The Economic Consequences of the Peace
by John Maynard Keynes

 Chapter 7: Remedies

 It is difficult to maintain true perspective in large
 affairs. I have criticised the work of Paris, and have depicted
 in sombre colours the condition and the prospects of Europe. This
 is one aspect of the position and, I believe, a true one. But in
 so complex a phenomenon the prognostics do not all point one way;
 and we may make the error of expecting consequences to follow too
 swiftly and too inevitably from what perhaps are not all the
 relevant causes. The blackness of the prospect itself leads us to
 doubt its accuracy; our imagination is dulled rather than
 stimulated by too woeful a narration, and our minds rebound from
 what is felt 'too bad to be true'. But before the reader allows
 himself to be too much swayed by these natural reflections, and
 before I lead him, as is the intention of this chapter, towards
 and ameliorations remedies and the discovery of happier
 tendencies, let him redress the balance of his thought by
 recalling two contrasts -- England and Russia, of which the one
 may encourage his optimism too much, but the other should remind
 him that catastrophes can still happen, and that modern society
 is not immune from the very greatest evils.
     In the chapters of this book I have not generally had in mind
 the situation or the problems of England. 'Europe' in my
 narration must generally be interpreted to exclude the British
 Isles. England is in a state of transition, and her economic
 problems are serious. We may be on the eve of great changes in
 her social and industrial structure. Some of us may welcome such
 prospects and some of us deplore them. But they are of a
 different kind altogether from those impending on Europe. I do
 not perceive in England the slightest possibility of catastrophe
 or any serious likelihood of a general upheaval of society. The
 war has impoverished us, but not seriously -- I should judge that
 the real wealth of the country in 1919 is at least equal to what
 it was in 1900. Our balance of trade is adverse, but not so much
 so that the readjustment of it need disorder our economic
 life.(1*) The deficit in our budget is large, but not beyond what
 firm and prudent statesmanship could bridge. The shortening of
 the hours of labour may have somewhat diminished our
 productivity. But it should not be too much to hope that this is
 a feature of transition, and no one who is acquainted with the
 British working man can doubt that, if it suits him, and if he is
 in sympathy and reasonable contentment with the conditions of his
 life, he can produce at least as much in a shorter working day as
 he did in the longer hours which prevailed formerly. The most
 serious problems for England have been brought to a head by the
 war, but are in their origins more fundamental. The forces of the
 nineteenth century have run their course and are exhausted. The
 economic motives and ideals of that generation no longer satisfy
 us: we must find a new way and must suffer again the malaise, and
 finally the pangs, of a new industrial birth. This is one
 element. The other is that on which I have enlarged in chapter 2
 -- the increase in the real cost of food and the diminishing
 response of Nature to any further increase in the population of
 the world, a tendency which must be especially injurious to the
 greatest of all industrial countries and the most dependent on
 imported supplies of food.
     But these secular problems are such as no age is free from.
 They are of an altogether different order from those which may
 afflict the peoples of Central Europe. Those readers who, chiefly
 mindful of the British conditions with which they are familiar,
 are apt to indulge their optimism, and still more those whose
 immediate environment is American, must cast their minds to
 Russia, Turkey, Hungary, or Austria, where the most dreadful
 material evils which men can suffer -- famine, cold, disease,
 war, murder, and anarchy -- are an actual present experience, if
 they are to apprehend the character of the misfortunes against
 the further extension of which it must surely be our duty to seek
 the remedy, if there is one.
     What then is to be done? The tentative suggestions of this
 chapter may appear to the reader inadequate. But the opportunity
 was missed at Paris during the six months which followed the
 armistice, and nothing we can do now can repair the mischief
 wrought at that time. Great privation and great risks to society
 have become unavoidable. All that is now open to us is to
 redirect, so far as lies in our power, the fundamental economic
 tendencies which underlie the events of the hour, so that they
 promote the re-establishment of prosperity and order, instead of
 leading us deeper into misfortune.
     We must first escape from the atmosphere and the methods of
 Paris. Those who controlled the conference may bow before the
 gusts of popular opinion, but they will never lead us out of our
 troubles. It is hardly to be supposed that the Council of Four
 can retrace their steps, even if they wished to do so. The
 replacement of the existing governments of Europe is, therefore,
 an almost indispensable preliminary.
