The Economic Consequences of the Peace
by John Maynard Keynes
1919



Chapter 1: Introductory

 The power to become habituated to his surroundings is a
 marked characteristic of mankind. Very few of us realise with
 conviction the intensely unusual, unstable, complicated,
 unreliable, temporary nature of the economic organisation by
 which Western Europe has lived for the last half century. We
 assume some of the most peculiar and temporary of our late
 advantages as natural, permanent, and to be depended on, and we
 lay our plans accordingly. On this sandy and false foundation we
 scheme for social improvement and dress our political platforms,
 pursue our animosities and particular ambitions, and feel
 ourselves with enough margin in hand to foster, not assuage,
 civil conflict in the European family. Moved by insane delusion
 and reckless self-regard, the German people overturned the
 foundations on which we all lived and built. But the spokesmen of
 the French and British peoples have run the risk of completing
 the ruin which Germany began, by a peace which, if it is carried
 into effect, must impair yet further, when it might have
 restored, the delicate, complicated organisation, already shaken
 and broken by war, through which alone the European peoples can
 employ themselves and live.
     In England the outward aspect of life does not yet teach us
 to feel or realise in the least that an age is over. We are busy
 picking up the threads of our life where we dropped them, with
 this difference only, that many of us seem a good deal richer
 than we were before. Where we spent millions before the war, we
 have now learnt that we can spend hundreds of millions and
 apparently not suffer for it. Evidently we did not exploit to the
 utmost the possibilities of our economic life. We look,
 therefore, not only to a return to the comforts of 1914, but to
 an immense broadening and intensification of them. All classes
 alike thus build their plans, the rich to spend more and save
 less, the poor to spend more and work less.
     But perhaps it is only in England (and America) that it is
 possible to be so unconscious. In continental Europe the earth
 heaves and no one but is aware of the rumblings. There it is not
 just a matter of extravagance or 'labour troubles'; but of life
 and death, of starvation and existence, and of the fearful
 convulsions of a dying civilisation.

     For one who spent in Paris the greater part of the six months
 which succeeded the armistice an occasional visit to London was a
 strange experience. England still stands outside Europe. Europe's
 voiceless tremors do not reach her. Europe is apart and England
 is not of her flesh and body. But Europe is solid with herself.
 France, Germany, Italy, Austria, and Holland, Russia and Roumania
 and Poland, throb together, and their structure and civilisation
 are essentially one. They flourished together, they have rocked
 together in a war which we, in spite of our enormous
 contributions and sacrifices (like though in a less degree than
 America), economically stood outside, and they may fall together.
 In this lies the destructive significance of the Peace of Paris.
 If the European civil war is to end with France and Italy abusing
 their momentary victorious power to destroy Germany and
 Austria-Hungary now prostrate, they invite their own destruction
 also, being so deeply and inextricably intertwined with their
 victims by hidden psychic and economic bonds. At any rate an
 Englishman who took part in the Conference of Paris and was
 during those months a member of the Supreme Economic Council of
 the Allied Powers, was bound to become -- for him a new
 experience -- a European in his cares and outlook. There, at the
 nerve centre of the European system, his British preoccupations
 must largely fall away and he must be haunted by other and more
 dreadful spectres. Paris was a nightmare, and everyone there was
 morbid. A sense of impending catastrophe overhung the frivolous
 scene; the futility and smallness of man before the great events
 confronting him; the mingled significance and unreality of the
 decisions; levity, blindness, insolence, confused cries from
 without-all the elements of ancient tragedy were there. Seated
 indeed amid the theatrical trappings of the French saloons of
 state, one could wonder if the extraordinary visages of Wilson
 and of Clemenceau, with their fixed hue and unchanging
 characterisation, were really faces at all and not the
 tragic-comic masks of some strange drama or puppet-show.
     The proceedings of Paris all had this air of extraordinary
 importance and unimportance at the same time. The decisions
 seemed charged with consequences to the future of human society;
 yet the air whispered that the word was not flesh, that it was
 futile, insignificant, of no effect, dissociated from events; and
 one felt most strongly the impression, described by Tolstoy in
 War and Peace or by Hardy in The Dynasts, of events marching on
 to their fated conclusion uninfluenced and unaffected by the
 cerebrations of statesmen in council:

                  Spirit of the Years

         Observe that all wide sight and self-command
         Deserts these throngs now driven to demonry
         By the Immanent Unrecking. Nought remains
         But vindictiveness here amid the strong,
         And there amid the weak an impotent rage.

                  Spirit of the Pities

         Why prompts the Will so senseless-shaped a doing?

                  Spirit of the Years

         I have told thee that It works unwittingly,
         As one possessed not judging.

     In Paris, where those connected with the Supreme Economic
 Council received almost hourly the reports of the misery,
 disorder, and decaying organisation of all Central and Eastern
 Europe, Allied and enemy alike, and learnt from the lips of the
 financial representatives of Germany and Austria unanswerable
 evidence of the terrible exhaustion of their countries, an
 occasional visit to the hot, dry room in the President's house,
 where the Four fulfilled their destinies in empty and arid
 intrigue, only added to the sense of nightmare. Yet there in
 Paris the problems of Europe were terrible and clamant, and an
 occasional return to the vast unconcern of London a little
 disconcerting. For in London these questions were very far away,
 and our own lesser problems alone troubling. London believed that
 Paris was making a great confusion of its business, but remained
 uninterested. In this spirit the British people received the
 treaty without reading it. But it is under the influence of
 Paris, not London, that this book has been written by one who,
 though an Englishman, feels himself a European also, and, because
 of too vivid recent experience, cannot disinterest himself from
 the further unfolding of the great historic drama of these days
 which will destroy great institutions, but may also create a new
 world.


Chapter 2: Europe Before the War

     Before 1870 different parts of the small continent of Europe
 had specialised in their own products; but, taken as a whole, it
 was substantially self-subsistent. And its population was
 adjusted to this state of affairs.
     After 1870 there was developed on a large scale an
 unprecedented situation, and the economic condition of Europe
 became during the next fifty years unstable and peculiar. The
 pressure of population on food, which had already been balanced
 by the accessibility of supplies from America, became for the
 first time in recorded history definitely reversed. As numbers
 increased, food was actually easier to secure. Larger
 proportional returns from an increasing scale of production
 became true of agriculture as well as industry. With the growth
 of the European population there were more emigrants on the one
 hand to till the soil of the new countries and, on the other,
 more workmen were available in Europe to prepare the industrial
 products and capital goods which were to maintain the emigrant
 populations in their new homes, and to build the railways and
 ships which were to make accessible to Europe food and raw
 products from distant sources. Up to about 1900 a unit of labour
 applied to industry yielded year by year a purchasing power over
 an increasing quantity of food. It is possible that about the
 year 1900 this process began to be reversed, and a diminishing
 yield of nature to man's effort was beginning to reassert itself.
 But the tendency of cereals to rise in real cost was balanced by
 other improvements; and -- one of many novelties -- the resources
 of tropical Africa then for the first time came into large
 employ, and a great traffic in oilseeds began to bring to the
 table of Europe in a new and cheaper form one of the essential
 foodstuffs of mankind. In this economic Eldorado, in this
 economic Utopia, as the earlier economists would have deemed it,
 most of us were brought up.
     That happy age lost sight of a view of the world which filled
 with deep-seated melancholy the founders of our political
 economy. Before the eighteenth century mankind entertained no
 false hopes. To lay the illusions which grew popular at that
 age's latter end, Malthus disclosed a devil. For half a century
 all serious economical writings held that devil in clear
 prospect. For the next half century he was chained up and out of
 sight. Now perhaps we have loosed him again.
     What an extraordinary episode in the economic progress of man
 that age was which came to an end in August 1914! The greater
 part of the population, it is true, worked hard and lived at a
 low standard of comfort, yet were, to all appearances, reasonably
 contented with this lot. But escape was possible, for any man of
 capacity or character at all exceeding the average, into the
 middle and upper classes, for whom life offered, at a low cost
 and with the least trouble, conveniences, comforts, and amenities
 beyond the compass of the richest and most powerful monarchs of
 other ages. The inhabitant of London could order by telephone,
 sipping his morning tea in bed, the various products of the whole
 earth, in such quantity as he might see fit, and reasonably
 expect their early delivery upon his doorstep; he could at the
 same moment and by the same means adventure his wealth in the
 natural resources and new enterprises of any quarter of the
 world, and share, without exertion or even trouble, in their
 prospective fruits and advantages; or he could decide to couple
 the security of his fortunes with the good faith of the
 townspeople of any substantial municipality in any continent that
 fancy or information might recommend. He could secure forthwith,
 if he wished it, cheap and comfortable means of transit to any
 country or climate without passport or other formality, could
 despatch his servant to the neighbouring office of a bank for
 such supply of the precious metals as might seem convenient, and
 could then proceed abroad to foreign quarters, without knowledge
 of their religion, language, or customs, bearing coined wealth
 upon his person, and would consider himself greatly aggrieved and
 much surprised at the least interference. But, most important of
 all, he regarded this state of affairs as normal, certain, and
 permanent, except in the direction of further improvement, and
 any deviation from it as aberrant, scandalous, and avoidable. The
 projects and politics of militarism and imperialism, of racial
 and cultural rivalries, of monopolies, restrictions, and
 exclusion, which were to play the serpent to this paradise, were
 little more than the amusements of his daily newspaper, and
 appeared to exercise almost no influence at all on the ordinary
 course of social and economic life, the internationalisation of
 which was nearly complete in practice.
     It will assist us to appreciate the character and
 consequences of the peace which we have imposed on our enemies,
 if I elucidate a little further some of the chief unstable
 elements, already present when war broke out, in the economic
 life of Europe.

 I. Population

     In 1870, Germany had a population of about 40 million. By
 1892 this figure had risen to 50 million, and by 30 June 1914 to
 about 68 million. In the years immediately preceding the war the
 annual increase was about 850,000, of whom an insignificant
 proportion emigrated.(1*) This great increase was only rendered
 possible by a far-reaching transformation of the economic
 structure of the country. From being agricultural and mainly
 self-supporting, Germany transformed herself into a vast and
 complicated industrial machine dependent for its working on the
 equipoise of many factors outside Germany as well as within. Only
 by operating this machine, continuously and at full blast, could
 she find occupation at home for her increasing population and the
 means of purchasing their subsistence from abroad. The German
 machine was like a top which to maintain its equilibrium must
 progress ever faster and faster.
     In the Austro-Hungarian empire, which grew from about 40
 million in 1890 to at least 50 million at the outbreak of war,
 the same tendency was present in a less degree, the annual excess
 of births over deaths being about half a million, out of which,
 however, there was an annual emigration of some quarter of a
 million persons.
     To understand the present situation, we must apprehend with
 vividness what an extraordinary centre of population the
 development of the Germanic system had enabled Central Europe to
 become. Before the war the population of Germany and
 Austria-Hungary together not only substantially exceeded that of
 the United States, but was about equal to that of the whole of
 North America. In these numbers, situated within a compact
 territory, lay the military strength of the Central Powers. But
 these same numbers -- for even the war has not appreciably
 diminished them(2*) -- if deprived of the means of life, remain a
 hardly less danger to European order.
     European Russia increased her population in a degree even
 greater than Germany -- from less than 100 million in 1890 to
 about 150 million at the outbreak of war;(3*) and in the years
 immediately preceding 1914 the excess of births over deaths in
 Russia as a whole was at the prodigious rate of two million per
 annum. This inordinate growth in the population of Russia, which
 has not been widely noticed in England, has been nevertheless one
 of the most significant facts of recent years.
     The great events of history are often due to secular changes
 in the growth of population and other fundamental economic
 causes, which, escaping by their gradual character the notice of
 contemporary observers, are attributed to the follies of
 statesmen or the fanaticism of atheists. Thus the extraordinary
 occurrences of the past two years in Russia, that vast upheaval
 of society, which has overturned what seemed most stable --
 religion, the basis of property, the ownership of land, as well
 as forms of government and the hierarchy of classes -- may owe
 more to the deep influences of expanding numbers than to Lenin or
 to Nicholas; and the disruptive powers of excessive national
 fecundity may have played a greater part in bursting the bonds of
 convention than either the power of ideas or the errors of
 autocracy.

