The Economic Consequences of the Peace

EUROPE AFTER THE TREATY

This chapter must be one of pessimism. The Treaty includes no provisions
for the economic rehabilitation of Europe,--nothing to make the defeated
Central Empires into good neighbors, nothing to stabilize the new States
of Europe, nothing to reclaim Russia; nor does it promote in any way a
compact of economic solidarity amongst the Allies themselves; no
arrangement was reached at Paris for restoring the disordered finances
of France and Italy, or to adjust the systems of the Old World and the
New.

The Council of Four paid no attention to these issues, being preoccupied
with others,--Clemenceau to crush the economic life of his enemy, Lloyd
George to do a deal and bring home something which would pass muster for
a week, the President to do nothing that was not just and right. It is
an extraordinary fact that the fundamental economic problems of a Europe
starving and disintegrating before their eyes, was the one question in
which it was impossible to arouse the interest of the Four. Reparation
was their main excursion into the economic field, and they settled it
as a problem of theology, of polities, of electoral chicane, from every
point of view except that of the economic future of the States whose
destiny they were handling.

I leave, from this point onwards, Paris, the Conference, and the Treaty,
briefly to consider the present situation of Europe, as the War and the
Peace have made it; and it will no longer be part of my purpose to
distinguish between the inevitable fruits of the War and the avoidable
misfortunes of the Peace.

The essential facts of the situation, as I see them, are expressed
simply. Europe consists of the densest aggregation of population in the
history of the world. This population is accustomed to a relatively high
standard of life, in which, even now, some sections of it anticipate
improvement rather than deterioration. In relation to other continents
Europe is not self-sufficient; in particular it cannot feed Itself.
Internally the population is not evenly distributed, but much of it is
crowded into a relatively small number of dense industrial centers. This
population secured for itself a livelihood before the war, without much
margin of surplus, by means of a delicate and immensely complicated
organization, of which the foundations were supported by coal, iron,
transport, and an unbroken supply of imported food and raw materials
from other continents. By the destruction of this organization and the
interruption of the stream of supplies, a part of this population is
deprived of its means of livelihood. Emigration is not open to the
redundant surplus. For it would take years to transport them overseas,
even, which is not the case, if countries could be found which were
ready to receive them. The danger confronting us, therefore, is the
rapid depression of the standard of life of the European populations to
a point which will mean actual starvation for some (a point already
reached in Russia and approximately reached in Austria). Men will not
always die quietly. For starvation, which brings to some lethargy and a
helpless despair, drives other temperaments to the nervous instability
of hysteria and to a mad despair. And these in their distress may
overturn the remnants of organization, and submerge civilization itself
in their attempts to satisfy desperately the overwhelming needs of the
individual. This is the danger against which all our resources and
courage and idealism must now co-operate.

On the 13th May, 1919, Count Brockdorff-Rantzau addressed to the Peace
Conference of the Allied and Associated Powers the Report of the German
Economic Commission charged with the study of the effect of the
conditions of Peace on the situation of the German population. "In the
course of the last two generations," they reported, "Germany has become
transformed from an agricultural State to an industrial State. So long
as she was an agricultural State, Germany could feed forty million
inhabitants. As an industrial State she could insure the means of
subsistence for a population of sixty-seven millions; and in 1913 the
importation of foodstuffs amounted, in round figures, to twelve million
tons. Before the war a total of fifteen million persons in Germany
provided for their existence by foreign trade, navigation, and the use,
directly or indirectly, of foreign raw material." After rehearsing the
main relevant provisions of the Peace Treaty the report continues:
"After this diminution of her products, after the economic depression
resulting from the loss of her colonies, her merchant fleet and her
foreign investments, Germany will not be in a position to import from
abroad an adequate quantity of raw material. An enormous part of German
industry will, therefore, be condemned inevitably to destruction. The
need of importing foodstuffs will increase considerably at the same time
that the possibility of satisfying this demand is as greatly diminished.
In a very short time, therefore, Germany will not be in a position to
give bread and work to her numerous millions of inhabitants, who are
prevented from earning their livelihood by navigation and trade. These
persons should emigrate, but this is a material impossibility, all the
more because many countries and the most important ones will oppose any
German immigration. To put the Peace conditions into execution would
logically involve, therefore, the loss of several millions of persons in
Germany. This catastrophe would not be long in coming about, seeing that
the health of the population has been broken down during the War by the
Blockade, and during the Armistice by the aggravation of the Blockade of
famine. No help, however great, or over however long a period it were
continued, could prevent those deaths en masse." "We do not know, and
indeed we doubt," the report concludes, "whether the Delegates of the
Allied and Associated Powers realize the inevitable consequences which
will take place if Germany, an industrial State, very thickly populated,
closely bound up with the economic system of the world, and under the
necessity of importing enormous quantities of raw material and
foodstuffs, suddenly finds herself pushed back to the phase of her
development, which corresponds to her economic condition and the numbers
of her population as they were half a century ago. Those who sign this
Treaty will sign the death sentence of many millions of German men,
women and children."