     I propose then to discuss a programme, for those who believe
 that the Peace of Versailles cannot stand, under the following

     I. The revision of the treaty.
     II. The settlement of inter-Ally indebtedness.
     III. An international loan and the reform of the currency.
     IV. The relations of Central Europe to Russia.


     Are any constitutional means open to us for altering the
 treaty? President Wilson and General Smuts, who believe that to
 have secured the covenant of the League of Nations outweighs much
 evil in the rest of the treaty, have indicated that we must look
 to the League for the gradual evolution of a more tolerable life
 for Europe. 'There are territorial settlements', General Smuts
 wrote in his statement on signing the peace treaty, 'which will
 need revision. There are guarantees laid down which we all hope
 will soon be found out of harmony with the new peaceful temper
 and unarmed state of our former enemies. There are punishments
 foreshadowed over most of which a calmer mood may yet prefer to
 pass the sponge of oblivion. There are indemnities stipulated
 which cannot be enacted without grave injury to the industrial
 revival of Europe, and which it will be in the interests of all
 to render more tolerable and moderate... I am confident that the
 League of Nations will yet prove the path of escape for Europe
 out of the ruin brought about by this war.' Without the League,
 President Wilson informed the Senate when he presented the treaty
 to them early in July 1919, '... long-continued supervision of
 the task of reparation which Germany was to undertake to complete
 within the next generation might entirely break down;(2*) the
 reconsideration and revision of administrative arrangements and
 restrictions which the treaty prescribed, but which it recognised
 might not provide lasting advantage or be entirely fair if too
 long enforced, would be impracticable.'
     Can we look forward with fair hopes to securing from the
 operation of the League those benefits which two of its principal
 begetters thus encourage us to expect from it? The relevant
 passage is to be found in article XIX of the covenant, which runs
 as follows: 'The assembly may from time to time advise the
 reconsideration by members of the League of treaties which have
 become inapplicable and the consideration of international
 conditions whose continuance might endanger the peace of the
     But alas! Article V provides that 'Except where otherwise
 expressly provided in this covenant or by the terms of the
 present treaty, decisions at any meeting of the assembly or of
 the council shall require the agreement of all the members of the
 League represented at the meeting.' Does not this provision
 reduce the League, so far as concerns an early reconsideration of
 any of the terms of the peace treaty, into a body merely for
 wasting time? If all the parties to the treaty are unanimously of
 opinion that it requires alteration in a particular sense, it
 does not need a League and a covenant to put the business
 through. Even when the assembly of the League is unanimous it can
 only 'advise' reconsideration by the members specially affected.
     But the League will operate, say its supporters, by its
 influence on the public opinion of the world, and the view of the
 majority will carry decisive weight in practice, even though
 constitutionally it is of no effect. Let us pray that this be so.
 Yet the League in the hands of the trained European diplomatist
 may become an unequalled instrument for obstruction and delay.
 The revision of treaties is entrusted primarily, not to the
 council, which meets frequently, but to the assembly, which will
 meet more rarely and must become, as any one with an experience
 of large inter-Ally conferences must know, an unwieldy polyglot
 debating society in which the greatest resolution and the best
 management may fail altogether to bring issues to a head against
 an opposition in favour of the status quo. There are indeed two
 disastrous blots on the covenant -- article V, which prescribes
 unanimity, and the much-criticised article X, by which 'The
 members of the League undertake to respect and preserve as
 against external aggression the territorial integrity and
 existing political independence of all members of the League.'
 These two articles together go some way to destroy the conception
 of the League as an instrument of progress, and to equip it from
 the outset with an almost fatal bias towards the status quo. It
 is these articles which have reconciled to the League some of its
 original opponents, who now hope to make of it another Holy
 Alliance for the perpetuation of the economic ruin of their
 enemies and the balance of power in their own interests which
 they believe themselves to have established by the peace.
     But while it would be wrong and foolish to conceal from
 ourselves in the interests of 'idealism' the real difficulties of
 the position in the special matter of revising treaties, that is
 no reason for any of us to decry the League, which the wisdom of
 the world may yet transform into a powerful instrument of peace,
 and which in articles XI-XVII(3*) has already accomplished a
 great and beneficent achievement. I agree, therefore, that our
 first efforts for the revision of the treaty must be made through
 the League rather than in any other way, in the hope that the
 force of general opinion, and if necessary, the use of financial
 pressure and financial inducements, may be enough to prevent a
 recalcitrant minority from exercising their right of veto. We
 must trust the new governments, whose existence I premise in the
 principal Allied countries, to show a profounder wisdom and a
 greater magnanimity than their predecessors.
     We have seen in chapters 4 and 5 that there are numerous
 particulars in which the treaty is objectionable. I do not intend
 to enter here into details, or to attempt a revision of the
 treaty clause by clause. I limit myself to three great changes
 which are necessary for the economic life of Europe, relating to
 reparation, to coal and iron, and to tariffs.