 II. Organization

     The delicate organisation by which these peoples lived
 depended partly on factors internal to the system.
     The interference of frontiers and of tariffs was reduced to a
 minimum, and not far short of three hundred millions of people
 lived within the three empires of Russia, Germany, and
 Austria-Hungary. The various currencies, which were all
 maintained on a stable basis in relation to gold and to one
 another, facilitated the easy flow of capital and of trade to an
 extent the full value of which we only realise now, when we are
 deprived of its advantages. Over this great area there was an
 almost absolute security of property and of person.
     These factors of order, security, and uniformity, which
 Europe had never before enjoyed over so wide and populous a
 territory or for so long a period, prepared the way for the
 organisation of that vast mechanism of transport, coal
 distribution, and foreign trade which made possible an industrial
 order of life in the dense urban centres of new population. This
 is too well known to require detailed substantiation with
 figures. But it may be illustrated by the figures for coal, which
 has been the key to the industrial growth of Central Europe
 hardly less than of England; the output of German coal grew from
 30 million tons in 1871 to 70 million tons in 1890, 110 million
 tons in 1900, and 190 million tons in 1913.
     Round Germany as a central support the rest of the European
 economic system grouped itself, and on the prosperity and
 enterprise of Germany the prosperity of the rest of the continent
 mainly depended. The increasing pace of Germany gave her
 neighbours an outlet for their products, in exchange for which
 the enterprise of the German merchant supplied them with their
 chief requirements at a low price.
     The statistics of the economic interdependence of Germany and
 her neighbours are overwhelming. Germany was the best customer of
 Russia, Norway, Holland, Belgium, Switzerland, Italy, and
 Austria-Hungary. she was the second-best customer of Great
 Britain, Sweden, 'and Denmark; and the third-best customer of
 France. She was the largest source of supply to Russia, Norway,
 Sweden, Denmark, Holland, Switzerland, Italy, Austria-Hungary,
 Roumania, and Bulgaria; and the second largest source of supply
 to Great Britain, Belgium, and France.
     In our own case we sent more exports to Germany than to any
 other country in the world except India, and we bought more from
 her than from any other country in the world except the United
 States.
     There was no European country except those west of Germany
 which did not do more than a quarter of their total trade with
 her; and in the case of Russia, Austria-Hungary, and Holland the
 proportion was far greater.
     Germany not only furnished these countries with trade but, in
 the case of some of them, supplied a great part of the capital
 needed for their own development. Of Germany's pre-war foreign
 investments, amounting in all to about £31,250 million, not far
 short of £3500 million was invested in Russia, Austria-Hungary,
 Bulgaria, Roumania, and Turkey. And by the system of 'peaceful
 penetration' she gave these countries not only capital but, what
 they needed hardly less, organisation. The whole of Europe east
 of the Rhine thus fell into the German industrial orbit, and its
 economic life was adjusted accordingly.
     But these internal factors would not have been sufficient to
 enable the population to support itself without the co-operation
 of external factors also and of certain general dispositions
 common to the whole of Europe. Many of the circumstances already
 treated were true of Europe as a whole, and were not peculiar to
 the central empires. But all of what follows was common to the
 whole European system.

 III The Psychology of Society

     Europe was so organised socially and economically as to
 secure the maximum accumulation of capital. While there was some
 continuous improvement in the daily conditions of life of the
 mass of the population, society was so framed as to throw a great
 part of the increased income into the control of the class least
 likely to consume it. The new rich of the nineteenth century were
 not brought up to large expenditures, and preferred the power
 which investment gave them to the pleasures of immediate
 consumption. In fact, it was precisely the inequality of the
 distribution of wealth which made possible those vast
 accumulations of fixed wealth and of capital improvements which
 distinguished that age from all others. Herein lay, in fact, the
 main justification of the capitalist system. If the rich had
 spent their new wealth on their own enjoyments, the world would
 long ago have found such a régime intolerable. But like bees they
 saved and accumulated, not less to the advantage of the whole
 community because they themselves held narrower ends in prospect.
     The immense accumulations of fixed capital which, to the
 great benefit of mankind, were built up during the half century
 before the war, could never have come about in a society where
 wealth was divided equitably. The railways of the world, which
 that age built as a monument to posterity, were, not less than
 the pyramids of Egypt, the work of labour which was not free to
 consume in immediate enjoyment the full equivalent of its
 efforts.
     Thus this remarkable system depended for its growth on a
 double bluff or deception. On the one hand the labouring classes
 accepted from ignorance or powerlessness, or were compelled,
 persuaded, or cajoled by custom, convention, authority, and the
 well-established order of society into accepting, a situation in
 which they could call their own very little of the cake that they
 and nature and the capitalists were co-operating to produce. And
 on the other hand the capitalist classes were allowed to call the
 best part of the cake theirs and were theoretically free to
 consume it, on the tacit underlying condition that they consumed
 very little of it in practice. The duty of 'saving' became
 nine-tenths of virtue and the growth of the cake the object of
 true religion. There grew round the non-consumption of the cake
 all those instincts of puritanism which in other ages has
 withdrawn itself from the world and has neglected the arts of
 production as well as those of enjoyment. And so the cake
 increased; but to what end was not clearly contemplated.
 Individuals would be exhorted not so much to abstain as to defer,
 and to cultivate the pleasures of security and anticipation.
 Saving was for old age or for your children; but this was only in
 theory -- the virtue of the cake was that it was never to be
 consumed, neither by you nor by your children after you.
     In writing thus I do not necessarily disparage the practices
 of that generation. In the unconscious recesses of its being
 society knew what it was about. The cake was really very small in
 proportion to the appetites of consumption, and no one, if it
 were shared all round, would be much the better off by the
 cutting of it. Society was working not for the small pleasures of
 today but for the future security and improvement of the race --
 in fact for 'progress'. If only the cake were not cut but was
 allowed to grow in the geometrical proportion predicted by
 Malthus of population, but not less true of compound interest,
 perhaps a day might come when there would at last be enough to go
 round, and when posterity could enter into the enjoyment of our
 labours. In that day overwork, overcrowding, and underfeeding
 would come to an end, and men, secure of the comforts and
 necessities of the body, could proceed to the nobler exercises of
 their faculties. One geometrical ratio might cancel another, and
 the nineteenth century was able to forget the fertility of the
 species in a contemplation of the dizzy virtues of compound
 interest.
     There were two pitfalls in this prospect: lest, population
 still outstripping accumulation, our self-denials promote not
 happiness but numbers; and lest the cake be after all consumed,
 prematurely, in war, the consumer of all such hopes.
     But these thoughts lead too far from my present purpose. I
 seek only to point out that the principle of accumulation based
 in on equality was a vital part of the pre-war order of society
 and of progress as we then understood it, and to emphasise that
 this principle depended on unstable psychological conditions,
 which it may be impossible to re-create. It was not natural for a
 population, of whom so few enjoyed the comforts of life, to
 accumulate so hugely. The war has disclosed the possibility of
 consumption to all and the vanity of abstinence to many. Thus the
 bluff is discovered; the labouring classes may be no longer
 willing to forgo so largely, and the capitalist classes, no
 longer confident of the future, may seek to enjoy more fully
 their liberties of consumption so long as they last, and thus
 precipitate the hour of their confiscation.

 IV. The Relation of the Old World to the New

     The accumulative habits of Europe before the war were the
 necessary condition of the greatest of the external factors which
 maintained the European equipoise.
     Of the surplus capital goods accumulated by Europe a
 substantial part was exported abroad, where its investment made
 possible the development of the new resources of food, materials,
 and transport, and at the same time enabled the Old World to
 stake out a claim in the natural wealth and virgin potentialities
 of the New. This last factor came to be of the vastest
 importance. The Old World employed with an immense prudence the
 annual tribute it was thus entitled to draw. The benefit of cheap
 and abundant supplies, resulting from the new developments which
 its surplus capital had made possible was, it is true, enjoyed
 and not postponed. But the greater part of the money interest
 accruing on these foreign investments was reinvested and allowed
 to accumulate, as a reserve (it was then hoped) against the less
 happy day when the industrial labour of Europe could no longer
 purchase on such easy terms the produce of other continents, and
 when the due balance would be threatened between its historical
 civilisations and the multiplying races of other climates and
 environments. Thus the whole of the European races tended to
 benefit alike from the development of new resources whether they
 pursued their culture at home or adventured it abroad.
     Even before the war, however, the equilibrium thus
 established between old civilisations and new resources was being
 threatened. The prosperity of Europe was based on the facts that,
 owing to the large exportable surplus of foodstuffs in America,
 she was able to purchase food at a cheap rate measured in terms
 of the labour required to produce her own exports, and that, as a
 result of her previous investments of capital, she was entitled
 to a substantial amount annually without any payment in return at
 all. The second of these factors then seemed out of danger but,
 as a result of the growth of population overseas, chiefly in the
 United States, the first was not so secure.
     When first the virgin soils of America came into bearing, the
 proportions of the population of those continents themselves, and
 consequently of their own local requirements, to those of Europe
 were very small. As lately as 1890 Europe had a population three
 times that of North and South America added together. But by 1914
 the domestic requirements of the United states for wheat were
 approaching their production, and the date was evidently near
 when there would be an exportable surplus only in years of
 exceptionally favourable harvest. Indeed, the present domestic
 requirements of the United States are estimated at more than
 ninety per cent of the average yield of the five years
 1909-13.(4*) At that time, however, the tendency towards
 stringency was showing itself, not so much in a lack of abundance
 as in a steady increase of real cost. That is to say, taking the
 world as a whole, there was no deficiency of wheat, but in order
 to call forth an adequate supply it was necessary to offer a
 higher real price. The most favourable factor in the situation
 was to be found in the extent to which Central and Western Europe
 was being fed from the exportable surplus of Russia and Roumania.
     In short, Europe's claim on the resources of the New World
 was becoming precarious; the law of diminishing returns was at
 last reasserting itself, and was making it necessary year by year
 for Europe to offer a greater quantity of other commodities to
 obtain the same amount of bread; and Europe, therefore, could by
 no means afford the disorganisation of any of her principal
 sources of supply.
     Much else might be said in an attempt to portray the economic
 peculiarities of the Europe of 1914. I have selected for emphasis
 the three or four greatest factors of instability -- the
 instability of an excessive population dependent for its
 livelihood on a complicated and artificial organisation, the
 psychological instability of the labouring and capitalist
 classes, and the instability of Europe's claim, coupled with the
 completeness of her dependence, on the food supplies of the New
 World.
     The war had so shaken this system as to endanger the life of
 Europe altogether. A great part of the continent was sick and
 dying; its population was greatly in excess of the numbers for
 which a livelihood was available; its organisation was destroyed,
 its transport system ruptured, and its food supplies terribly
 impaired.
     It was the task of the peace conference to honour engagements
 and to satisfy justice; but not less to re-establish life and to
 heal wounds. These tasks were dictated as much by prudence as by
 the magnanimity which the wisdom of antiquity approved in
 victors. We will examine in the following chapters the actual
 character of the peace.

 NOTES:

 1. In 1913 there were 25,843 emigrants from Germany, of whom
 19,124 went to the United States.

 2. The net decrease of the German population at the end of 1918
 by decline of births and excess of deaths as compared with the
 beginning of 1914, is estimated at about 2,700,000.

 3. Including Poland and Finland, but excluding Siberia, central
 Asia,and the Caucasus.

 4. Even since 1914 the population of the United States has
 increased by seven or eight million. As their annual consumption
 of wheat per head is not less than six bushels, the pre-war scale
 of production in the United States would only show a substantial
 surplus over present domestic requirements in about one year out
 of five. We have been saved for the moment by the great harvests
 of 1918 and 1919, which have been called forth by Mr Hoover's
 guaranteed price. But the United States can hardly be expected to
 continue indefinitely to raise by a substantial figure the cost
 of living in its own country, in order to provide wheat for a
 Europe which cannot pay for it.