I know of no adequate answer to these words. The indictment is at least
as true of the Austrian, as of the German, settlement. This is the
fundamental problem in front of us, before which questions of
territorial adjustment and the balance of European power are
insignificant. Some of the catastrophes of past history, which have
thrown back human progress for centuries, have been due to the reactions
following on the sudden termination, whether in the course of nature or
by the act of man, of temporarily favorable conditions which have
permitted the growth of population beyond what could be provided for
when the favorable conditions were at an end.

The significant features of the immediate situation can be grouped under
three heads: first, the absolute falling off, for the time being, in
Europe's internal productivity; second, the breakdown of transport and
exchange by means of which its products could be conveyed where they
were most wanted; and third, the inability of Europe to purchase its
usual supplies from overseas.

The decrease of productivity cannot be easily estimated, and may be the
subject of exaggeration. But the primâ facie evidence of it is
overwhelming, and this factor has been the main burden of Mr. Hoover's
well-considered warnings. A variety of causes have produced it;—violent
and prolonged internal disorder as in Russia and Hungary; the creation
of new governments and their inexperience in the readjustment of
economic relations, as in Poland and Czecho-Slovakia; the loss
throughout the Continent of efficient labor, through the casualties of
war or the continuance of mobilization; the falling-off in efficiency
through continued underfeeding in the Central Empires; the exhaustion
of the soil from lack of the usual applications of artificial manures
throughout the course of the war; the unsettlement of the minds of the
laboring classes on the fundamental economic issues of their lives. But
above all (to quote Mr. Hoover), "there is a great relaxation of effort
as the reflex of physical exhaustion of large sections of the
population from privation and the mental and physical strain of the
war." Many persons are for one reason or another out of employment
altogether. According to Mr. Hoover, a summary of the unemployment
bureaus in Europe in July, 1919, showed that 15,000,000 families were
receiving unemployment allowances in one form or another, and were
being paid in the main by a constant inflation of currency. In Germany
there is the added deterrent to labor and to capital (in so far as the
Reparation terms are taken literally), that anything, which they may
produce beyond the barest level of subsistence, will for years to come
be taken away from them.

Such definite data as we possess do not add much, perhaps, to the
general picture of decay. But I will remind the reader of one or two of
them. The coal production of Europe as a whole is estimated to have
fallen off by 30 per cent; and upon coal the greater part of the
industries of Europe and the whole of her transport system depend.
Whereas before the war Germany produced 85 per cent of the total food
consumed by her inhabitants, the productivity of the soil is now
diminished by 40 per cent and the effective quality of the live-stock by
55 per cent.[145] Of the European countries which formerly possessed a
large exportable surplus, Russia, as much by reason of deficient
transport as of diminished output, may herself starve. Hungary, apart
from her other troubles, has been pillaged by the Romanians immediately
after harvest. Austria will have consumed the whole of her own harvest
for 1919 before the end of the calendar year. The figures are almost too
overwhelming to carry conviction to our minds; if they were not quite so
bad, our effective belief in them might be stronger.

But even when coal can be got and grain harvested, the breakdown of the
European railway system prevents their carriage; and even when goods can
be manufactured, the breakdown of the European currency system prevents
their sale. I have already described the losses, by war and under the
Armistice surrenders, to the transport system of Germany. But even so,
Germany's position, taking account of her power of replacement by
manufacture, is probably not so serious as that of some of her
neighbors. In Russia (about which, however, we have very little exact or
accurate information) the condition of the rolling-stock is believed to
be altogether desperate, and one of the most fundamental factors in her
existing economic disorder. And in Poland, Roumania, and Hungary the
position is not much better. Yet modern industrial life essentially
depends on efficient transport facilities, and the population which
secured its livelihood by these means cannot continue to live without
them. The breakdown of currency, and the distrust in its purchasing
value, is an aggravation of these evils which must be discussed in a
little more detail in connection with foreign trade.