     Reparation. If the sum demanded for reparation is less than
 what the Allies are entitled to on a strict interpretation of
 their engagements, it is unnecessary to particularise the items
 it represents or to hear arguments about its compilation. I
 suggest, therefore, the following settlement:
     (1) The amount of the payment to be made by Germany in
 respect of reparation and the costs of the armies of occupation
 might be fixed at £32,000 million.
     (2) The surrender of merchant ships and submarine cables
 under the treaty, of war material under the armistice, of state
 property in ceded territory, of claims against such territory in
 respect of public debt, and of Germany's claims against her
 former Allies, should be reckoned as worth the lump sum of £3500
 million, without any attempt being made to evaluate them item by
     (3) The balance of £31,500 million should not carry interest
 pending its repayment, and should be paid by Germany in thirty
 annual instalments of £350 million, beginning in 1923.
     (4) The reparation commission should be dissolved or, if any
 duties remain for it to perform, it should become an appanage of
 the League of Nations and should include representatives of
 Germany and of the neutral states.
     (5) Germany would be left to meet the annual instalments in
 such manner as she might see fit, any complaint against her for
 non-fulfilment of her obligations being lodged with the League of
 Nations. That is to say, there would be no further expropriation
 of German private property abroad, except so far as is required
 to meet private German obligations out of the proceeds of such
 property already liquidated or in the hands of public trustees
 and enemy-property custodians in the Allied countries and in the
 United States; and, in particular, article 260 (which provides
 for the expropriation of German interests in public utility
 enterprises) would be abrogated.
     (6) No attempt should be made to extract reparation payments
 from Austria.
     Coal and iron. (1) The Allies' options on coal under annex V
 should be abandoned, but Germany's obligation to make good
 France's loss of coal through the destruction of her mines should
 remain. That is to say, Germany should undertake '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 years 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 obligation should lapse, nevertheless, in the event
 of the coal districts of Upper Silesia being taken from Germany
 in the final settlement consequent on the plebiscite.
     (2) The arrangement as to the Saar should hold good, except
 that, on the one hand, Germany should receive no credit for the
 mines, and, on the other, should receive back both the mines and
 the territory without payment and unconditionally after ten
 years. But this should be conditional on France's entering into
 an agreement for the same period to supply Germany from Lorraine
 with at least 50% of the iron ore which was carried from Lorraine
 into Germany proper before the war, in return for an undertaking
 from Germany to supply Lorraine with an amount of coal equal to
 the whole amount formerly sent to Lorraine from Germany proper,
 after allowing for the output of the Saar.
     (3) The arrangement as to Upper Silesia should hold good.
 That is to say, a plebiscite should be held, and in coming to a
 final decision 'regard will be paid (by the principal Allied and
 Associated Powers) to the wishes of the inhabitants as shown by
 the vote, and to the geographical and economic conditions of the
 locality'. But the Allies should declare that in their judgment
 'economic conditions' require the inclusion of the coal districts
 in Germany unless the wishes of the inhabitants are decidedly to
 the contrary.
     (4) The coal commission already established by the Allies
 should become an appanage of the League of Nations, and should be
 enlarged to include representatives of Germany and the other
 states of Central and Eastern Europe, of the northern neutrals,
 and of Switzerland. Its authority should be advisory only, but
 should extend over the distribution of the coal supplies of
 Germany, Poland, and the constituent parts of the former
 Austro-Hungarian empire, and of the exportable surplus of the
 United Kingdom. All the states represented on the commission
 should undertake to furnish it with the fullest information, and
 to be guided by its advice so far as their sovereignty and their
 vital interests permit.
     Tariffs. A free trade union should be established under the
 auspices of the League of Nations of countries undertaking to
 impose no protectionist tariffs(4*) whatever against the produce
 of other members of the union. Germany, Poland, the new states
 which formerly composed the Austro-Hungarian and Turkish empires,
 and the mandated states should be compelled to adhere to this
 union for ten years, after which time adherence would be
 voluntary. The adherence of other states would be voluntary from
 the outset. But it is to be hoped that the United Kingdom, at any
 rate, would become an original member.

     By fixing the reparation payments well within Germany's
 capacity to pay, we make possible the renewal of hope and
 enterprise within her territory, we avoid the perpetual friction
 and opportunity of improper pressure arising out of treaty
 clauses which are impossible of fulfilment, and we render
 unnecessary the intolerable powers of the reparation commission.
     By a moderation of the clauses relating directly or
 indirectly to coal, and by the exchange of iron ore, we permit
 the continuance of Germany's industrial life, and put limits on
 the loss of productivity which would be brought about otherwise
 by the interference of political frontiers with the natural
 localisation of the iron and steel industry.