Chapter 3: The Conference

     In chapters 4 and 5 I shall study in some detail the economic
 and financial provisions of the treaty of peace with Germany. But
 it will be easier to appreciate the true origin of many of these
 terms if we examine here some of the personal factors which
 influenced their preparation. In attempting this task I touch,
 inevitably, questions of motive, on which spectators are liable
 to error and are not entitled to take on themselves the
 responsibilities of final judgment. Yet, if I seem in this
 chapter to assume sometimes the liberties which are habitual to
 historians, but which, in spite of the greater knowledge with
 which we speak, we generally hesitate to assume towards
 contemporaries, let the reader excuse me when he remembers how
 greatly, if it is to understand its destiny, the world needs
 light, even if it is partial and uncertain, on the complex
 struggle of human will and purpose, not yet finished, which,
 concentrated in the persons of four individuals in a manner never
 paralleled, made them in the first months of 1919 the microcosm
 of mankind.
     In those parts of the treaty with which I am here concerned,
 the lead was taken by the French, in the sense that it was
 generally they who made in the first instance the most definite
 and the most extreme proposals. This was partly a matter of
 tactics. When the final result is expected to be a compromise, it
 is often prudent to start from an extreme position; and the
 French anticipated at the outset -- like most other persons -- a
 double process of compromise, first of all to suit the ideas of
 their allies and associates, and secondly in the course of the
 peace conference proper with the Germans themselves. These
 tactics were justified by the event. Clemenceau gained a
 reputation for moderation with his colleagues in council by
 sometimes throwing over with an air of intellectual impartiality
 the more extreme proposals of his ministers; and much went
 through where the American and British critics were naturally a
 little ignorant of the true point at issue, or where too
 persistent criticism by France's allies put them in a position
 which they felt as invidious, of always appearing to take the
 enemy's part and to argue his case. Where, therefore, British and
 American interests were not seriously involved their criticism
 grew slack, and some provisions were thus passed which the French
 themselves did not take very seriously, and for which the
 eleventh-hour decision to allow no discussion with the Germans
 removed the opportunity of remedy.
     But, apart from tactics, the French had a policy. Although
 Clemenceau might curtly abandon the claims of a Klotz or a
 Loucheur, or close his eyes with an air of fatigue when French
 interests were no longer involved in the discussion, he knew
 which points were vital, and these he abated little. In so far as
 the main economic lines of the treaty represent an intellectual
 idea, it is the idea of France and of Clemenceau.
     Clemenceau was by far the most eminent member of the Council
 of Four, and he had taken the measure of his colleagues. He alone
 both had an idea and had considered it in all its consequences.
 His age, his character, his wit, and his appearance joined to
 give him objectivity and a defined outline in an environment of
 confusion. One could not despise Clemenceau or dislike him, but
 only take a different view as to the nature of civilised man, or
 indulge, at least, a different hope.
     The figure and bearing of Clemenceau are universally
 familiar. At the Council of Four he wore a square-tailed coat of
 a very good, thick black broadcloth, and on his hands, which were
 never uncovered, grey suede gloves; his boots were of thick black
 leather, very good, but of a country style, and sometimes
 fastened in front, curiously, by a buckle instead of laces. His
 seat in the room in the President's house, where the regular
 meetings of the Council of Four were held (as distinguished from
 their private and unattended conferences in a smaller chamber
 below), was on a square brocaded chair in the middle of the
 semicircle facing the fire-place, with Signor Orlando on his
 left, the President next by the fire-place, and the Prime
 Minister opposite on the other side of the fire-place on his
 right. He carried no papers and no portfolio, and was unattended
 by any personal secretary, though several French ministers and
 officials appropriate to the particular matter in hand would be
 present round him. His walk, his hand, and his voice were not
 lacking in vigour, but he bore nevertheless, especially after the
 attempt upon him, the aspect of a very old man conserving his
 strength for important occasions. He spoke seldom, leaving the
 initial statement of the French case to his ministers or
 officials; he closed his eyes often and sat back in his chair
 with an impassive face of parchment, his grey-gloved hands
 clasped in front of him. A short sentence, decisive or cynical,
 was generally sufficient, a question, an unqualified abandonment
 of his ministers, whose face would not be saved, or a display of
 obstinacy reinforced by a few words in a piquantly delivered
 English.(1*) But speech and passion were not lacking when they
 were wanted, and the sudden outburst of words, often followed by
 a fit of deep coughing from the chest, produced their impression
 rather by force and surprise than by persuasion.
     Not infrequently Mr Lloyd George, after delivering a speech
 in English, would, during the period of its interpretation into
 French, cross the hearth-rug to the President to reinforce his
 case by some ad hominem argument in private conversation, or to
 sound the ground for a compromise -- and this would sometimes be
 the signal for a general upheaval and disorder. The President's
 advisers would press round him, a moment later the British
 experts would dribble across to learn the result or see that all
 was well, and next the French would be there, a little suspicious
 lest the others were arranging something behind them, until all
 the room were on their feet and conversation was general in both
 languages. My last and most vivid impression is of such a scene
 -- the President and the Prime Minister as the centre of a
 surging mob and a babel of sound, a welter of eager, impromptu
 compromises and counter-compromises, all sound and fury
 signifying nothing, on what was an unreal question anyhow, the
 great issues of the morning's meeting forgotten and neglected;
 and Clemenceau, silent and aloof on the outskirts -- for nothing
 which touched the security of France was forward -- throned, in
 his grey gloves, on the brocade chair, dry in soul and empty of
 hope, very old and tired, but surveying the scene with a cynical
 and almost impish air; and when at last silence was restored and
 the company had returned to their places, it was to discover that
 he had disappeared.
     He felt about France what Pericles felt of Athens -- unique
 value in her, nothing else mattering; but his theory of politics
 was Bismarck's. He had one illusion -- France; and one
 disillusion -- mankind, including Frenchmen, and his colleagues
 not least. His principles for the peace can be expressed simply.
 In the first place, he was a foremost believer in the view of
 German psychology that the German understands and can understand
 nothing but intimidation, that he is without generosity or
 remorse in negotiation, that there is no advantage he will not
 take of you, and no extent to which he will not demean himself
 for profit, that he is without honour, pride, or mercy. Therefore
 you must never negotiate with a German or conciliate him; you
 must dictate to him. On no other terms will he respect you, or
 will you prevent him from cheating you. But it is doubtful how
 far he thought these characteristics peculiar to Germany, or
 whether his candid view of some other nations was fundamentally
 different. His philosophy had, therefore, no place for
 'sentimentality' in international relations. Nations are real
 things, of whom you love one and feel for the rest indifference
 -- or hatred. The glory of the nation you love is a desirable end
 -- but generally to be obtained at your neighbour's expense. The
 politics of power are inevitable, and there is nothing very new
 to learn about this war or the end it was fought for; England had
 destroyed, as in each preceding century, a trade rival; a mighty
 chapter had been closed in the secular struggle between the
 glories of Germany and of France. Prudence required some measure
 of lip service to the 'ideals' of foolish Americans and
 hypocritical Englishmen; but it would be stupid to believe that
 there is much room in the world, as it really is, for such
 affairs as the League of Nations, or any sense in the principle
 of self-determination except as an ingenious formula for
 rearranging the balance of power in one's own interests.
     These, however, are generalities. In tracing the practical
 details of the peace which he thought necessary for the power and
 the security of France, we must go back to the historical causes
 which had operated during his lifetime. Before the Franco-German
 war the populations of France and Germany were approximately
 equal; but the coal and iron and shipping of Germany were in
 their infancy, and the wealth of France was greatly superior.
 Even after the loss of Alsace-Lorraine there was no great
 discrepancy between the real resources of the two countries. But
 in the intervening period the relative position had changed
 completely. By 1914 the population of Germany was nearly seventy
 per cent in excess of that of France; she had become one of the
 first manufacturing and trading nations of the world; her
 technical skill and her means for the production of future wealth
 were unequalled. France on the other hand had a stationary or
 declining population, and, relatively to others, had fallen
 seriously behind in wealth and in the power to produce it.
     In spite, therefore, of France's victorious issue from the
 present struggle (with the aid, this time, of England and
 America), her future position remained precarious in the eyes of
 one who took the view that European civil war is to be regarded
 as a normal, or at least a recurrent, state of affairs for the
 future, and that the sort of conflicts between organised Great
 Powers which have occupied the past hundred years will also
 engage the next. According to this vision of the future, European
 history is to be a perpetual prize-fight, of which France has won
 this round, but of which this round is certainly not the last.
 From the belief that essentially the old order does not change,
 being based on human nature which is always the same, and from a
 consequent scepticism of all that class of doctrine which the
 League of Nations stands for, the policy of France and of
 Clemenceau followed logically. For a peace of magnanimity or of
 fair and equal treatment, based on such 'ideology' as the
 Fourteen Points of the President, could only have the effect of
 shortening the interval of Germany's recovery and hastening the
 day when she will once again hurl at France her greater numbers
 and her superior resources and technical skill. Hence the
 necessity of 'guarantees'; and each guarantee that was taken, by
 increasing irritation and thus the probability of a subsequent
 revanche by Germany, made necessary yet further provisions to
 crush. Thus, as soon as this view of the world is adopted and the
 other discarded, a demand for a Carthaginian peace is inevitable,
 to the full extent of the momentary power to impose it. For
 Clemenceau made no pretence of considering himself bound by the
 Fourteen Points and left chiefly to others such concoctions as
 were necessary from time to time to save the scruples or the face
 of the President.
     So far as possible, therefore, it was the policy of France to
 set the clock back and to undo what, since 1870, the progress of
 Germany had accomplished. By loss of territory and other measures
 her population was to be curtailed; but chiefly the economic
 system, upon which she depended for her new strength, the vast
 fabric built upon iron, coal, and transport, must be destroyed.
 If France could seize, even in part, what Germany was compelled
 to drop, the inequality of strength between the two rivals for
 European hegemony might be remedied for many generations.
     Hence sprang those cumulative provisions for the destruction
 of highly organised economic life which we shall examine in the
 next chapter.
     This is the policy of an old man, whose most vivid
 impressions and most lively imagination are of the past and not
 of the future. He sees the issue in terms of France and Germany,
 not of humanity and of European civilisation struggling forwards
 to a new order. The war has bitten into his consciousness
 somewhat differently from ours, and he neither expects nor hopes
 that we are at the threshold of a new age.
     It happens, however, that it is not only an ideal question
 that is at issue. My purpose in this book is to show that the
 Carthaginian peace is not practically right or possible. Although
 the school of thought from which it springs is aware of the
 economic factor, it overlooks, nevertheless, the deeper economic
 tendencies which are to govern the future. The clock cannot be
 set back. You cannot restore Central Europe to 1870 without
 setting up such strains in the European structure and letting
 loose such human and spiritual forces as, pushing beyond
 frontiers and races, will overwhelm not only you and your
 'guarantees', but your institutions, and the existing order of
 your society.
     By what legerdemain was this policy substituted for the
 Fourteen Points, and how did the President come to accept it? The
 answer to these questions is difficult and depends on elements of
 character and psychology and on the subtle influence of
 surroundings, which are hard to detect and harder still to
 describe. But, if ever the action of a single individual matters,
 the collapse of the President has been one of the decisive moral
 events of history; and I must make an attempt to explain it. What
 a place the President held in the hearts and hopes of the world
 when he sailed to us in the George Washington! What a great man
 came to Europe in those early days of our victory!
     In November 1918 the armies of Foch and the words of Wilson
 had brought us sudden escape from what was swallowing up all we
 cared for. The conditions seemed favourable beyond any
 expectation. The victory was so complete that fear need play no
 part in the settlement. The enemy had laid down his arms in
 reliance on a solemn compact as to the general character of the
 peace, the terms of which seemed to assure a settlement of
 justice and magnanimity and a fair hope for a restoration of the
 broken current of life. To make assurance certain the President
 was coming himself to set the seal on his work.
     When President Wilson left Washington he enjoyed a prestige
 and a moral influence throughout the world unequalled in history.
 His bold and measured words carried to the peoples of Europe
 above and beyond the voices of their own politicians. The enemy
 peoples trusted him to carry out the compact he had made with
 them; and the Allied peoples acknowledged him not as a victor
 only but almost as a prophet. In addition to this moral influence
 the realities of power were in his hands. The American armies
 were at the height of their numbers, discipline, and equipment.
 Europe was in complete dependence on the food supplies of the
 United States; and financially she was even more absolutely at
 their mercy. Europe not only already owed the United States more
 than she could pay; but only a large measure of further
 assistance could save her from starvation and bankruptcy. Never
 had a philosopher held such weapons wherewith to bind the princes
 of this world. How the crowds of the European capitals pressed
 about the carriage of the President! With what curiosity,
 anxiety, and hope we sought a glimpse of the features and bearing
 of the man of destiny who, coming from the West, was to bring
 healing to the wounds of the ancient parent of his civilisation
 and lay for us the foundations of the future.
     The disillusion was so complete, that some of those who had
 trusted most hardly dared speak of it. Could it be true? they
 asked of those who returned from Paris. Was the treaty really as