What then is our picture of Europe? A country population able to support
life on the fruits of its own agricultural production but without the
accustomed surplus for the towns, and also (as a result of the lack of
imported materials and so of variety and amount in the saleable
manufactures of the towns) without the usual incentives to market food
in return for other wares; an industrial population unable to keep its
strength for lack of food, unable to earn a livelihood for lack of
materials, and so unable to make good by imports from abroad the failure
of productivity at home. Yet, according to Mr. Hoover, "a rough estimate
would indicate that the population of Europe is at least 100,000,000
greater than can be supported without imports, and must live by the
production and distribution of exports."

The problem of the re-inauguration of the perpetual circle of production
and exchange in foreign trade leads me to a necessary digression on the
currency situation of Europe.

Lenin is said to have declared that the best way to destroy the
Capitalist System was to debauch the currency. By a continuing process
of inflation, governments can confiscate, secretly and unobserved, an
important part of the wealth of their citizens. By this method they not
only confiscate, but they confiscate arbitrarily; and, while the
process impoverishes many, it actually enriches some. The sight of this
arbitrary rearrangement of riches strikes not only at security, but at
confidence in the equity of the existing distribution of wealth. Those
to whom the system brings windfalls, beyond their deserts and even
beyond their expectations or desires, become "profiteers,", who are the
object of the hatred of the bourgeoisie, whom the inflationism has
impoverished, not less than of the proletariat. As the inflation
proceeds and the real value of the currency fluctuates wildly from
month to month, all permanent relations between debtors and creditors,
which form the ultimate foundation of capitalism, become so utterly
disordered as to be almost meaningless; and the process of
wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of
overturning the existing basis of society than to debauch the currency.
The process engages all the hidden forces of economic law on the side of
destruction, and does it in a manner which not one man in a million is
able to diagnose.

In the latter stages of the war all the belligerent governments
practised, from necessity or incompetence, what a Bolshevist might have
done from design. Even now, when the war is over, most of them continue
out of weakness the same malpractices. But further, the Governments of
Europe, being many of them at this moment reckless in their methods as
well as weak, seek to direct on to a class known as "profiteers" the
popular indignation against the more obvious consequences of their
vicious methods. These "profiteers" are, broadly speaking, the
entrepreneur class of capitalists, that is to say, the active and
constructive element in the whole capitalist society, who in a period of
rapidly rising prices cannot help but get rich quick whether they wish
it or desire it or not. If prices are continually rising, every trader
who has purchased for stock or owns property and plant inevitably makes
profits. By directing hatred against this class, therefore, the European
Governments are carrying a step further the fatal process which the
subtle mind of Lenin had consciously conceived. The profiteers are a
consequence and not a cause of rising prices. By combining a popular
hatred of the class of entrepreneurs with the blow already given to
social security by the violent and arbitrary disturbance of contract and
of the established equilibrium of wealth which is the inevitable result
of inflation, these Governments are fast rendering impossible a
continuance of the social and economic order of the nineteenth century.
But they have no plan for replacing it.

We are thus faced in Europe with the spectacle of an extraordinary
weakness on the part of the great capitalist class, which has emerged
from the industrial triumphs of the nineteenth century, and seemed a
very few years ago our all-powerful master. The terror and personal
timidity of the individuals of this class is now so great, their
confidence in their place in society and in their necessity to the
social organism so diminished, that they are the easy victims of
intimidation. This was not so in England twenty-five years ago, any
more than it is now in the United States. Then the capitalists believed
in themselves, in their value to society, in the propriety of their
continued existence in the full enjoyment of their riches and the
unlimited exercise of their power. Now they tremble before every
insult;--call them pro-Germans, international financiers, or profiteers,
and they will give you any ransom you choose to ask not to speak of them
so harshly. They allow themselves to be ruined and altogether undone by
their own instruments, governments of their own making, and a press of
which they are the proprietors. Perhaps it is historically true that no
order of society ever perishes save by its own hand. In the complexer
world of Western Europe the Immanent Will may achieve its ends more
subtly and bring in the revolution no less inevitably through a Klotz or
a George than by the intellectualisms, too ruthless and self-conscious
for us, of the bloodthirsty philosophers of Russia.