     By the proposed free trade union some part of the loss of
 organisation and economic efficiency may be retrieved which must
 otherwise result from the innumerable new political frontiers now
 created between greedy, jealous, immature, and economically
 incomplete, nationalist states. Economic frontiers were tolerable
 so long as an immense territory was included in a few great
 empires; but they will not be tolerable when the empires of
 Germany, Austria-Hungary, Russia, and Turkey have been
 partitioned between some twenty independent authorities. A free
 trade union, comprising the whole of Central, Eastern, and
 south-Eastern Europe, Siberia, Turkey, and (I should hope) the
 United Kingdom, Egypt, and India, might do as much for the peace
 and prosperity of the world as the League of Nations itself.
 Belgium, Holland, Scandinavia, and Switzerland might be expected
 to adhere to it shortly. And it would be greatly to be desired by
 their friends that France and Italy also should see their way to
     It would be objected, I suppose, by some critics that such an
 arrangement might go some way in effect towards realising the
 former German dream of Mittel-Europa. If other countries were so
 foolish as to remain outside the union and to leave to Germany
 all its advantages, there might be some truth in this. But an
 economic system, to which everyone had the opportunity of
 belonging and which gave special privilege to none, is surely
 absolutely free from the objections of a privileged and avowedly
 imperialistic scheme of exclusion and discrimination. Our
 attitude to these criticisms must be determined by our whole
 moral and emotional reaction to the future of international
 relations and the peace of the world. If we take the view that
 for at least a generation to come Germany cannot be trusted with
 even a modicum of prosperity, that while all our recent allies
 are angels of light, all our recent enemies, Germans, Austrians,
 Hungarians, and the rest, are children of the devil, that year by
 year Germany must be kept impoverished and her children starved
 and crippled, and that she must be ringed round by enemies; then
 we shall reject all the proposals of this chapter, and
 particularly those which may assist Germany to regain a part of
 her former material prosperity and find a means of livelihood for
 the industrial population of her towns. But if this view of
 nations and of their relation to one another is adopted by the
 democracies of Western Europe, and is financed by the United
 States, heaven help us all. If we aim deliberately at the
 impoverishment of Central Europe, vengeance, I dare predict, will
 not limp. Nothing can then delay for very long that final civil
 war between the forces of reaction and the despairing convulsions
 of revolution, before which the horrors of the late German war
 will fade into nothing, and which will destroy, whoever is
 victor, the civilisation and the progress of our generation. Even
 though the result disappoint us, must we not base our actions on
 better expectations, and believe that the prosperity and
 happiness of one country promotes that of others, that the
 solidarity of man is not a fiction, and that nations can still
 afford to treat other nations as fellow-creatures?
     Such changes as I have proposed above might do something
 appreciable to enable the industrial populations of Europe to
 continue to earn a livelihood. But they would not be enough by
 themselves. In particular, France would be a loser on paper (on
 paper only, for she will never secure the actual fulfilment of
 her present claims), and an escape from her embarrassments must
 be shown her in some other direction. I proceed, therefore, to
 proposals, first, for the adjustment of the claims of America and
 the Allies amongst themselves; and second, for the provision of
 sufficient credit to enable Europe to re-create her stock of
 circulating capital.


     In proposing a modification of the reparation terms, I have
 considered them so far only in relation to Germany. But fairness
 requires that so great a reduction in the amount should be
 accompanied by a readjustment of its apportionment between the
 Allies themselves. The professions which our statesmen made on
 every platform during the war, as well as other considerations,
 surely require that the areas damaged by the enemy's invasion
 should receive a priority of compensation. While this was one of
 the ultimate objects for which we said we were fighting, we never
 included the recovery of separation allowances amongst our war
 aims. I suggest, therefore, that we should by our acts prove
 ourselves sincere and trustworthy, and that accordingly Great
 Britain should waive altogether her claims for cash payment, in
 favour of Belgium, Serbia, and France. The whole of the payments
 made by Germany would then be subject to the prior charge of
 repairing the material injury done to those countries and
 provinces which suffered actual invasion by the enemy; and I
 believe that the sum of £31,500 million thus available would be
 adequate to cover entirely the actual costs of restoration.
 Further, it is only by a complete subordination of her own claims
 for cash compensation that Great Britain can ask with clean hands
 for a revision of the treaty and clear her honour from the breach
 of faith for which she bears the main responsibility, as a result
 of the policy to which the General Election of 1918 pledged her
     With the reparation problem thus cleared up it would be
 possible to bring forward with a better grace and more hope of
 success two other financial proposals, each of which involves an
 appeal to the generosity of the United States.