 bad as it seemed? What had happened to the President? What
 weakness or what misfortune had led to so extraordinary, so
 unlooked-for a betrayal?
     Yet the causes were very ordinary and human. The President
 was not a hero or a prophet; he was not even a philosopher; but a
 generously intentioned man, with many of the weaknesses of other
 human beings, and lacking that dominating intellectual equipment
 which would have been necessary to cope with the subtle and
 dangerous spellbinders whom a tremendous clash of forces and
 personalities had brought to the top as triumphant masters in the
 swift game of give and take, face to face in council -- a game of
 which he had no experience at all.
     We had indeed quite a wrong idea of the President. We knew
 him to be solitary and aloof, and believed him very strong-willed
 and obstinate. We did not figure him as a man of detail, but the
 clearness with which he had taken hold of certain main ideas
 would, we thought, in combination with his tenacity, enable him
 to sweep through cobwebs. Besides these qualities he would have
 the objectivity, the cultivation, and the wide knowledge of the
 student. The great distinction of language which had marked his
 famous Notes seemed to indicate a man of lofty and powerful
 imagination. His portraits indicated a fine presence and a
 commanding delivery. With all this he had attained and held with
 increasing authority the first position in a country where the
 arts of the politician are not neglected. All of which, without
 expecting the impossible, seemed a fine combination of qualities
 for the matter in hand.
     The first impression of Mr Wilson at close quarters was to
 impair some but not all of these illusions. His head and features
 were finely cut and exactly like his photographs, and the muscles
 of his neck and the carriage of his head were distinguished. But,
 like Odysseus, the President looked wiser when he was seated; and
 his hands, though capable and fairly strong, were wanting in
 sensitiveness and finesse. The first glance at the President
 suggested not only that, whatever else he might be, his
 temperament was not primarily that of the student or the scholar,
 but that he had not much even of that culture of the world which
 marks M. Clemenceau and Mr Balfour as exquisitely cultivated
 gentlemen of their class and generation. But more serious than
 this, he was not only insensitive to his surroundings in the
 external sense, he was not sensitive to his environment at all.
 What chance could such a man have against Mr Lloyd George's
 unerring, almost medium-like, sensibility to everyone immediately
 round him? To see the British Prime Minister watching the
 company, with six or seven senses not available to ordinary men,
 judging character, motive, and subconscious impulse, perceiving
 what each was thinking and even what each was going to say next,
 and compounding with telepathic instinct the argument or appeal
 best suited to the vanity, weakness, or self-interest of his
 immediate auditor, was to realise that the poor President would
 be playing blind man's buff in that party. Never could a man have
 stepped into the parlour a more perfect and predestined victim to
 the finished accomplishments of the Prime the Minister. The Old
 World was tough in wickedness anyhow; the Old World's heart of
 stone might blunt the sharpest blade of the bravest
 knight-errant. But this blind and deaf Don Quixote was entering a
 cavern where the swift and glittering blade was in the hands of
 the adversary.
     But if the President was not the philosopher-king, what was
 he? After all he was a man who had spent much of his life at a
 university. He was by no means a business man or an ordinary
 party politician, but a man of force, personality, and
 importance. What, then, was his temperament?
     The clue once found was illuminating. The President was like
 a nonconformist minister, perhaps a Presbyterian. His thought and
 his temperament were essentially theological not intellectual,
 with all the strength and the weakness of that manner of thought,
 feeling, and expression. It is a type of which there are not now
 in England and Scotland such magnificent specimens as formerly;
 but this description, nevertheless, will give the ordinary
 Englishman the distinctest impression of the President.
     With this picture of him in mind, we can return to the actual
 course of events. The President's programme for the world, as set
 forth in his speeches and his Notes, had displayed a spirit and a
 purpose so admirable that the last desire of his sympathisers was
 to criticise details-the details, they felt, were quite rightly
 not filled in at present, but would be in due course. It was
 commonly believed at the commencement of the Paris conference
 that the President had thought out, with the aid of a large body
 of advisers, a comprehensive scheme not only for the League of
 Nations, but for the embodiment of the Fourteen Points in an
 actual treaty of peace. But in fact the President had thought out
 nothing; when it came to practice his ideas were nebulous and
 incomplete. He had no plan, no scheme, no constructive ideas
 whatever for clothing with the flesh of life the commandments
 which he had thundered from the White House. He could have
 preached a sermon on any of them or have addressed a stately
 prayer to the Almighty for their fulfilment; but he could not
 frame their concrete application to the actual state of Europe.
     He not only had no proposals in detail, but he was in many
 respects, perhaps inevitably, ill-informed as to European
 conditions. And not only was he ill-informed -- that was true of
 Mr Lloyd George also -- but his mind was slow and unadaptable.
 The President's slowness amongst the Europeans was noteworthy. He
 could not, all in a minute, take in what the rest were saying,
 size up the situation with a glance, frame a reply, and meet the
 case by a slight change of ground; and he was liable, therefore,
 to defeat by the mere swiftness, apprehension, and agility of a
 Lloyd George. There can seldom have been a statesman of the first
 rank more incompetent than the President in the agilities of the
 council chamber. A moment often arrives when substantial victory
 is yours if by some slight appearance of a concession you can
 save the face of the opposition or conciliate them by a
 restatement of your proposal helpful to them and not injurious to
 anything essential to yourself. The President was not equipped
 with this simple and usual artfulness. His mind was too slow and
 unresourceful to be ready with any alternatives. The President
 was capable of digging his toes in and refusing to budge, as he
 did over Fiume. But he had no other mode of defence, and it
 needed as a rule but little manoeuvring by his opponents to
 prevent matters from coming to such a head until it was too late.
 By pleasantness and an appearance of conciliation, the President
 would be manoeuvred off his ground, would miss the moment for
 digging his toes in and, before he knew where he had been got to,
 it was too late. Besides, it is impossible month after month, in
 intimate and ostensibly friendly converse between close
 associates, to be digging the toes in all the time. Victory would
 only have been possible to one who had always a sufficiently
 lively apprehension of the position as a whole to reserve his
 fire and know for certain the rare exact moments for decisive
 action. And for that the President was far too slow-minded and
 bewildered.
     He did not remedy these defects by seeking aid from the
 collective wisdom of his lieutenants. He had gathered round him
 for the economic chapters of the treaty a very able group of
 businessmen; but they were inexperienced in public affairs, and
 knew (with one or two exceptions) as little of Europe as he did,
 and they were only called in irregularly as he might need them
 for a particular purpose. Thus the aloofness which had been found
 effective in Washington was maintained, and the abnormal reserve
 of his nature did not allow near him anyone who aspired to moral
 equality or the continuous exercise of influence. His
 fellow-plenipotentiaries were dummies; and even the trusted
 Colonel House, with vastly more knowledge of men and of Europe
 than the President, from whose sensitiveness the President's
 dullness had gained so much, fell into the background as time
 went on. All this was encouraged by his colleagues on the Council
 of Four, who, by the break-up of the Council of Ten, completed
 the isolation which the President's own temperament had
 initiated. Thus day after day and week after week he allowed
 himself to be closeted, unsupported, unadvised, and alone, with
 men much sharper than himself, in situations of supreme
 difficulty, where he needed for success every description of
 resource, fertility, and knowledge. He allowed himself to be
 drugged by their atmosphere, to discuss on the basis of their
 plans and of their data, and to be led along their paths.
     These and other various causes combined to produce the
 following situation. The reader must remember that the processes
 which are here compressed into a few pages took place slowly,
 gradually, insidiously, over a period of about five months.
     As the President had thought nothing out, the Council was
 generally working on the basis of a French or British draft. He
 had to take up, therefore, a persistent attitude of obstruction,
 criticism, and negation, if the draft was to become at all in
 line with his own ideas and purpose. If he was met on some points
 with apparent generosity (for there was always a safe margin of
 quite preposterous suggestions which no one took seriously), it
 was difficult for him not to yield on others. Compromise was
 inevitable, and never to compromise on the essential, very
 difficult. Besides, he was soon made to appear to be taking the
 German part, and laid himself open to the suggestion (to which he
 was foolishly and unfortunately sensitive) of being 'pro-German'.
     After a display of much principle and dignity in the early
 days of the Council of Ten, he discovered that there were certain
 very important points in the programme of his French, British or
 Italian colleague, as the case might be, of which he was
 incapable of securing the surrender by the methods of secret
 diplomacy. What then was he to do in the last resort? He could
 let the conference drag on an endless length by the exercise of
 sheer obstinacy. He could break it up and return to America in a
 rage with nothing settled. Or he could attempt an appeal to the
 world over the heads of the conference. These were wretched
 alternatives, against each of which a great deal could be said.
 They were also very risky, especially for a politician. The
 President's mistaken policy over the congressional election had
 weakened his personal position in his own country, and it was by
 no means certain that the American public would support him in a
 position of intransigency. It would mean a campaign in which the
 issues would be clouded by every sort of personal and party
 consideration, and who could say if right would triumph in a
 struggle which would certainly not be decided on its merits.
 Besides, any open rupture with his colleagues would certainly
 bring upon his head the blind passions of 'anti-German'
 resentment with which the public of all Allied countries were
 still inspired. They would not listen to his arguments. They
 would not be cool enough to treat the issue as one of
 international morality or of the right governance of Europe. The
 cry would simply be that for various sinister and selfish reasons
 the President wished 'to let the Hun off'. The almost unanimous
 voice of the French and British Press could be anticipated. Thus,
 if he threw down the gage publicly he might be defeated. And if
 he were defeated, would not the final peace be far worse than if
 he were to retain his prestige and endeavour to make it as good
 as the limiting conditions of European politics would allow him?
 But above all, if he were defeated, would he not lose the League
 of Nations? And was not this, after all, by far the most
 important issue for the future happiness of the world? The treaty
 would be altered and softened by time. Much in it which now
 seemed so vital would become trifling, and much which was
 impracticable would for that very reason never happen. But the
 League, even in an imperfect form, was permanent; it was the
 first commencement of a new principle in the government of the
 world; truth and justice in international relations could not be
 established in a few months -- they must be born in due course by
 the slow gestation of the League. Clemenceau had been clever
 enough to let it be seen that he would swallow the League at a
 price.
     At the crisis of his fortunes the President was a lonely man.
 Caught up in the toils of the Old World, he stood in great need
 of sympathy, of moral support, of the enthusiasm of masses. But
 buried in the conference, stifled in the hot and poisoned
 atmosphere of Paris, no echo reached him from the outer world,
 and no throb of passion, sympathy, or encouragement from his
 silent constituents in all countries. He felt that the blaze of
 popularity which had greeted his arrival in Europe was already
 dimmed; the Paris Press jeered at him openly; his political
 opponents at home were taking advantage of his absence to create
 an atmosphere against him; England was cold, critical, and
 unresponsive. He had so formed his entourage that he did not
 receive through private channels the current of faith and
 enthusiasm of which the public sources seemed dammed up. He
 needed, but lacked, the added strength of collective faith. The
 German terror still overhung us, and even the sympathetic public
 was very cautious; the enemy must not be encouraged, our friends
 must be supported, this was not the time for discord or
 agitations, the President must be trusted to do his best. And in
 this drought the flower of the President's faith withered and
 dried up.
     Thus it came to pass that the President countermanded the
 George Washington, which, in a moment of well-founded rage, he
 had ordered to be in readiness to carry him from the treacherous
 halls of Paris back to the seat of his authority, where he could
 have felt himself again. But as soon, alas, as he had taken the
 road of compromise, the defects, already indicated, of his
 temperament and of his equipment, were fatally apparent. He could
 take the high line; he could practise obstinacy; he could write
 Notes from Sinai or Olympus; he could remain unapproachable in
 the White House or even in the Council of Ten and be safe. But if
 he once stepped down to the intimate equality of the Four, the
 game was evidently up.
     Now it was that what I have called his theological or
 Presbyterian temperament became dangerous. Having decided that
 some concessions were unavoidable, he might have sought by
 firmness and address and the use of the financial power of the
 United States to secure as much as he could of the substance,
 even at some sacrifice of the letter. But the President was not
 capable of so clear an understanding with himself as this
 implied. He was too conscientious. Although compromises were now
 necessary, he remained a man of principle and the Fourteen Points
 a contract absolutely binding upon him. He would do nothing that
 was not honourable; he would do nothing that was not just and
 right; he would do nothing that was contrary to his great
 profession of faith. Thus, without any abatement of the verbal
 inspiration of the Fourteen Points, they became a document for
 gloss and interpretation and for all the intellectual apparatus
 of self-deception by which, I daresay, the President's
 forefathers had persuaded themselves that the course they thought
 it necessary to take was consistent with every syllable of the
 Pentateuch.
     The President's attitude to his colleagues had now become: I
 want to meet you so far as I can; I see your difficulties and I
 should like to be able to agree to what you propose; but I can do
 nothing that is not just and right, and you must first of all
 show me that what you want does really fall within the words of
 the pronouncements which are binding on me. Then began the
 weaving of that web of sophistry and Jesuitical exegesis that was
 finally to clothe with insincerity the language and substance of
 the whole treaty. The word was issued to the witches of all
 Paris:

