out of the
many that have disturbed our repose since the greatest nightmare of all
left the world a quivering nervous wreck.
Nor did we expect remission of our debts. Whenever we were tempted
to exaggerate the bounds of human charity paragraphs appeared that
reminded us of the attitude of the "Middle West." America was
discovered by Europe centuries ago, but the "Middle West," as a
political entity, is to untutored Europeans a discovery of the war.
We were then told by returning explorers that it was the seat of the
American conscience--inexorable, intractable, but irresistible when
engaged in any enterprise. How potent this conscience was, as a world
force, the war demonstrated. From the heights it hurled an avalanche
of force against Germany that overwhelmed the last hope of resistance.
Unfortunately for us when it came to debts we struck against the hard
side of the Middle West conscience.
Our hope was therefore not in remission. There were, however, many
other possibilities. We were not the only debtors of the American
government. Other Allies had borrowed not merely indirectly through
us, but directly from America. We had every confidence that the United
States government would not mete out to Britain severer treatment
than it was prepared to accord to our Allies. We had to contend, it
is true, with legends of our inexhaustible wealth. Apart from our
great coal deposits, and a climate which leaves those who endure it
no alternative but activity, we have no treasure except the industry,
the resources and the inherited skill of our people. We have nothing
like the rich plains and the fertilising and ripening sunshine of
France, which maintain sixty per cent. of its population. Our sources
of wealth--apart from coal--are precarious, for they depend more
largely than any other country on conditions outside our own. We are
international providers, merchants and carriers. A sixty-year contract
to pay large sums across the seas is in many respects a more serious
consideration for us than for countries whose riches are inherent in
their soil and are, therefore, more self-contained. The demoralised
condition of the world markets has left us with a larger proportion
of our industrial population unemployed than any other European
country. I hear tales of unemployment in the United States of America,
but the reports that reach us here on American unemployment are so
contradictory that I can build no argument upon them. But, as to the
gigantic dimensions of our unemployed problem there can be no doubt. We
have 1,400,000 workmen on the unemployed register drawing unemployment
pay in one form or another. The annual cost to the nation of feeding
its workless population runs to over £100,000,000--almost the figure of
the annuity demanded from Germany as a war indemnity.
Although there are signs of improvement the omens point to a prolonged
period of subnormal trade. Continuous depression for years will mean
that Britain will suffer more from the devastation to her trade caused
by the war than France from the devastation of her provinces. Our
country, anxious about its means of livelihood, with a million and a
half of its workmen walking the streets in a vain search for work, has
to bear the heaviest burden of taxation in the world. Why? Because it
has not only to pay interest on its own heavy war debts, but also on
£3,000,000,000 which it either advanced to the Allies or incurred on
their behalf. That is why we felt hopeful that the United States would
not discriminate against a nation so situated.
When I talk of debts the Allies owe to us, I want to emphasise the
fact that these debts are not paper myths nor tricks of accountancy.
They are onerous facts representing a real burden borne at this hour
by the bent and panting taxpayer of Britain. If these loans had never
been made the weight on his shoulders to-day would have been lighter by
over two shillings in the pound. He is every year paying to the actual
lenders--some British, some American--that proportion of his income.
It is a weight he undertook to carry for his Allies during the war on
the sacred pledge of those Allies that they would take it over after
the war. The American government borrowed from their public to make
advances to Great Britain, and have called upon the British taxpayer to
redeem his pledge. We make no complaint, for the demand is a mitigation
of the strict letter of the bond. But that amount is in substance part
of the debt owing by the Allies to Britain. And the British taxpayer
naturally feels it is hard on him to have to bear not only his own
legitimate burdens but that he should in addition have to carry the
debts of his less heavily taxed brethren in continental countries. He
naturally inferred that if equal pressure had been administered on all
debtors alike it would have forced an all-around consultation which
would have terminated in an all-round settlement.
That was the real purport of the Balfour note. The true significance
of that great document has been entirely misunderstood--sometimes
carelessly, sometimes purposely, sometimes insolently. I guarantee
that not one per cent. of its critics if confronted suddenly with an
examination on its contents would secure one mark out of a hundred.
It has suffered the same fate as the treaty of Versailles. Opinion
is sharply divided as to both between those who rend without reading
and those who read without rending. Most men have received their
impressions of the Balfour note from denunciatory phrases penned
by writers who received their ideas about it from men who gave
instructions to condemn it without ever reading it. The men who really
understood both the Versailles treaty and the Balfour note have been
too busy to find time to inform, to interpret, and to explain.
But the time has come when the public attention should be once more
drawn to the remarkable and far-reaching proposals of the Balfour note.
They constitute an offer on the part of Britain to measure the amount
of her claims against her Allies by the extent of her obligations to
the United States of America. The British government even offered to
include the claim of their country against Germany in this generous
concession. What does that mean in reference to present conditions?
That if the Allies and Germany between them found the £30,000,000 a
year which Britain has undertaken to pay America, she would forgo her
claim to the £3,300,000,000 due to her under contract and treaty.
It was a great offer and if accepted would have produced results
beneficent beyond computation. Britain, which would have been the
heaviest direct loser, would have profited indirectly through the world
recovery that would have ensued.
How was it received? Some criticised it because it asked too
little--some because it demanded too much. Many criticised because
they were determined to approve nothing that emanated from such a
government, but most of its censors condemned it because they never
took the trouble to understand it, and the shrillest among the street
cries happened to denounce it. The government that propounded it soon
after left the seat of authority, and the administration that succeeded
put forward a new scheme which attracted even less acceptance. So this
great project which would have settled for ever the question which
above all others is vexing peace and unsettling minds in Europe was
pigeon-holed where it was not already basketed.