   Loans to   By United States  By United Kingdom By France Total
                 Million £3       Million £3       Million £3 Million
 United Kingdom     842             --             --        842
 France             550             508            --      1,058
 Italy              325             467            35        827
 Russia              38             568(5*)       160        766
 Belgium             80              98(6*)        90        268
 Serbia and
     Jugoslavia      20             202            20         60
 Other Allies        35              79            50        164

 Total            1,900(7*)       1,740           355      3,995

     The first is for the entire cancellation of inter-Ally
 indebtedness (that is to say, indebtedness between the
 governments of the Allied and Associated countries) incurred for
 the purposes of the war. This proposal, which has been put
 forward already in certain quarters, is one which I believe to be
 absolutely essential to the future prosperity of the world. It
 would be an act of farseeing statesmanship for the United Kingdom
 and the United States, the two Powers chiefly concerned, to adopt
 it. The sums of money which are involved are shown approximately
 in the above table.(8*)
     Thus the total volume of inter-Ally indebtedness, assuming
 that loans from one Ally are not set off against loans to
 another, is nearly £34,000 million. The United States is a lender
 only. The United Kingdom has lent about twice as much as she has
 borrowed. France has borrowed about three times as much as she
 has lent. The other Allies have been borrowers only.
     If all the above inter-Ally indebtedness were mutually
 forgiven, the net result on paper (i.e. assuming all the loans to
 be good) would be a surrender by the United States of about
 £32,000 million and by the United Kingdom of about £3900 million.
 France would gain about £3700 million and Italy about £3800
 million. But these figures overstate the loss to the United
 Kingdom and understate the gain to France; for a large part of
 the loans made by both these countries has been to Russia and
 cannot, by any stretch of imagination, be considered good. If the
 loans which the United Kingdom has made to her allies are
 reckoned to be worth 5o % of their full value (an arbitrary but
 convenient assumption which the Chancellor of the Exchequer has
 adopted on more than one occasion as being as good as any other
 for the purposes of an approximate national balance sheet), the
 operation would involve her neither in loss nor in gain. But in
 whatever way the net result is calculated on paper, the relief in
 anxiety which such a liquidation of the position would carry with
 it would be very great. It is from the United States, therefore,
 that the proposal asks generosity.
     Speaking with a very intimate knowledge of the relations
 throughout the war between the British, the American, and the
 other Allied treasuries, I believe this to be an act of
 generosity for which Europe can fairly ask, provided Europe is
 making an honourable attempt in other directions not to continue
 war, economic or otherwise, but to achieve the economic
 reconstitution of the whole continent. The financial sacrifices
 of the United States have been, in proportion to her wealth,
 immensely less than those of the European states. This could
 hardly have been otherwise. It was a European quarrel, in which
 the United States government could not have justified itself
 before its citizens in expending the whole national strength, as
 did the Europeans. After the United States came into the war her
 financial assistance was lavish and unstinted, and without this
 assistance the Allies could never have won the war,(9*) quite
 apart from the decisive influence of the arrival of the American
 troops. Europe, too, should never forget the extraordinary
 assistance afforded her during the first six months of 1919
 through the agency of Mr Hoover and the American commission of
 relief. Never was a nobler work of disinterested goodwill carried
 through with more tenacity and sincerity and skill, and with less
 thanks either asked or given. The ungrateful governments of
 Europe owe much more to the statesmanship and insight of Mr
 Hoover and his band of American workers than they have yet
 appreciated or will ever acknowledge. The American relief
 commission, and they only, saw the European position during those
 months in its true perspective and felt towards it as men should.
 It was their efforts, their energy, and the American resources
 placed by the President at their disposal, often acting in the
 teeth of European obstruction, which not only saved an immense
 amount of human suffering, but averted a widespread breakdown of
 the European system.(10*)
     But in speaking thus as we do of American financial
 assistance, we tacitly assume, and America, I believe, assumed it
 too when she gave the money, that it was not in the nature of an
 investment. If Europe is going to repay the £32,000 million worth
 of financial assistance which she has had from the United States
 with compound interest at 5%, the matter takes on quite a
 different complexion. If America's advances are to be regarded in
 this light, her relative financial sacrifice has been very slight
     Controversies as to relative sacrifice are very barren and
 very foolish also; for there is no reason in the world why
 relative sacrifice should necessarily be equal -- so many other
 very relevant considerations being quite different in the two
 cases. The two or three facts following are put forward,
 therefore, not to suggest that they provide any compelling
 argument for Americans, but only to show that from his own
 selfish point of view an Englishman is not seeking to avoid due
 sacrifice on his country's part in making the present suggestion.