             Fair is foul, and foul is fair,
             Hover through the fog and filthy air.

     The subtlest sophisters and most hypocritical draftsmen were
 set to work, and produced many ingenious exercises which might
 have deceived for more than an hour a cleverer man than the
 President.
     Thus instead of saying that German Austria is prohibited from
 uniting with Germany except by leave of France (which would be
 inconsistent with the principle of self-determination), the
 treaty, with delicate draftsmanship, states that 'Germany
 acknowledges and will respect strictly the independence of
 Austria, within the frontiers which may be fixed in a treaty
 between that state and the principal Allied and Associated
 Powers; she agrees that this independence shall be inalienable,
 except with the consent of the council of the League of Nations',
 which sounds, but is not, quite different. And who knows but that
 the President forgot that another part of the treaty provides
 that for this purpose the council of the League must be
 unanimous.
     Instead of giving Danzig to Poland, the treaty establishes
 Danzig as a 'free' city, but includes this 'free' city within the
 Polish customs frontier, entrusts to Poland the control of the
 river and railway system, and provides that 'the Polish
 government shall undertake the conduct of the foreign relations
 of the free city of Danzig as well as the diplomatic protection
 of citizens of that city when abroad.'
     In placing the river system of Germany under foreign control,
 the treaty speaks of declaring international those 'river systems
 which naturally provide more than one state with access to the
 sea, with or without transhipment from one vessel to another'.
     Such instances could be multiplied. The honest and
 intelligible purpose of French policy, to limit the population of
 Germany and weaken her economic system, is clothed, for the
 President's sake, in the august language of freedom and
 international equality.
     But perhaps the most decisive moment in the disintegration of
 the President's moral position and the clouding of his mind was
 when at last, to the dismay of his advisers, he allowed himself
 to be persuaded that the expenditure of the Allied governments on
 pensions and separation allowances could be fairly regarded as
 'damage done to the civilian population of the Allied and
 Associated Powers by German aggression by land, by sea, and from
 the air', in a sense in which the other expenses of the war could
 not be so regarded. It was a long theological struggle in which,
 after the rejection of many different arguments, the President
 finally capitulated before a masterpiece of the sophist's art.
     At last the work was finished; and the President's conscience
 was still intact. In spite of everything, I believe that his
 temperament allowed him to leave Paris a really sincere man; and
 it is probable that to this day he is genuinely convinced that
 the treaty contains practically nothing inconsistent with his
 former professions.
     But the work was too complete, and to this was due the last
 tragic episode of the drama. The reply of Brockdorff-Rantzau
 inevitably took the line that Germany had laid down her arms on
 the basis of certain assurances, and that the treaty in many
 particulars was not consistent with these assurances. But this
 was exactly what the President could not admit; in the sweat of
 solitary contemplation and with prayers to God he had done
 nothing that was not just and right; for the President to admit
 that the German reply had force in it was to destroy his
 self-respect and to disrupt the inner equipoise of his soul; and
 every instinct of his stubborn nature rose in self-protection. In
 the language of medical psychology, to suggest to the President
 that the treaty was an abandonment of his professions was to
 touch on the raw a Freudian complex. It was a subject intolerable
 to discuss, and every subconscious instinct plotted to defeat its
 further exploration.
     Thus it was that Clemenceau brought to success what had
 seemed to be, a few months before, the extraordinary and
 impossible proposal that the Germans should not be heard. If only
 the President had not been so conscientious, if only he had not
 concealed from himself what he had been doing, even at the last
 moment he was in a position to have recovered lost ground and to
 have achieved some very considerable successes. But the President
 was set. His arms and legs had been spliced by the surgeons to a
 certain posture, and they must be broken again before they could
 be altered. To his horror, Mr Lloyd George, desiring at the last
 moment all the moderation he dared, discovered that he could not
 in five days persuade the President of error in what it had taken
 five months to prove to him to be just and right. After all, it
 was harder to de-bamboozle this old Presbyterian than it had been
 to bamboozle him; for the former involved his belief in and
 respect for himself.
     Thus in the last act the President stood for stubbornness and
 a refusal of conciliations.

 NOTES:

 1. He alone amongst the Four could speak and understand both
 languages, Orlando knowing only French and the Prime Minister and
 President only English; and it is of historical importance that
 Orlando and the President had no direct means of communication.



Chapter 4: The Treaty

     The thoughts which I have expressed in the second chapter
 were not present to the mind of Paris. The future life of Europe
 was not their concern; its means of livelihood was not their
 anxiety. Their preoccupations, good and bad alike, related to
 frontiers and nationalities, to the balance of power, to imperial
 aggrandisements, to the future enfeeblement of a strong and
 dangerous enemy, to revenge, and to the shifting by the victors
 of their unbearable financial burdens on to the shoulders of the
 defeated.
     Two rival schemes for the future polity of the world took the
 field -- the Fourteen Points of the President, and the
 Carthaginian peace of M. Clemenceau. Yet only one of these was
 entitled to take the field; for the enemy had not surrendered
 unconditionally, but on agreed terms as to the general character
 of the peace.
     This aspect of what happened cannot, unfortunately, be passed
 over with a word, for in the minds of many Englishmen at least it
 has been a subject of very great misapprehension. Many persons
 believe that the armistice terms constituted the first contract
 concluded between the Allied and Associated Powers and the German
 government, and that we entered the conference with our hands
 free, except so far as these armistice terms might bind us. This
 was not the case. To make the position plain, it is necessary
 briefly to review the history of the negotiations which began
 with the German Note of 5 October 1918, and concluded with
 President Wilson's Note of 5 November 1918.
     On 5 October 1918 the German government addressed a brief
 Note to the President accepting the Fourteen Points and asking
 for peace negotiations. The President's reply of 8 October asked
 if he was to understand definitely that the German government
 accepted 'the terms laid down' in the Fourteen Points and in his
 subsequent addresses and 'that its object in entering into
 discussion would be only to agree upon the practical details of
 their application.' He added that the evacuation of invaded
 territory must be a prior condition of an armistice. On 12
 October the German government returned an unconditional
 affirmative to these questions; 'its object in entering into
 discussions would be only to agree upon practical details of the
 application of these terms'. On 14 October, having received this
 affirmative answer, the President made a further communication to
 make clear the points: (1) that the details of the armistice
 would have to be left to the military advisers of the United
 States and the Allies, and must provide absolutely against the
 possibility of Germany's resuming hostilities; (2) that submarine
 warfare must cease if these conversations were to continue; and
 (3) that he required further guarantees of the representative
 character of the government with which he was dealing. On 20
 October Germany accepted points (1) and (2), and pointed out, as
 regards (3), that she now had a constitution and a government
 dependent for its authority on the Reichstag. On 23 October the
 President announced that, 'having received the solemn and
 explicit assurance of the German government that it unreservedly
 accepts the terms of peace laid down in his address to the
 Congress of the United States on 8 January 1918 (the Fourteen
 Points), and the principles of settlement enunciated in his
 subsequent addresses, particularly the address of 27 September,
 and that it is ready to discuss the details of their
 application', he has communicated the above correspondence to the
 governments of the Allied Powers 'with the suggestion that, if
 these governments are disposed to effect peace upon the terms and
 principles indicated,' they will ask their military advisers to
 draw up armistice terms of such a character as to 'ensure to the
 associated governments the unrestricted power to safeguard and
 enforce the details of the peace to which the German government
 has agreed'. At the end of this Note the President hinted more
 openly than in that of 14 October at the abdication of the
 Kaiser. This completes the preliminary negotiations to which the
 President alone was a party, acting without the governments of
 the Allied Powers.
     On 5 November 1918 the President transmitted to Germany the
 reply he had received from the governments associated with him,
 and added that Marshal Foch had been authorised to communicate
 the terms of an armistice to properly accredited representatives.
 In this reply the allied governments, 'subject to the
 qualifications which follow, declare their willingness to make
 peace with the government of Germany on the terms of peace laid
 down in the President's address to Congress of 8 January 1918,
 and the principles of settlement enunciated in his subsequent
 addresses'. The qualifications in question were two in number.
 The first related to the freedom of the seas, as to which they
 'reserved to themselves complete freedom'. The second related to
 reparation and ran as follows: 'Further, in the conditions of
 peace laid down in his address to Congress on 8 January 1918, the
 President declared that invaded territories must be restored as
 well as evacuated and made free. The allied governments feel that
 no doubt ought to be allowed to exist as to what this provision
 implies. By it they understand that compensation will be made by
 Germany for all damage done to the civilian population of the
 Allies and to their property by the aggression of Germany by
 land, by sea, and from the air.'(1*)
     The nature of the contract between Germany and the Allies
 resulting from this exchange of documents is plain and
 unequivocal. The terms of the peace are to be in accordance with
 the addresses of the President, and the purpose of the peace
 conference is 'to discuss the details of their application.' The
 circumstances of the contract were of an unusually solemn and
 binding character; for one of the conditions of it was that
 Germany should agree to armistice terms which were to be such as
 would leave her helpless. Germany having rendered herself
 helpless in reliance on the contract, the honour of the Allies
 was peculiarly involved in fulfilling their part and, if there
 were ambiguities, in not using their position to take advantage
 of them.
     What, then, was the substance of this contract to which the
 Allies had bound themselves? An examination of the documents
 shows that, although a large part of the addresses is concerned
 with spirit, purpose, and intention, and not with concrete
 solutions, and that many questions requiring a settlement in the
 peace treaty are not touched on, nevertheless there are certain
 questions which they settle definitely. It is true that within
 somewhat wide limits the Allies still had a free hand. Further,
 it is difficult to apply on a contractual basis those passages
 which deal with spirit, purpose, and intention; every man must
 judge for himself whether, in view of them, deception or
 hypocrisy has been practised. But there remain, as will be seen
 below, certain important issues on which the contract is
 unequivocal.
     In addition to the Fourteen Points of 8 January 1918, the
 addresses of the President which form part of the material of the
 contract are four in number -- before the Congress of 11
 February; at Baltimore on 6 April; at Mount Vernon on 4 July; and
 at New York on 27 September, the last of these being specially
 referred to in the contract. I venture to select from these
 addresses those engagements of substance, avoiding repetitions,
 which are most relevant to the German treaty. The parts I omit
 add to, rather than detract from, those I quote; but they chiefly
 relate to intention, and are perhaps too vague and general to be
 interpreted contractually.(2*)
     The Fourteen Points -- (3) 'The removal. so far as possible,
 of all economic barriers and the establishment of an equality of
 trade conditions among all the nations consenting to the peace
 and associating themselves for its maintenance.' (4) 'Adequate
 guarantees given and taken that national armaments will be
 reduced to the lowest point consistent with domestic safety.' (5)
 'A free, open-minded, and absolutely impartial adjustment of all
 colonial claims', regard being had to the interests of the
 populations concerned. (6), (7), (8), and (11) The evacuation and
 'restoration' of all invaded territory, especially of Belgium. To
 this must be added the rider of the Allies, claiming compensation
 for all damage done to civilians and their property by land, by
 sea, and from the air (quoted in full above). (8) The righting of
 'the wrong done to France by Prussia in 1871 in the matter of
 Alsace-Lorraine'. (13) An independent Poland, including 'the
 territories inhabited by indisputably Polish populations' and
 'assured a free and secure access to the sea'. (14) The League of
 Nations.
     Before the Congress, 11 February -- 'There shall be no
 annexations, no contributions, no punitive damages...
 Self-determination is not a mere phrase. It is an imperative
 principle of action which statesmen will henceforth ignore at
 their peril... Every territorial settlement involved in this war
 must be made in the interest and for the benefit of the
 populations concerned, and not as a part of any mere adjustment
 or compromise of claims amongst rival States.'
     New York, 27 September -- (1) 'The impartial justice meted
 out must involve no discrimination between those to whom we wish
 to be just and those to whom we do not wish to be just.' (2) 'No
 special or separate interest of any single nation or any group of
 nations can be made the basis of any part of the settlement which
 is not consistent with the common interest of all.' (3) 'There
 can be no leagues or alliances or special covenants and
 understandings within the general and common family of the League
 of Nations.' (4) 'There can be no special selfish economic
 combinations within the League and no employment of any form of
 economic boycott or exclusion, except as the power of economic
 penalty by exclusion from the markets of the world may be vested
 in the League of Nations itself as a means of discipline and
 control.' (5) 'All international agreements and treaties of every
 kind must be made known in their entirety to the rest of the
 world.'
     This wise and magnanimous programme for the world had passed,
 on 5 November 1918, beyond the region of idealism and aspiration,
 and had become part of a solemn contract to which all the Great
 Powers of the world had put their signature. But it was lost,
 nevertheless, in the morass of Paris -- the spirit of it
 altogether, the letter in parts ignored and in other parts
 distorted.
     The German observations on the draft treaty of peace were
 largely a comparison between the terms of this understanding, on
 the basis of which the German nation had agreed to lay down its
 arms, and the actual provisions of the document offered them for
 signature thereafter. The German commentators had little
 difficulty in showing that the draft treaty constituted a breach
 of engagements and of international morality comparable with
 their own offence in the invasion of Belgium. Nevertheless, the
 German reply was not in all its parts a document fully worthy of
 the occasion, because in spite of the justice and importance of
 much of its contents, a truly broad treatment and high dignity of
 outlook were a little wanting, and the general effect lacks the
 simple treatment, with the dispassionate objectivity of despair,
 which the deep passions of the occasion might have evoked. The
 Allied governments gave it, in any case, no serious
 consideration, and I doubt if anything which the German
 delegation could have said at that stage of the proceedings would
 have much influenced the result.
     The commonest virtues of the individual are often lacking in
 the spokesmen of nations; a statesman representing not himself
 but his country may prove, without incurring excessive blame --
 as history often records -- vindictive, perfidious, and
 egotistic. These qualities are familiar in treaties imposed by
 victors. But the German delegation did not succeed in exposing in
 burning and prophetic words the quality which chiefly
 distinguishes this transaction from all its historical
 predecessors -- its insincerity.
     This theme, however, must be for another pen than mine. I am
 mainly concerned in what follows not with the justice of the
 treaty -- neither with the demand for penal justice against the
 enemy, nor with the obligation of contractual justice on the
 victor -- but with its wisdom and with its consequences.
     I propose, therefore, in this chapter to set forth baldly the
 principal economic provisions of the treaty, reserving, however,
 for the next my comments on the reparation chapter and on
 Germany's capacity to meet the payments there demanded from her.
     The German economic system as it existed before the war
 depended on three main factors: I. Overseas commerce as
 represented by her mercantile marine, her colonies, her foreign
 investments, her exports, and the overseas connections of her
 merchants. II. The exploitation of her coal and iron and the
 industries built upon them. III. Her transport and tariff system.
 Of these the first, while not the least important, was certainly
 the most vulnerable. The treaty aims at the systematic
 destruction of all three, but principally of the first two.