The inflationism of the currency systems of Europe has proceeded to
extraordinary lengths. The various belligerent Governments, unable, or
too timid or too short-sighted to secure from loans or taxes the
resources they required, have printed notes for the balance. In Russia
and Austria-Hungary this process has reached a point where for the
purposes of foreign trade the currency is practically valueless. The
Polish mark can be bought for about three cents and the Austrian crown
for less than two cents, but they cannot be sold at all. The German mark
is worth less than four cents on the exchanges. In most of the other
countries of Eastern and South-Eastern Europe the real position is
nearly as bad. The currency of Italy has fallen to little more than a
half of its nominal value in spite of its being still subject to some
degree of regulation; French currency maintains an uncertain market; and
even sterling is seriously diminished in present value and impaired in
its future prospects.

But while these currencies enjoy a precarious value abroad, they have
never entirely lost, not even in Russia, their purchasing power at home.
A sentiment of trust in the legal money of the State is so deeply
implanted in the citizens of all countries that they cannot but believe
that some day this money must recover a part at least of its former
value. To their minds it appears that value is inherent in money as
such, and they do not apprehend that the real wealth, which this money
might have stood for, has been dissipated once and for all. This
sentiment is supported by the various legal regulations with which the
Governments endeavor to control internal prices, and so to preserve some
purchasing power for their legal tender. Thus the force of law
preserves a measure of immediate purchasing power over some commodities
and the force of sentiment and custom maintains, especially amongst
peasants, a willingness to hoard paper which is really worthless.

The presumption of a spurious value for the currency, by the force of
law expressed in the regulation of prices, contains in itself, however,
the seeds of final economic decay, and soon dries up the sources of
ultimate supply. If a man is compelled to exchange the fruits of his
labors for paper which, as experience soon teaches him, he cannot use to
purchase what he requires at a price comparable to that which he has
received for his own products, he will keep his produce for himself,
dispose of it to his friends and neighbors as a favor, or relax his
efforts in producing it. A system of compelling the exchange of
commodities at what is not their real relative value not only relaxes
production, but leads finally to the waste and inefficiency of barter.
If, however, a government refrains from regulation and allows matters to
take their course, essential commodities soon attain a level of price
out of the reach of all but the rich, the worthlessness of the money
becomes apparent, and the fraud upon the public can be concealed no
longer.

The effect on foreign trade of price-regulation and profiteer-hunting
as cures for inflation is even worse. Whatever may be the case at home,
the currency must soon reach its real level abroad, with the result that
prices inside and outside the country lose their normal adjustment. The
price of imported commodities, when converted at the current rate of
exchange, is far in excess of the local price, so that many essential
goods will not be imported at all by private agency, and must be
provided by the government, which, in re-selling the goods below cost
price, plunges thereby a little further into insolvency. The bread
subsidies, now almost universal throughout Europe, are the leading
example of this phenomenon.

The countries of Europe fall into two distinct groups at the present
time as regards their manifestations of what is really the same evil
throughout, according as they have been cut off from international
intercourse by the Blockade, or have had their imports paid for out of
the resources of their allies. I take Germany as typical of the first,
and France and Italy of the second.

The note circulation of Germany is about ten times[146] what it was
before the war. The value of the mark in terms of gold is about
one-eighth of its former value. As world-prices in terms of gold are
more than double what they were, it follows that mark-prices inside
Germany ought to be from sixteen to twenty times their pre-war level if
they are to be in adjustment and proper conformity with prices outside
Germany.[147] But this is not the case. In spite of a very great rise in
German prices, they probably do not yet average much more than five
times their former level, so far as staple commodities are concerned;
and it is impossible that they should rise further except with a
simultaneous and not less violent adjustment of the level of money
wages. The existing maladjustment hinders in two ways (apart from other
obstacles) that revival of the import trade which is the essential
preliminary of the economic reconstruction of the country. In the first
place, imported commodities are beyond the purchasing power of the great
mass of the population,[148] and the flood of imports which might have
been expected to succeed the raising of the blockade was not in fact
commercially possible.[149] In the second place, it is a hazardous
enterprise for a merchant or a manufacturer to purchase with a foreign
credit material for which, when he has imported it or manufactured it,
he will receive mark currency of a quite uncertain and possibly
unrealizable value. This latter obstacle to the revival of trade is one
which easily escapes notice and deserves a little attention. It is
impossible at the present time to say what the mark will be worth in
terms of foreign currency three or six months or a year hence, and the
exchange market can quote no reliable figure. It may be the case,
therefore, that a German merchant, careful of his future credit and
reputation, who is actually offered a short period credit in terms of
sterling or dollars, may be reluctant and doubtful whether to accept it.
He will owe sterling or dollars, but he will sell his product for marks,
and his power, when the time comes, to turn these marks into the
currency in which he has to repay his debt is entirely problematic.
Business loses its genuine character and becomes no better than a
speculation in the exchanges, the fluctuations in which entirely
obliterate the normal profits of commerce.