 (1) The sums which the British Treasury borrowed from the
 American Treasury, after the latter came into the war, were
 approximately offset by the sums which England lent to her other
 allies during the same period (i.e. excluding sums lent before
 the United States came into the war); so that almost the whole of
 England's indebtedness to the United States was incurred, not on
 her own account, but to enable her to assist the rest of her
 allies, who were for various reasons not in a position to draw
 their assistance from the United States direct.(11*) (2) The
 United Kingdom has disposed of about £31,000 million worth of her
 foreign securities, and in addition has incurred foreign debt to
 the amount of about £31,200 million. The United States, so far
 from selling, has bought back upwards of £31,000 million, and has
 incurred practically no foreign debt. (3) The population of the
 United Kingdom is about one-half that of the United States, the
 income about one-third, and the accumulated wealth between
 one-half and one-third. The financial capacity of the United
 Kingdom may therefore be put at about two-fifths that of the
 United States. This figure enables us to make the following
 comparison: Excluding loans to allies in each case (as is right
 on the assumption that these loans are to be repaid), the war
 expenditure of the United Kingdom has been about three times that
 of the United States, or in proportion to capacity between seven
 and eight times.
     Having cleared this issue out of the way as briefly as
 possible, I turn to the broader issues of the future relations
 between the parties to the late war, by which the present
 proposal must primarily be judged.
     Failing such a settlement as is now proposed, the war will
 have ended with a network of heavy tribute payable from one Ally
 to another. The total amount of this tribute is even likely to
 exceed the amount obtainable from the enemy; and the war will
 have ended with the intolerable result of the Allies paying
 indemnities to one another instead of receiving them from the
     For this reason the question of inter-Allied indebtedness is
 closely bound up with the intense popular feeling amongst the
 European Allies on the question of indemnities -- a feeling which
 is based, not on any reasonable calculation of what Germany can,
 in fact, pay, but on a well-founded appreciation of the
 unbearable financial situation in which these countries will find
 themselves unless she pays. Take Italy as an extreme example. If
 Italy can reasonably be expected to pay £3800 million, surely
 Germany can and ought to pay an immeasurably higher figure. Or if
 it is decided (as it must be) that Austria can pay next to
 nothing, is it not an intolerable conclusion that Italy should be
 loaded with a crushing tribute, while Austria escapes ? Or, to
 put it slightly differently, how can Italy be expected to submit
 to payment of this great sum and see Czechoslovakia pay little or
 nothing? At the other end of the scale there is the United
 Kingdom. Here the financial position is different, since to ask
 us to pay £3800 million is a very different proposition from
 asking Italy to pay it. But the sentiment is much the same. If we
 have to be satisfied without full compensation from Germany, how
 bitter will be the protests against paying it to the United
 States. We, it will be said, have to be content with a claim
 against the bankrupt estates of Germany, France, Italy, and
 Russia, whereas the United States has secured a first mortgage
 upon us. The case of France is at least as overwhelming. She can
 barely secure from Germany the full measure of the destruction of
 her countryside. Yet victorious France must pay her friends and
 allies more than four times the indemnity which in the defeat of
 1870 she paid Germany. The hand of Bismarck was light compared
 with that of an Ally or of an associate. A settlement of
 inter-Ally indebtedness is, therefore, an indispensable
 preliminary to the peoples of the Allied countries facing, with
 other than a maddened and exasperated heart, the inevitable truth
 about the prospects of an indemnity from the enemy.
     It might be an exaggeration to say that it is impossible for
 the European Allies to pay the capital and interest due from them
 on these debts, but to make them do so would certainly be to
 impose a crushing burden. They may be expected, therefore, to
 make constant attempts to evade or escape payment, and these
 attempts will be a constant source of international friction and
 ill-will for many years to come. A debtor nation does not love
 its creditor, and it is fruitless to expect feelings of goodwill
 from France, Italy and Russia towards this country or towards
 America, if their future development is stifled for many years to
 come by the annual tribute which they must pay us. There will be
 a great incentive to them to seek their friends in other
 directions, and any future rupture of peaceable relations will
 always carry with it the enormous advantage of escaping the
 payment of external debts. If, on the other hand, these great
 debts are forgiven, a stimulus will be given to the solidarity
 and true friendliness of the nations lately associated.