                             I

     (1) Germany has ceded to the Allies all the vessels of her
 mercantile marine exceeding 1,600 tons gross, half the vessels
 between 1,000 tons and 1,600 tons, and one-quarter of her
 trawlers and other fishing boats.(3*) The cession is
 comprehensive, including not only vessels flying the German flag,
 but also all vessels owned by Germans but flying other flags, and
 all vessels under construction as well as those afloat.(4*)
 Further, Germany undertakes, if required, to build for the Allies
 such types of ships as they may specify up to 200,000 tons(5*)
 annually for five years, the value of these ships being credited
 to Germany against what is due from her for reparation.(6*)
     Thus the German mercantile marine is swept from the seas and
 cannot be restored for many years to come on a scale adequate to
 meet the requirements of her own commerce. For the present, no
 lines will run from Hamburg, except such as foreign nations may
 find it worth while to establish out of their surplus tonnage.
 Germany will have to pay to foreigners for the carriage of her
 trade such charges as they may be able to exact, and will receive
 only such conveniences as it may suit them to give her. The
 prosperity of German ports and commerce can only revive, it would
 seem, in proportion as she succeeds in bringing under her
 effective influence the merchant marines of Scandinavia and of
 Holland.
     (2) Germany has ceded to the Allies 'all her rights and
 titles over her overseas possessions.'(7*)
     This cession not only applies to sovereignty but extends on
 unfavourable terms to government property, all of which,
 including railways, must be surrendered without payment, while,
 on the other hand, the German government remains liable for any
 debt which may have been incurred for the purchase or
 construction of this property, or for the development of the
 colonies generally.(8*)
     In distinction from the practice ruling in the case of most
 similar cessions in recent history, the property and persons of
 private German nationals, as distinct from their government, are
 also injuriously affected. The Allied government exercising
 authority in any former German colony 'may make such provisions
 as it thinks fit with reference to the repatriation from them of
 German nationals and to the conditions upon which German subjects
 of European origin shall, or shall not, be allowed to reside,
 hold property, trade or exercise a profession in them'.(9*) All
 contracts and agreements in favour of German nationals for the
 construction or exploitation of public works lapse to the Allied
 governments as part of the payment due for reparation.
     But these terms are unimportant compared with the more
 comprehensive provision by which 'the Allied and Associated
 Powers reserve the right to retain and liquidate all property,
 rights, and interests belonging at the date of the coming into
 force of the present treaty to German nationals, or companies
 controlled by them', within the former German colonies.(10*) This
 wholesale expropriation of private property is to take place
 without the Allies affording any compensation to the individuals
 expropriated, and the proceeds will be employed, first, to meet
 private debts due to Allied nationals from any German nationals,
 and second, to meet claims due from Austrian, Hungarian,
 Bulgarian, or Turkish nationals. Any balance may either be
 returned by the liquidating Power direct to Germany, or retained
 by them. If retained, the proceeds must be transferred to the
 reparation commission for Germany's credit in the reparation
 account.(11*)
     In short, not only are German sovereignty and German
 influence extirpated from the whole of her former overseas
 possessions, but the persons and property of her nationals
 resident or owning property in those parts are deprived of legal
 status and legal security.
     (3) The provisions just outlined in regard to the private
 property of Germans in the ex-German colonies apply equally to
 private German property in Alsace-Lorraine, except in so far as
 the French government may choose to grant exceptions.(12*) This
 is of much greater practical importance than the similar
 expropriation overseas because of the far higher value of the
 property involved and the closer interconnection, resulting from
 the great development of the mineral wealth of these provinces
 since 1871, of German economic interests there with those in
 Germany itself. Alsace-Lorraine has been part of the German
 empire for nearly fifty years -- a considerable majority of its
 population is German-speaking -- and it has been the scene of
 some of Germany's most important economic enterprises.
 Nevertheless, the property of those Germans who reside there, or
 who have invested in its industries, is now entirely at the
 disposal of the French government without compensation, except in
 so far as the German government itself may choose to afford it.
 The French government is entitled to expropriate without
 compensation the personal property of private German citizens and
 German companies resident or situated within Alsace-Lorraine, the
 proceeds being credited in part satisfaction of various French
 claims. The severity of this provision is only mitigated to the
 extent that the French government may expressly permit German
 nationals to continue to reside, in which case the above
 provision is not applicable. Government, state, and municipal
 property, on the other hand, is to be ceded to France without any
 credit being given for it. This includes the railway system of
 the two provinces, together with its rolling-stock.(13*) But
 while the property is taken over, liabilities contracted in
 respect of it in the form of public debts of any kind remain the
 liability of Germany.(14*) The provinces also return to French
 sovereignty free and quit of their share of German war or pre-war
 dead-weight debt; nor does Germany receive a credit on this
 account in respect of reparation.
     (4) The expropriation of German private property is not
 limited, however, to the ex-German colonies and Alsace-Lorraine.
 The treatment of such property forms, indeed, a very significant
 and material section of the treaty, which has not received as
 much attention as it merits, although it was the subject of
 exceptionally violent objection on the part of the German
 delegates at Versailles. So far as I know, there is no precedent
 in any peace treaty of recent history for the treatment of
 private property set forth below, and the German representatives
 urged that the precedent now established strikes a dangerous and
 immoral blow at the security of private property everywhere. This
 is an exaggeration, and the sharp distinction, approved by custom
 and convention during the past two centuries, between the
 property and rights of a state and the property and rights of its
 nationals is an artificial one, which is being rapidly put out of
 date by many other influences than the peace treaty, and is
 inappropriate to modern socialistic conceptions of the relations
 between the state and its citizens. It is true, however, that the
 treaty strikes a destructive blow at a conception which lies at
 the root of much of so-called international law, as this has been
 expounded hitherto.
     The principal provisions relating to the expropriation of
 German private property situated outside the frontiers of
 Germany, as these are now determined, are overlapping in their
 incidence, and the more drastic would seem in some cases to
 render the others unnecessary. Generally speaking, however, the
 more drastic and extensive provisions are not so precisely framed
 as those of more particular and limited application. They are as
 follows:
     (a) The Allies 'reserve the right to retain and liquidate all
 property, rights and interests belonging at the date of the
 coming into force of the present treaty to German nationals, or
 companies controlled by them, within their territories, colonies,
 possessions and protectorates, including territories ceded to
 them by the present treaty.'(15*)
     This is the extended version of the provision which has been
 discussed already in the case of the colonies and of
 Alsace-Lorraine. The value of the property so expropriated will
 be applied, in the first instance, to the satisfaction of private
 debts due from Germany to the nationals of the Allied government
 within whose jurisdiction the liquidation takes place, and,
 second, to the satisfaction of claims arising out of the acts of
 Germany's former allies. Any balance, if the liquidating
 government elects to retain it, must be credited in the
 reparation account.(16*) It is, however, a point of considerable
 importance that the liquidating government is not compelled to
 transfer the balance to the reparation commission, but can, if it
 so decides, return the proceeds direct to Germany. For this will
 enable the United States, if they so wish, to utilise the very
 large balances in the hands of their enemy-property custodian to
 pay for the provisioning of Germany, without regard to the views
 of the reparation commission.
     These provisions had their origin in the scheme for the
 mutual settlement of enemy debts by means of a clearing house.
 Under this proposal it was hoped to avoid much trouble and
 litigation by making each of the governments lately at war
 responsible for the collection of private debts due from its
 nationals to the nationals of any of the other governments (the
 normal process of collection having been suspended by reason of
 the war), and for the distribution of the funds so collected to
 those of its nationals who had claims against the nationals of
 the other governments, any final balance either way being settled
 in cash. Such a scheme could have been completely bilateral and
 reciprocal. And so in part it is, the scheme being mainly
 reciprocal as regards the collection of commercial debts. But the
 completeness of their victory permitted the Allied governments to
 introduce in their own favour many divergencies from reciprocity,
 of which the following are the chief: Whereas the property of
 Allied nationals within German jurisdiction reverts under the
 treaty to Allied ownership on the conclusion of peace, the
 property of Germans within Allied jurisdiction is to be retained
 and liquidated as described above, with the result that the whole
 of German property over a large part of the world can be
 expropriated, and the large properties now within the custody of
 public trustees and similar officials in the Allied countries may
 be retained permanently. In the second place, such German assets
 are chargeable, not only with the liabilities of Germans, but
 also, if they run to it, with 'payment of the amounts due in
 respect of claims by the nationals of such Allied or Associated
 Power with regard to their property, rights, and interests in the
 territory of other enemy Powers,' as, for example, Turkey,
 Bulgaria, and Austria.(17*) This is a remarkable provision, which
 is naturally non-reciprocal. In the third place, any final
 balance due to Germany on private account need not be paid over,
 but can be held against the various liabilities of the German
 government.(18*) The effective operation of these articles is
 guaranteed by the delivery of deeds, titles, and
 information.(19*) In the fourth place, pre-war contracts between
 Allied and German nationals may be cancelled or revived at the
 option of the former, so that all such contracts which are in
 Germany's favour will be cancelled, while, on the other hand, she
 will be compelled to fulfil those which are to her disadvantage.
     (b) So far we have been concerned with German property within
 Allied jurisdiction. The next provision is aimed at the
 elimination of German interests in the territory of her
 neighbours and former allies, and of certain other countries.
 Under article 260 of the financial clauses it is provided that
 the reparation commission may, within one year of the coming into
 force of the treaty, demand that the German government
 expropriate its nationals and deliver to the reparation
 commission 'any rights and interests of German nationals in any
 public utility undertaking or in any concession(20*) operating in
 Russia, China, Turkey, Austria, Hungary, and Bulgaria, or in the
 possessions or dependencies of these states, or in any territory
 formerly belonging to Germany or her allies, to be ceded by
 Germany or her allies to any Power or to be administered by a
 mandatory under the present treaty.' This is a comprehensive
 description, overlapping in part the provisions dealt with under
 (a) above, but including, it should be noted, the new states and
 territories carved out of the former Russian, Austro-Hungarian,
 and Turkish empires. Thus Germany's influence is eliminated and
 her capital confiscated in all those neighbouring countries to
 which she might naturally look for her future livelihood, and for
 an outlet for her energy, enterprise, and technical skill.
     The execution of this programme in detail will throw on the
 reparation commission a peculiar task, as it will become
 possessor of a great number of rights and interests over a vast
 territory owing dubious obedience, disordered by war, disruption,
 and Bolshevism. The division of the spoils between the victors
 will also provide employment for a powerful office, whose
 doorsteps the greedy adventurers and jealous concession-hunters
 of twenty or thirty nations will crowd and defile.
     Lest the reparation commission fail by ignorance to exercise
 its rights to the full, it is further provided that the German
 government shall communicate to it within six months of the
 treaty's coming into force a list of all the rights and interests
 in question, 'whether already granted, contingent or not yet
 exercised', and any which are not so communicated within this
 period will automatically lapse in favour of the Allied
 governments.(21*) How far an edict of this character can be made
 binding on a German national, whose person and property lie
 outside the jurisdiction of his own government, is an unsettled
 question; but all the countries specified in the above list are
 open to pressure by the Allied authorities, whether by the
 imposition of an appropriate treaty clause or otherwise.
     (c) There remains a third provision more sweeping than either
 of the above, neither of which affects German interests in
 neutral countries. The reparation commission is empowered up to 1
 May 1921 to demand payment up to £31,000 million in such manner as
 they may fix, 'whether in gold, commodities, ships, securities or
 otherwise'.(22*) This provision has the effect of entrusting to
 the reparation commission for the period in question dictatorial
 powers over all German property of every description whatever.
 They can, under this article, point to any specific business,
 enterprise, or property, whether within or outside Germany, and
 demand its surrender; and their authority would appear to extend
 not only to property existing at the date of the peace, but also
 to any which may be created or acquired at any time in the course
 of the next eighteen months. For example, they could pick out --
 as presumably they will as soon as they are established -- the fine
 and powerful German enterprise in South America known as the
 Deutsche Ueberseeische Elektrizitëtsgesellschaft (the D.U.E.G.),
 and dispose of it to Allied interests. The clause is unequivocal
 and all-embracing. It is worth while to note in passing that it
 introduces a quite novel principle in the collection of
 indemnities. Hitherto, a sum has been fixed, and the nation
 mulcted has been left free to devise and select for itself the
 means of payment. But in this case the payees can (for a certain
 period) not only demand a certain sum but specify the particular
 kind of property in which payment is to be effected. Thus the
 powers of the reparation commission, with which I deal more
 particularly in the next chapter, can be employed to destroy
 Germany's commercial and economic organisation as well as to
 exact payment.
     The cumulative effect of (a), (b), and (c) (as well as of
 certain other minor provisions on which I have not thought it
 necessary to enlarge) is to deprive Germany (or rather to empower
 the Allies so to deprive her at their will -- it is not yet
 accomplished) of everything she possesses outside her own
 frontiers as laid down in the treaty. Not only are her overseas
 investments taken and her connections destroyed, but the same
 process of extirpation is applied in the territories of her
 former allies and of her immediate neighbours by land.
     (5) Lest by some oversight the above provisions should
 overlook any possible contingencies, certain other articles
 appear in the treaty, which probably do not add very much in
 practical effect to those already described, but which deserve
 brief mention as showing the spirit of completeness in which the
 victorious Powers entered upon the economic subjection of their
 defeated enemy.
     First of all there is a general clause of barrer and
 renunciation: 'In territory outside her European frontiers as
 fixed by the present treaty, Germany renounces all rights, titles
 and privileges whatever in or over territory which belonged to
 her or to her allies, and all rights, titles and privileges
 whatever their origin which she held as against the Allied and
 Associated Powers...'(23*)
     There follow certain more particular provisions. Germany
 renounces all rights and privileges she may have acquired in
 China.(24*) There are similar provisions for Siam,(25*) for
 Liberia,(26*) for Morocco,(27*) and for Egypt.(28*) In the case
 of Egypt not only are special privileges renounced, but by
 article 150 ordinary liberties are withdrawn, the Egyptian
 government being accorded 'complete liberty of action in
 regulating the status of German nationals and the conditions
 under which they may establish themselves in Egypt.'
     By article 258 Germany renounces her right to any
 participation in any financial or economic organisations of an
 international character 'operating in any of the Allied or
 Associated States, or in Austria, Hungary, Bulgaria or Turkey, or
 in the dependencies of these states, or in the former Russian
 empire'.
     Generally speaking, only those pre-war treaties and
 conventions are revived which it suits the Allied governments to
 revive, and those in Germany's favour may be allowed to
 lapse.(29*)
     It is evident, however, that none of these provisions are of
 any real importance, as compared with those described previously.
 They represent the logical completion of Germany's outlawry and
 economic subjection to the convenience of the Allies; but they do
 not add substantially to her effective disabilities.