There are therefore three separate obstacles to the revival of trade: a
maladjustment between internal prices and international prices, a lack
of individual credit abroad wherewith to buy the raw materials needed to
secure the working capital and to re-start the circle of exchange, and a
disordered currency system which renders credit operations hazardous or
impossible quite apart from the ordinary risks of commerce.

The note circulation of France is more than six times its pre-war level.
The exchange value of the franc in terms of gold is a little less than
two-thirds its former value; that is to say, the value of the franc has
not fallen in proportion to the increased volume of the currency.[150]
This apparently superior situation of France is due to the fact that
until recently a very great part of her imports have not been paid for,
but have been covered by loans from the Governments of Great Britain and
the United States. This has allowed a want of equilibrium between
exports and imports to be established, which is becoming a very serious
factor, now that the outside assistance is being gradually discontinued.
The internal economy of France and its price level in relation to the
note circulation and the foreign exchanges is at present based on an
excess of imports over exports which cannot possibly continue. Yet it is
difficult to see how the position can be readjusted except by a lowering
of the standard of consumption in France, which, even if it is only
temporary, will provoke a great deal of discontent.[151]

The situation of Italy is not very different. There the note circulation
is five or six times its pre-war level, and the exchange value of the
lira in terms of gold about half its former value. Thus the adjustment
of the exchange to the volume of the note circulation has proceeded
further in Italy than in France. On the other hand, Italy's "invisible"
receipts, from emigrant remittances and the expenditure of tourists,
have been very injuriously affected; the disruption of Austria has
deprived her of an important market; and her peculiar dependence on
foreign shipping and on imported raw materials of every kind has laid
her open to special injury from the increase of world prices. For all
these reasons her position is grave, and her excess of imports as
serious a symptom as in the case of France.[152]

The existing inflation and the maladjustment of international trade are
aggravated, both in France and in Italy, by the unfortunate budgetary
position of the Governments of these countries.

In France the failure to impose taxation is notorious. Before the war
the aggregate French and British budgets, and also the average taxation
per head, were about equal; but in France no substantial effort has been
made to cover the increased expenditure. "Taxes increased in Great
Britain during the war," it has been estimated, "from 95 francs per head
to 265 francs, whereas the increase in France was only from 90 to 103
francs." The taxation voted in France for the financial year ending June
30, 1919, was less than half the estimated normal post-bellum
expenditure. The normal budget for the future cannot be put below
$4,400,000,000 (22 milliard francs), and may exceed this figure; but
even for the fiscal year 1919-20 the estimated receipts from taxation
do not cover much more than half this amount. The French Ministry of
Finance have no plan or policy whatever for meeting this prodigious
deficit, except the expectation of receipts from Germany on a scale
which the French officials themselves know to be baseless. In the
meantime they are helped by sales of war material and surplus American
stocks and do not scruple, even in the latter half of 1919, to meet the
deficit by the yet further expansion of the note issue of the Bank of
France.[153]

The budgetary position of Italy is perhaps a little superior to that of
France. Italian finance throughout the war was more enterprising than
the French, and far greater efforts were made to impose taxation and pay
for the war. Nevertheless Signor Nitti, the Prime Minister, in a letter
addressed to the electorate on the eve of the General Election (Oct.,
1919), thought it necessary to make public the following desperate
analysis of the situation:--(1) The State expenditure amounts to about
three times the revenue. (2) All the industrial undertakings of the
State, including the railways, telegraphs, and telephones, are being run
at a loss. Although the public is buying bread at a high price, that
price represents a loss to the Government of about a milliard a year.
(3) Exports now leaving the country are valued at only one-quarter or
one-fifth of the imports from abroad. (4) The National Debt is
increasing by about a milliard lire per month. (5) The military
expenditure for one month is still larger than that for the first year
of the war.