     The existence of the great war debts is a menace to financial
 stability everywhere. There is no European country in which
 repudiation may not soon become an important political issue. In
 the case of internal debt, however, there are interested parties
 on both sides, and the question is one of the internal
 distribution of wealth. With external debts this is not so, and
 the creditor nations may soon find their interest inconveniently
 bound up with the maintenance of a particular type of government
 or economic organisation in the debtor countries. Entangling
 alliances or entangling leagues are nothing to the entanglements
 of cash owing.
     The final consideration influencing the reader's attitude to
 this proposal must, however, depend on his view as to the future
 place in the world's progress of the vast paper entanglements
 which are our legacy from war finance both at home and abroad.
 The war has ended with everyone owing everyone else immense sums
 of money. Germany owes a large sum to the Allies; the Allies owe
 a large sum to Great Britain; and Great Britain owes a large sum
 to the United States. The holders of war loan in every country
 are owed a large sum by the state; and the state in its turn is
 owed a large sum by these and other taxpayers. The whole position
 is in the highest degree artificial, misleading, and vexatious.
 We shall never be able to move again, unless we can free our
 limbs from these paper shackles. A general bonfire is so great a
 necessity that unless we can make of it an orderly and
 good-tempered affair in which no serious injustice is done to
 anyone, it will, when it comes at last, grow into a conflagration
 that may destroy much else as well. As regards internal debt, I
 am one of those who believe that a capital levy for the
 extinction of debt is an absolute prerequisite of sound finance
 in every one of the European belligerent countries. But the
 continuance on a huge scale of indebtedness between governments
 has special dangers of its own.
     Before the middle of the nineteenth century no nation owed
 payments to a foreign nation on any considerable scale, except
 such tributes as were exacted under the compulsion of actual
 occupation in force and, at one time, by absentee princes under
 the sanctions of feudalism. It is true that the need for European
 capitalism to find an outlet in the New World has led during the
 past fifty years, though even now on a relatively modest scale,
 to such countries as Argentina owing an annual sum to such
 countries as England. But the system is fragile; and it has only
 survived because its burden on the paying countries has not so
 far been oppressive, because this burden is represented by real
 assets and is bound up with the property system generally, and
 because the sums already lent are not unduly large in relation to
 those which it is still hoped to borrow. Bankers are used to this
 system, and believe it to be a necessary part of the permanent
 order of society. They are disposed to believe, therefore, by
 analogy with it, that a comparable system between governments, on
 a far vaster and definitely oppressive scale, represented by no
 real assets, and less closely associated with the property
 system, is natural and reasonable and in conformity with human
     I doubt this view of the world. Even capitalism at home,
 which engages many local sympathies, which plays a real part in
 the daily process of production, and upon the security of which
 the present organisation of society largely depends, is not very
 safe. But however this may be, will the discontented peoples of
 Europe be willing for a generation to come so to order their
 lives that an appreciable part of their daily produce may be
 available to meet a foreign payment the reason for which, whether
 as between Europe and America, or as between Germany and the rest
 of Europe, does not spring compellingly from their sense of
 justice or duty?
     On the one hand, Europe must depend in the long run on her
 own daily labour and not on the largesse of America; but, on the
 other hand, she will not pinch herself in order that the fruit of
 her daily labour may go elsewhere. In short, I do not believe
 that any of these tributes will continue to be paid, at the best,
 for more than a very few years. They do not square with human
 nature or agree with the spirit of the age.
     If there is any force in this mode of thought, expediency and
 generosity agree together, and the policy which will best promote
 immediate friendship between nations will not conflict with the
 permanent interests of the benefactor.(12*)


     I pass to a second financial proposal. The requirements of
 Europe are immediate. The prospect of being relieved of
 oppressive interest payments to England and America over the
 whole life of the next two generations (and of receiving from
 Germany some assistance year by year to the costs of restoration)
 would free the future from excessive anxiety. But it would not
 meet the ills of the immediate present -- the excess of Europe's
 imports over her exports, the adverse exchange, and the disorder
 of the currency. It will be very difficult for European
 production to get started again without a temporary measure of
 external assistance. I am therefore a supporter of an
 international loan in some shape or form, such as has been
 advocated in many quarters in France, Germany, and England, and
 also in the United States. In whatever way the ultimate
 responsibility for repayment is distributed, the burden of
 finding the immediate resources must inevitably fall in major
 part upon the United States.
     The chief objections to all the varieties of this species of
 project are, I suppose, the following. The United States is
 disinclined to entangle herself further (after recent
 experiences) in the affairs of Europe, and, anyhow, has for the
 time being no more capital to spare for export on a large scale.