                             II

     The provisions relating to coal and iron are more important
 in respect of their ultimate consequences on Germany's internal
 industrial economy than for the money value immediately involved.
 The German empire has been built more truly on coal and iron than
 on blood and iron. The skilled exploitation of the great
 coalfields of the Ruhr, Upper Silesia, and the Saar, alone made
 possible the development of the steel, chemical, and electrical
 industries which established her as the first industrial nation
 of continental Europe. One-third of Germany's population lives in
 towns of more than 20,000 inhabitants, an industrial
 concentration which is only possible on a foundation of coal and
 iron. In striking, therefore, at her coal supply, the French
 politicians were not mistaking their target. It is only the
 extreme immoderation, and indeed technical impossibility, of the
 treaty's demands which may save the situation in the long run.
     (1) The treaty strikes at Germany's coal supply in four ways:
     (i) 'As compensation for the destruction of the coal-mines in
 the north of France, and as part payment towards the total
 reparation due from Germany for the damage resulting from the
 war, Germany cedes to France in full and absolute possession,
 with exclusive rights of exploitation, unencumbered, and free
 from all debts and charges of any kind, the coal-mines situated
 in the Saar Basin.'(30*) While the administration of this
 district is vested for fifteen years in the League of Nations, it
 is to be observed that the mines are ceded to France absolutely.
 Fifteen years hence the population of the district will be called
 upon to indicate by plebiscite their desires as to the future
 sovereignty of the territory; and, in the event of their electing
 for union with Germany, Germany is to be entitled to repurchase
 the mines at a price payable in gold.(31*)
     The judgment of the world has already recognised the
 transaction of the Saar as an act of spoliation and insincerity.
 So far as compensation for the destruction of French coal-mines
 is concerned, this is provided for, as we shall see in a moment,
 elsewhere in the treaty. 'There is no industrial region in
 Germany', the German representatives have said without
 contradiction, 'the population of which is so permanent, so
 homogeneous, and so little complex as that of the Saar district.
 Among more than 650,000 inhabitants, there were in 1918 less than
 100 French. The Saar district has been German for more than 1,000
 years. Temporary occupation as a result of warlike operations on
 the part of the French always terminated in a short time in the
 restoration of the country upon the conclusion of peace. During a
 period of 1,048 years France has possessed the country for not
 quite 68 years in all. When, on the occasion of the first Treaty
 of Paris in 1814, a small portion of the territory now coveted
 was retained for France, the population raised the most energetic
 opposition and demanded "reunion with their German fatherland,"
 to which they were "related by language, customs, and religion".
 After an occupation of one year and a quarter, this desire was
 taken into account in the second Treaty of Paris in 1815. Since
 then the country has remained uninterruptedly attached to
 Germany, and owes its economic development to that connection.'
     The French wanted the coal for the purpose of working the
 ironfields of Lorraine, and in the spirit of Bismarck they have
 taken it. Not precedent, but the verbal professions of the
 Allies, have rendered it indefensible.(32*)
     (ii) Upper Silesia, a district without large towns, in which,
 however, lies one of the major coalfields of Germany with a
 production of about 23% of the total German output of hard coal,
 is, subject to a plebiscite,(33*) to be ceded to Poland. Upper
 Silesia was never part of historic Poland; but its population is
 mixed Polish, German, and Czechoslovakian, the precise
 proportions of which are disputed.(34*) Economically it is
 intensely German; the industries of eastern Germany depend upon
 it for their coal; and its loss would be a destructive blow at
 the economic structure of the German state.(35*)
     With the loss of the fields of Upper Silesia and the Saar,
 the coal supplies of Germany are diminished by not far short of
 one-third.
     (iii) Out of the coal that remains to her, Germany is obliged
 to make good year by year the estimated loss which France has
 incurred by the destruction and damage of war in the coalfields
 of her northern provinces. In paragraph 2 of annex V to the
 reparation chapter, 'Germany undertakes to deliver to France
 annually, for a period not exceeding ten years, an amount of coal
 equal to the difference between the annual production before the
 war of the coal-mines of the Nord and Pas de Calais, destroyed as
 a result of the war, and the production of the mines of the same
 area during the year in question: such delivery not to exceed 20
 million tons in any one year of the first five years, and 8
 million tons in any one year of the succeeding five years'.
     This is a reasonable provision if it stood by itself, and one
 which Germany should be able to fulfil if she were left her other
 resources to do it with.
     (iv) The final provision relating to coal is part of the
 general scheme of the reparation chapter by which the sums due
 for reparation are to be partly paid in kind instead of in cash.
 As a part of the payment due for reparation, Germany is to make
 the following deliveries of coal or its equivalent in coke (the
 deliveries to France being wholly additional to the amounts
 available by the cession of the Saar or in compensation for
 destruction in Northern France):
     (a) to France 7 million tons annually for ten years;(36*)
     (b) to Belgium 8 million tons annually for ten years;
     (c) to Italy an annual quantity, rising by annual increments
 from 4.5 million tons in 1919-20 to 8.5 million tons in each of
 the six years 1923-4 to 1928-9;
     (d) to Luxemburg, if required, a quantity of coal equal to
 the pre-war annual consumption of German coal in Luxemburg.
     This amounts in all to an annual average of about 25 million
 tons.

     These figures have to be examined in relation to Germany's
 probable output. The maximum pre-war figure was reached in 1913
 with a total of 191.5 million tons. Of this, 19 million tons were
 consumed at the mines, and on balance (i.e. exports less imports)
 33.5 million tons were exported, leaving 139 million tons for
 domestic consumption. It is estimated that this total was
 employed as follows:

                                 Million tons
          Railways                    18.0
          Gas, water, and electricity 12.5
          Bunkers                      6.5
          House-fuel, small industry
             and agriculture          24.0
          Industry                    78.0
                                     139.0

     The diminution of production due to loss of territory is:
                                 Million tons
             Alsace-Lorraine         3.8
             Saar Basin             13.2
             Upper Silesia          43.8
                                    60.8