But if this is the budgetary position of France and Italy, that of the
rest of belligerent Europe is yet more desperate. In Germany the total
expenditure of the Empire, the Federal States, and the Communes in
1919-20 is estimated at 25 milliards of marks, of which not above 10
milliards are covered by previously existing taxation. This is without
allowing anything for the payment of the indemnity. In Russia, Poland,
Hungary, or Austria such a thing as a budget cannot be seriously
considered to exist at all.[154]

Thus the menace of inflationism described above is not merely a product
of the war, of which peace begins the cure. It is a continuing
phenomenon of which the end is not yet in sight.

All these influences combine not merely to prevent Europe from
supplying immediately a sufficient stream of exports to pay for the
goods she needs to import, but they impair her credit for securing the
working capital required to re-start the circle of exchange and also, by
swinging the forces of economic law yet further from equilibrium rather
than towards it, they favor a continuance of the present conditions
instead of a recovery from them. An inefficient, unemployed,
disorganized Europe faces us, torn by internal strife and international
hate, fighting, starving, pillaging, and lying. What warrant is there
for a picture of less somber colors?

I have paid little heed in this book to Russia, Hungary, or
Austria.[155] There the miseries of life and the disintegration of
society are too notorious to require analysis; and these countries are
already experiencing the actuality of what for the rest of Europe is
still in the realm of prediction. Yet they comprehend a vast territory
and a great population, and are an extant example of how much man can
suffer and how far society can decay. Above all, they are the signal to
us of how in the final catastrophe the malady of the body passes over
into malady of the mind. Economic privation proceeds by easy stages, and
so long as men suffer it patiently the outside world cares little.
Physical efficiency and resistance to disease slowly diminish,[156] but
life proceeds somehow, until the limit of human endurance is reached at
last and counsels of despair and madness stir the sufferers from the
lethargy which precedes the crisis. Then man shakes himself, and the
bonds of custom are loosed. The power of ideas is sovereign, and he
listens to whatever instruction of hope, illusion, or revenge is carried
to him on the air. As I write, the flames of Russian Bolshevism seem,
for the moment at least, to have burnt themselves out, and the peoples
of Central and Eastern Europe are held in a dreadful torpor. The lately
gathered harvest keeps off the worst privations, and Peace has been
declared at Paris. But winter approaches. Men will have nothing to look
forward to or to nourish hopes on. There will be little fuel to moderate
the rigors of the season or to comfort the starved bodies of the
town-dwellers.

But who can say how much is endurable, or in what direction men will
seek at last to escape from their misfortunes?

FOOTNOTES:

[145] Professor Starling's Report on Food Conditions in
Germany. (Cmd. 280.)

[146] Including the Darlehenskassenscheine somewhat more.

[147] Similarly in Austria prices ought to be between twenty
and thirty times their former level.

[148] One of the moat striking and symptomatic difficulties
which faced the Allied authorities in their administration of the
occupied areas of Germany during the Armistice arose out of the fact
that even when they brought food into the country the inhabitants could
not afford to pay its cost price.

[149] Theoretically an unduly low level of home prices should
stimulate exports and so cure itself. But in Germany, and still more in
Poland and Austria, there is little or nothing to export. There must be
imports before there can be exports.

[150] Allowing for the diminished value of gold, the exchange
value of the franc should be less than 40 per cent of its previous
value, instead of the actual figure of about 60 per cent, if the fall
were proportional to the increase in the volume of the currency.

[151] How very far from equilibrium France's international
exchange now is can be seen from the following table:

Excess of
Monthly Imports Exports Imports
Average $1,000 $1,000 $1,000

1913 140,355 114,670 25,685
1914 106,705 81,145 25,560
1918 331,915 69,055 262,860
Jan.-Mar. 1919 387,140 66,670 320,470
Apr.-June 1919 421,410 83,895 337,515
July 1919 467,565 123,675 343,890

These figures have been converted, at approximately par rates, but this
is roughly compensated by the fact that the trade of 1918 and 1919 has
been valued at 1917 official rates. French imports cannot possibly
continue at anything approaching these figures, and the semblance of
prosperity based on such a state of affairs is spurious.