But surely this is not the end of all endeavours to reach a settlement
of the question of inter-Allied debts. We cannot rest satisfied with an
arrangement which effectively binds us to pay without prospect of the
slightest contribution from our debtors. What America cannot indulge
in we cannot afford. The gold of Europe now lies in its coffers.
Who are we--plunged in the mire of debt up to our nostrils--to give
ourselves airs of generosity superior to the only golden land left in
this war-stripped earth?
If there is to be a general jubilee in which all alike participate in
order to give the world a new start, then I feel sure Britain will play
her part bravely and nobly. But a jerry-mandered jubilee which frees
France, Italy and Belgium from all their debts whilst leaving Britain
sweating to pay off debts incurred for her Allies on the strength of
their bond--that we cannot bear.
I trust the government will insist on an arrangement with our Allies
which, even if it is not a replica of our contract with the American
government, will at any rate ensure us a contribution that will
safeguard us against loss under that contract. It is I fear hopeless
to expect that we should be recouped the 2_s._ in the pound which
interest on Allied debts costs our taxpayers, but at any rate we
might be guaranteed against the 6_d._ in the pound which the American
instalments involve. I feel the effort is beset with difficulties
and that the outlook is not hopeful. There have of late been a few
discouraging symptoms. One is the reception accorded at the recent
Paris conference to the British prime minister's liberal offer
regarding inter-Allied debts. It was a tactical error to open the
conference with such a scheme and the effect was singularly unfortunate.
Had I been disposed to press my criticisms on the conduct of the recent
negotiations in Paris it would have been that they were so managed that
for the first time since the war Britain has been completely isolated
at a European conference. That is a misfortune, for it encouraged the
French government to rash action. Up to the last conference Britain and
Italy had remained in substantial accord even when France and Belgium
took a different view, and Belgium had never before quitted any of the
gatherings in complete disagreement with Great Britain. So France,
always tempted as she was to occupy the Ruhr, hesitated to do so in the
face of so formidable an Allied resistance. What is relevant, however,
to the subject of this article is the cause of our unwonted isolation
on the occasion of the last conference. The British premier started
the negotiations by tabling proposals which promised forgiveness of
most of the indebtedness of these countries to Britain, but which
implied immediate arrangements for beginning repayment of the rest.
This suggestion of repayment instantly consolidated opposition to the
whole of the British plan. It became clear that existing governments
on the continent had no intention, unless firmly pressed, of paying
the smallest percentage of the debt they incurred on the faith of a
solemn engagement to repay the loan when that was possible, and to pay
interest meanwhile. If we point to the fact as we did in the Balfour
note, that we have undertaken to repay the United States of America
the heavy debt incurred by us on behalf of the Allies, they simply
shrug their shoulders and say in effect: "That is your affair. We repay
neither Britain nor America, and there is an end of it."
The other unpleasant incident is a speech delivered by M. Poincaré
in the French Chamber in the course of which he dealt casually with
the subject of inter-Allied indebtedness. The French prime minister
then announced categorically that France had no intention of paying
her debts until she has first received her share of reparations from
Germany. What does that mean in effect? That the France represented
by M. Poincaré has no intention of ever paying her debts. When
the colossal figure of German reparations is taken into account
thirty years is a moderate estimate of the period required for its
liquidation. Is the French debt to lie dormant carrying no interest
meanwhile? If it is, then the debt is practically wiped out, for the
present value of £500,000,000 debt payable thirty years hence is
insignificant. The present government of France have therefore declared
they do not mean to pay what France owes. Surely the time to dictate
the conditions of your repayment of a loan--when you propose to pay,
how much you propose to pay, or whether you mean to pay at all--is when
you are borrowing and not after you have spent the money.
And yet in the same speech in which M. Poincaré serves up hot
platitudes for senatorial palates about the sanctity of national
obligations, he dismisses France's faithful ally with the cold comfort
that France is too busy collecting the accounts due to her to attend
to the debts she owes. I believe in my heart that there is a France
of which he is not the spokesman--a great France which will not treat
shabbily a faithful friend who stood by her in the hour of despair
and who is now staggering under unparalleled burdens incurred in the
discharge of the obligations of friendship.
All this makes it more necessary that the situation should be cleared
up without undue delay. Having just completed negotiations for
liquidating our own war indebtedness to America we are in a position
to insist on a settlement with those on whose behalf we incurred that
indebtedness. If nothing is done the conditions will harden against us.
We shall be assumed to have accepted the Poincaré repudiation. I do not
know what conditions the government have made with the United States
government as to the marketability of the securities to be created in
funding our debt. If they are to be placed on the market the chance of
any future deal is destroyed. Ere that be done we must know where we
are in reference to our own claims. I trust the government will act
promptly. Delay was justifiable so long as we were in the same position
in reference to what we owed as what we claimed. The Baldwin settlement
has altered all that. If we do not insist on an arrangement now the
British taxpayer will have the fate of Issachar--that of the poor beast
between two burdens--his own and that of the Allies.
XXIII
THE BRITISH ELECTIONS
It is the duty of every patriotic citizen, in view of the difficulties
with which the country is confronted, to assist the government of
the day by every means at his disposal. Factious criticism disturbs
judgment and tends to unnerve. Governments to-day require full command
of mind and nerve to enable them to arrive at sound decisions and to
persevere in them. Faction is, therefore, treason to the country.
That does not, however, preclude a calm survey of the elections and
their meaning. Quite the contrary, for we must think of the future and
prepare for it.
The result of the elections has fully justified those who maintained
that no party standing alone could hope to secure the measure of public
support which will guarantee stable government. It is true that the
Conservatives have succeeded in obtaining the return of a majority of
members to the new Parliament. But the most notable feature of the
elections is the return of a decisive majority of members by a very
definite minority of the electors.