     There would remain, therefore, on the basis of the 1913
 output, 130.7 million tons or, deducting consumption at the mines
 themselves, (say) 118 million tons. For some years there must be
 sent out of this supply upwards of 20 million tons to France as
 compensation for damage done to French mines, and 25 million tons
 to France, Belgium, Italy, and Luxemburg;(37*) as the former
 figure is a maximum, and the latter figure is to be slightly less
 in the earliest years, we may take the total export to Allied
 countries which Germany has undertaken to provide as 40 million
 tons, leaving, on the above basis, 78 million tons for her own
 use as against a pre-war consumption of 139 million tons.
     This comparison, however, requires substantial modification
 to make it accurate. On the one hand, it is certain that the
 figures of pre-war output cannot be relied on as a basis of
 present output. During 1918 the production was 161.5 million tons
 as compared with 191.5 million tons in 1913; and during the first
 half of 1919 it was less than 50 million tons, exclusive of
 Alsace-Lorraine and the Saar but including Upper Silesia,
 corresponding to an annual production of about 100 million
 tons.(38*) The causes of so low an output were in part temporary
 and exceptional, but the German authorities agree, and have not
 been confuted, that some of them are bound to persist for some
 time to come. In part they are the same as elsewhere; the daily
 shift has been shortened from 8 1/2 to 7 hours, and it is
 improbable that the powers of the central government will be
 adequate to restore them to their former figure. But in addition,
 the mining plant is in bad condition (due to the lack of certain
 essential materials during the blockade), the physical efficiency
 of the men is greatly impaired by malnutrition (which cannot be
 cured if a tithe of the reparation demands are to be satisfied --
 the standard of life will have rather to be lowered), and the
 casualties of the war have diminished the numbers of efficient
 miners. The analogy of English conditions is sufficient by itself
 to tell us that a pre-war level of output cannot be expected in
 Germany. German authorities put the loss of output at somewhat
 above thirty per cent, divided about equally between the
 shortening of the shift and the other economic influences. This
 figure appears on general grounds to be plausible, but I have not
 the knowledge to endorse or to criticise it.
     The pre-war figure of 118 million tons net (i.e. after
 allowing for loss of territory and consumption at the mines) is
 likely to fall, therefore, at least as low as to 100 million(39*)
 tons, having regard to the above factors. If 40 million tons of
 this are to be exported to the Allies, there remain 60 million
 tons for Germany herself to meet her own domestic consumption.
 Demand as well as supply will be diminished by loss of territory,
 but at the most extravagant estimate this could not be put above
 29 million tons.(40*) Our hypothetical calculations, therefore,
 leave us with post-war German domestic requirements, on the basis
 of a prewar efficiency of railways and industry, of 110 million
 tons against an output not exceeding 100 million tons, of which
 40 million tons are mortgaged to the Allies.
     The importance of the subject has led me into a somewhat
 lengthy statistical analysis. It is evident that too much
 significance must not be attached to the precise figures arrived
 at, which are hypothetical and dubious.(41*) But the general
 character of the facts presents itself irresistibly. Allowing for
 the loss of territory and the loss of efficiency, Germany cannot
 export coal in the near future (and will even be dependent on her
 treaty rights to purchase in Upper Silesia), if she is to
 continue as an industrial nation. Every million tons she is
 forced to export must be at the expense of closing down an
 industry. With results to be considered later this within certain
 limits is possible. But it is evident that Germany cannot and
 will not furnish the Allies with a contribution of 40 million
 tons annually. Those Allied ministers who have told their peoples
 that she can have certainly deceived them for the sake of
 allaying for the moment the misgivings of the European peoples as
 to the path along which they are being led.
     The presence of these illusory provisions (amongst others) in
 the clauses of the treaty of peace is especially charged with
 danger for the future. The more extravagant expectations as to
 reparation receipts, by which finance ministers have deceived
 their publics, will be heard of no more when they have served
 their immediate purpose of postponing the hour of taxation and
 retrenchment. But the coal clauses will not be lost sight of so
 easily -- for the reason that it will be absolutely vital in the
 interests of France and Italy that these countries should do
 everything in their power to exact their bond. As a result of the
 diminished output due to German destruction in France, of the
 diminished output of mines in the United Kingdom and elsewhere,
 and of many secondary causes, such as the breakdown of transport
 and of organisation and the inefficiency of new governments, the
 coal position of all Europe is nearly desperate;(42*) and France
 and Italy, entering the scramble with certain treaty rights, will
 not lightly surrender them.
     As is generally the case in real dilemmas, the French and
 Italian case will possess great force, indeed unanswerable force
 from a certain point of view. The position will be truly
 represented as a question between German industry on the one hand
 and French and Italian industry on the other. It may be admitted
 that the surrender of the coal will destroy German industry; but
 it may be equally true that its non-surrender will jeopardise
 French and Italian industry. In such a case must not the victors
 with their treaty rights prevail, especially when much of the
 damage has been ultimately due to the wicked acts of those who
 are now defeated? Yet if these feelings and these rights are
 allowed to prevail beyond what wisdom would recommend, the
 reactions on the social and economic life of Central Europe will
 be far too strong to be confined within their original limits.
     But this is not yet the whole problem. If France and Italy
 are to make good their own deficiencies in coal from the output
 of Germany, then northern Europe, Switzerland, and Austria, which
 previously drew their coal in large part from Germany's
 exportable surplus, must be starved of their supplies. Before the
 war 13.4 million tons of Germany's coal exports went to
 Austria-Hungary. Inasmuch as nearly all the coalfields of the
 former empire lie outside what is now German Austria, the
 industrial ruin of this latter state, if she cannot obtain coal
 from Germany, will be complete. The case of Germany's neutral
 neighbours, who were formerly supplied in part from Great Britain
 but in large part from Germany, will be hardly less serious. They
 will go to great lengths in the direction of making their own
 supplies to Germany of materials which are essential to her,
 conditional on these being paid for in coal. Indeed they are
 already doing so.(43*) With the breakdown of money economy the
 practice of international barter is becoming prevalent. Nowadays
 money in Central and south-eastern Europe is seldom a true
 measure of value in exchange, and will not necessarily buy
 anything, with the consequence that one country, possessing a
 commodity essential to the needs of another, sells it not for
 cash but only against a reciprocal engagement on the part of the
 latter country to furnish in return some article not less
 necessary to the former. This is an extraordinary complication as
 compared with the former almost perfect simplicity of
 international trade. But in the no less extraordinary conditions
 of today's industry it is not without advantages as a means of
 stimulating production. The butter-shifts of the Ruhr(44*) show
 how far modern Europe has retrograded in the direction of barter,
 and afford a picturesque illustration of the low economic
 organisation to which the breakdown of currency and free exchange
 between individuals and nations is quickly leading us. But they
 may produce the coal where other devices would fail.(45*)
     Yet if Germany can find coal for the neighbouring neutrals,
 France and Italy may loudly claim that in this case she can and
 must keep her treaty obligations. In this there will be a great
 show of justice, and it will be difficult to weigh against such
 claims the possible facts that, while German miners will work for
 butter, there is no available means of compelling them to get
 coal the sale of which will bring in nothing, and that if Germany
 has no coal to send to her neighbours she may fail to secure
 imports essential to her economic existence.
     If the distribution of the European coal supplies is to be a
 scramble in which France is satisfied first, Italy next, and
 everyone else takes their chance, the industrial future of Europe
 is black and the prospects of revolution very good. It is a case
 where particular interests and particular claims, however well
 founded in sentiment or in justice, must yield to sovereign
 expediency. If there is any approximate truth in Mr Hoover's
 calculation that the coal output of Europe has fallen by
 one-third, a situation confronts us where distribution must be
 effected with evenhanded impartiality in accordance with need,
 and no incentive can be neglected towards increased production
 and economical methods of transport. The establishment by the
 Supreme Council of the Allies in August 1919 of a European coal
 commission, consisting of delegates from Great Britain, France,
 Italy, Belgium, Poland, and Czechoslovakia, was a wise measure
 which, properly employed and extended, may prove of great
 assistance. But I reserve constructive proposals for chapter 7.
 Here I am only concerned with tracing the consequences, per
 impossibile, of carrying out the treaty au pied de la
 lettre.(46*)
     (2) The provisions relating to iron ore require less detailed
 attention, though their effects are destructive. They require
 less attention, because they are in large measure inevitable.
 Almost exactly 75% of the iron ore raised in Germany in 1913 came
 from Alsace-Lorraine.(47*) In this the chief importance of the
 stolen provinces lay.
     There is no question but that Germany must lose these
 orefields. The only question is how far she is to be allowed
 facilities for purchasing their produce. The German delegation
 made strong efforts to secure the inclusion of a provision by
 which coal and coke to be furnished by them to France should be
 given in exchange for minette from Lorraine. But they secured no
 such stipulation, and the matter remains at France's option.
     The motives which will govern France's eventual policy are
 not entirely concordant. While Lorraine comprised 75% of
 Germany's iron ore, only 25 % of the blast furnaces lay within
 Lorraine and the Saar basin together, a large proportion of the
 ore being carried into Germany proper. Approximately the same
 proportion of Germany's iron and steel foundries, namely 25 per
 cent, were situated in Alsace-Lorraine. For the moment,
 therefore, the most economical and profitable course would
 certainly be to export to Germany, as hitherto, a considerable
 part of the output of the mines.
     On the other hand, France, having recovered the deposits of
 Lorraine, may be expected to aim at replacing as far as possible
 the industries which Germany had based on them by industries
 situated within her own frontiers. Much time must elapse before
 the plant and the skilled labour could be developed within
 France, and even so she could hardly deal with the ore unless she
 could rely on receiving the coal from Germany. The uncertainty,
 too, as to the ultimate fate of the Saar will be disturbing to
 the calculations of capitalists who contemplate the establishment
 of new industries in France.
     In fact, here, as elsewhere, political considerations cut
 disastrously across economic. In a régime of free trade and free
 economic intercourse it would be of little consequence that iron
 lay on one side of a political frontier, and labour, coal, and
 blast furnaces on the other. But as it is, men have devised ways
 to impoverish themselves and one another; and prefer collective
 animosities to individual happiness. It seems certain,
 calculating on the present passions and impulses of European
 capitalistic society, that the effective iron output of Europe
 will be diminished by a new political frontier (which sentiment
 and historic justice require), because nationalism and private
 interest are thus allowed to impose a new economic frontier along
 the same lines. These latter considerations are allowed, in the
 present governance of Europe, to prevail over the intense need of
 the continent for the most sustained and efficient production to
 repair the destructions of war, and to satisfy the insistence of
 labour for a larger reward.(48*)
     The same influences are likely to be seen, though on a lesser
 scale, in the event of the transference of Upper Silesia to
 Poland. While Upper Silesia contains but little iron, the
 presence of coal has led to the establishment of numerous blast
 furnaces. What is to be the fate of these? If Germany is cut off
 from her supplies of ore on the west, will she export beyond her
 frontiers on the east any part of the little which remains to
 her? The efficiency and output of the industry seem certain to
 diminish.
     Thus the treaty strikes at organisation, and by the
 destruction of organisation impairs yet further the reduced
 wealth of the whole community. The economic frontiers which are
 to be established between the coal and the iron upon which modern
 industrialism is founded will not only diminish the production of
 useful commodities, but may possibly occupy an immense quantity
 of human labour in dragging iron or coal, as the case may be,
 over many useless miles to satisfy the dictates of a political
 treaty or because obstructions have been established to the
 proper localisation of industry.

                             III

     There remain those treaty provisions which relate to the
 transport and the tariff systems of Germany. These parts of the
 treaty have not nearly the importance and the significance of
 those discussed hitherto. They are pinpricks, interferences and
 vexations, not so much objectionable for their solid
 consequences, as dishonourable to the Allies in the light of
 their professions. Let the reader consider what follows in the
 light of the assurances already quoted, in reliance on which
 Germany laid down her arms.
     (1) The miscellaneous economic clauses commence with a number
 of provisions which would be in accordance with the spirit of the
 third of the Fourteen Points -- if they were reciprocal. Both for
 imports and exports, and as regards tariffs, regulations, and
 prohibitions, Germany binds herself for five years to accord
 most-favoured-nation treatment to the Allied and Associated
 states.(49*) But she is not entitled herself to receive such
 treatment.
     For five years Alsace-Lorraine shall be free to export into
 Germany, without payment of customs duty, up to the average
 amount sent annually into Germany from 1911 to 1913.(50*) But
 there is no similar provision for German exports into
 Alsace-Lorraine.
     For three years Polish exports to Germany, and for five years
 Luxemburg's exports to Germany, are to have a similar
 privilege,(51*) but not German exports to Poland or to Luxemburg.
 Luxemburg also, which for many years has enjoyed the benefits of
 inclusion within the German customs union, is permanently
 excluded from it henceforward.(52*)
     For six months after the treaty has come into force Germany
 may not impose duties on imports from the Allied and Associated
 states higher than the most favourable duties prevalent before
 the war; and for a further two years and a half (making three
 years in all) this prohibition continues to apply to certain
 commodities, notably to some of those as to which special
 agreements existed before the war, and also to wine, to vegetable
 oils, to artificial silk, and to washed or scoured wool.(53*)
 This is a ridiculous and injurious provision, by which Germany is
 prevented from taking those steps necessary to conserve her
 limited resources for the purchase of necessaries and the
 discharge of reparation. As a result of the existing distribution
 of wealth in Germany, and of financial wantonness amongst
 individuals, the offspring of uncertainty, Germany is threatened
 with a deluge of luxuries and semi-luxuries from abroad, of which
 she has been starved for years, which would exhaust or diminish
 her small supplies of foreign exchange. These provisions strike
 at the authority of the German government to ensure economy in
 such consumption, or to raise taxation during a critical period.
 What an example of senseless greed overreaching itself, to
 introduce, after taking from Germany what liquid wealth she has
 and demanding impossible payments for the future, a special and
 particularised injunction that she must allow as readily as in
 the days of her prosperity the import of champagne and of silk!
     One other article affects the customs régime of Germany
 which, if it was applied, would be serious and extensive in its
 consequences. The Allies have reserved the right to apply a
 special customs régime to the occupied area on the left bank of
 the Rhine, 'in the event of such a measure being necessary in
 their opinion in order to safeguard the economic interests of the
 population of these territories'.(54*) This provision was
 probably introduced as a possibly useful adjunct to the French
 policy of somehow detaching the left-bank provinces from Germany
 during the years of their occupation. The project of establishing
 an independent republic under French clerical auspices, which
 would act as a buffer state and realise the French ambition of
 driving Germany proper beyond the Rhine, has not yet been
 abandoned. Some believe that much may be accomplished by a régime
 of threats, bribes, and cajolery extended over a period of
 fifteen years or longer.(55*) If this article is acted upon, and
 the economic system of the left bank of the Rhine is effectively
 severed from the rest of Germany, the effect would be
 far-reaching. But the dreams of designing diplomats do not always
 prosper, and we must trust the future.
     (2) The clauses relating to railways, as originally presented
 to Germany, were substantially modified in the final treaty, and
 are now limited to a provision by which goods coming from Allied
 territory to Germany, or in transit through Germany, shall
 receive the most favoured treatment as regards rail freight,
 rates, etc., applied to goods of the same kind carried on any
 German lines 'under similar conditions of transport, for example,
 as regards length of route'.(56*) As a non-reciprocal provision
 this is an act of interference in internal arrangements which it
 is difficult to justify, but the practical effect of this,(57*)
 and of an analogous provision relating to passenger traffic,(58*)
 will much depend on the interpretation of the phrase, 'similar
 conditions of transport'.(59*)
     For the time being Germany's transport system will be much
 more seriously disordered by the provisions relating to the
 cession of rolling-stock. Under paragraph 7 of the armistice
 conditions Germany was called on to surrender 5,000 locomotives
 and 150,000 waggons, 'in good working order, with all necessary
 spare parts and fittings'. Under the treaty Germany is required
 to confirm this surrender and to recognise the title of the
 Allies to the material.(60*) She is further required, in the case
 of railway systems in ceded territory, to hand over these systems
 complete with their full complement of rolling-stock 'in a normal
 state of upkeep' as shown in the last inventory before 11
 November 1918.(61*) That is to say, ceded railway systems are not
 to bear any share in the general depletion and deterioration of
 the German rolling-stock as a whole.
     This is a loss which in course of time can doubtless be made
 good. But lack of lubricating oils and the prodigious wear and
 tear of the war, not compensated by normal repairs, had already
 reduced the German railway system to a low state of efficiency.
 The further heavy losses under the treaty will confirm this state
 of affairs for some time to come, and are a substantial
 aggravation of the difficulties of the coal problem and of export
 industry generally.
     (3) There remain the clau