[152] The figures for Italy are as follows:

Excess of
Monthly Imports Exports Imports
Average $1,000 $1,000 $1,000

1913 60,760 41,860 18,900
1914 48,720 36,840 11,880
1918 235,025 41,390 193,635
Jan.-Mar. 1919 229,240 38,685 191,155
Apr.-June 1919 331,035 69,250 261,785
July-Aug. 1919 223,535 84,515 139,020

[153] In the last two returns of the Bank of France available
as I write (Oct. 2 and 9, 1919) the increases in the note issue on the
week amounted to $93,750,000 and $94,125,000 respectively.

[154] On October 3, 1919, M. Bilinski made his financial
statement to the Polish Diet. He estimated his expenditure for the next
nine months at rather more than double his expenditure for the past nine
months, and while during the first period his revenue had amounted to
one-fifth of his expenditure, for the coming months he was budgeting for
receipts equal to one-eighth of his outgoings. The Times correspondent
at Warsaw reported that "in general M. Bilinski's tone was optimistic
and appeared to satisfy his audience."

[155] The terms of the Peace Treaty imposed on the Austrian
Republic bear no relation to the real facts of that State's desperate
situation. The Arbeiter Zeitung of Vienna on June 4, 1919, commented
on them as follows: "Never has the substance of a treaty of peace so
grossly betrayed the intentions which were said to have guided its
construction as is the case with this Treaty ... in which every provision
is permeated with ruthlessness and pitilessness, in which no breath of
human sympathy can be detected, which flies in the face of everything
which binds man to man, which is a crime against humanity itself,
against a suffering and tortured people." I am acquainted in detail with
the Austrian Treaty and I was present when some of its terms were being
drafted, but I do not find it easy to rebut the justice of this
outburst.

[156] For months past the reports of the health conditions in
the Central Empires have been of such a character that the imagination
is dulled, and one almost seems guilty of sentimentality in quoting
them. But their general veracity is not disputed, and I quote the three
following, that the reader may not be unmindful of them: "In the last
years of the war, in Austria alone at least 35,000 people died of
tuberculosis, in Vienna alone 12,000. Today we have to reckon with a
number of at least 350,000 to 400,000 people who require treatment for
tuberculosis.... As the result of malnutrition a bloodless generation is
growing up with undeveloped muscles, undeveloped joints, and undeveloped
brain" (Neue Freie Presse, May 31, 1919). The Commission of Doctors
appointed by the Medical Faculties of Holland, Sweden, and Norway to
examine the conditions in Germany reported as follows in the Swedish
Press in April, 1919: "Tuberculosis, especially in children, is
increasing in an appalling way, and, generally speaking, is malignant.
In the same way rickets is more serious and more widely prevalent. It is
impossible to do anything for these diseases; there is no milk for the
tuberculous, and no cod-liver oil for those suffering from rickets....
Tuberculosis is assuming almost unprecedented aspects, such as have
hitherto only been known in exceptional cases. The whole body is
attacked simultaneously, and the illness in this form is practically
incurable.... Tuberculosis is nearly always fatal now among adults. It
is the cause of 90 per cent of the hospital cases. Nothing can be done
against it owing to lack of food-stuffs.... It appears in the most
terrible forms, such as glandular tuberculosis, which turns into
purulent dissolution." The following is by a writer in the Vossische
Zeitung, June 5, 1919, who accompanied the Hoover Mission to the
Erzgebirge: "I visited large country districts where 90 per cent of all
the children were ricketty and where children of three years are only
beginning to walk.... Accompany me to a school in the Erzgebirge. You
think it is a kindergarten for the little ones. No, these are children
of seven and eight years. Tiny faces, with large dull eyes, overshadowed
by huge puffed, ricketty foreheads, their small arms just skin and bone,
and above the crooked legs with their dislocated joints the swollen,
pointed stomachs of the hunger œdema.... 'You see this child here,' the
physician in charge explained; 'it consumed an incredible amount of
bread, and yet did not get any stronger. I found out that it hid all the
bread it received underneath its straw mattress. The fear of hunger was
so deeply rooted in the child that it collected stores instead of eating
the food: a misguided animal instinct made the dread of hunger worse
than the actual pangs.'" Yet there are many persons apparently in whose
opinion justice requires that such beings should pay tribute until they
are forty or fifty years of age in relief of the British taxpayer.