 There is no guarantee that Europe will put financial assistance
 to proper use, or that she will not squander it and be in just as
 bad case two or three years hence as she is in now: M. Klotz will
 use the money to put off the day of taxation a little longer,
 Italy and Jugoslavia will fight one another on the proceeds,
 Poland will devote it to fulfilling towards all her neighbours
 the military role which France has designed for her, the
 governing classes of Roumania will divide up the booty amongst
 themselves. In short, America would have postponed her own
 capital developments and raised her own cost of living in order
 that Europe might continue for another year or two the practices,
 the policy, and the men of the past nine months. And as for
 assistance to Germany, is it reasonable or at all tolerable that
 the European Allies, having stripped Germany of her last vestige
 of working capital, in opposition to the arguments and appeals of
 the American financial representatives at Paris, should then turn
 to the United States for funds to rehabilitate the victim in
 sufficient measure to allow the spoliation to recommence in a
 year or two?
     There is no answer to these objections as matters are now. If
 I had influence at the United States Treasury, I would not lend a
 penny to a single one of the present governments of Europe. They
 are not to be trusted with resources which they would devote to
 the furtherance of policies in repugnance to which, in spite of
 the President's failure to assert either the might or the ideals
 of the people of the United States, the Republican and the
 Democratic parties are probably united. But if, as we must pray
 they will, the souls of the European peoples turn away this
 winter from the false idols which have survived the war that
 created them, and substitute in their hearts, for the hatred and
 the nationalism which now possess them, thoughts and hopes of the
 happiness and solidarity of the European family -- then should
 natural piety and filial love impel the American people to put on
 one side all the smaller objections of private advantage and to
 complete the work that they began in saving Europe from the
 tyranny of organised force, by saving her from herself. And even
 if the conversion is not fully accomplished, and some parties
 only in each of the European countries have espoused a policy of
 reconciliation, America can still point the way and hold up the
 hands of the party of peace by having a plan and a condition on
 which she will give her aid to the work of renewing life.
     The impulse which, we are told, is now strong in the mind of
 the United States to be quit of the turmoil, the complication,
 the violence, the expense, and, above all, the unintelligibility
 of the European problems, is easily understood. No one can feel
 more intensely than the writer how natural it is to retort to the
 folly and impracticability of the European statesmen -- Rot,
 then, in your own malice, and we will go our way --

             Remote from Europe; from her blasted hopes;
             Her fields of carnage, and polluted air.

     But if America recalls for a moment what Europe has meant to
 her and still means to her, what Europe, the mother of art and of
 knowledge, in spite of everything, still is and still will be,
 will she not reject these counsels of indifference and isolation,
 and interest herself in what may prove decisive issues for the
 progress and civilisation of all mankind?
     Assuming then, if only to keep our hopes up, that America
 will be prepared to contribute to the process of building up the
 good forces of Europe, and will not, having completed the
 destruction of an enemy, leave us to our misfortunes, what form
 should her aid take?
     I do not propose to enter on details. But the main outlines
 of all schemes for an international loan are much the same. The
 countries in a position to lend assistance, the neutrals, the
 United Kingdom and, for the greater portion of the sum required,
 the United States, must provide foreign purchasing credits for
 all the belligerent countries of continental Europe, Allied and
 ex-enemy alike. The aggregate sum required might not be so large
 as is sometimes supposed. Much might be done, perhaps, with a
 fund of £3200 million in the first instance. This sum, even if a
 precedent of a different kind had been established by the
 cancellation of inter-Ally war debt, should be lent and should be
 borrowed with the unequivocal intention of its being repaid in
 full. With this object in view, the security for the loan should
 be the best obtainable, and the arrangements for its ultimate
 repayment as complete as possible. In particular, it should rank,
 both for payment of interest and discharge of capital, in front
 of all reparation claims, all inter-Ally war debt, all internal
 war loans, and all other government indebtedness of any other
 kind. Those borrowing countries who will be entitled to
 reparation payments should be required to pledge all such
 receipts to repayment of the new loan. And all the borrowing
 countries should be required to place their customs duties on a
 gold basis and to pledge such receipts to its service.
     Expenditure out of the loan should be subject to general, but
 not detailed, supervision by the lending countries.
     If, in addition to this loan for the purchase of food and
 materials, a guarantee fund were established up to an equal
 amount, namely £3200 million (of which it would probably prove
 necessary to find only a part in cash), to which all members of
 the League of Nations would contribute according to their means,
 it might be practicable to base upon it a general reorganisation
 of the currency.
     In this manner Europe might be equipped with the minimum
 amount of liquid resources necessary to revive her hopes, to
 renew her economic organisation, and to enable her great
 intrinsic wealth to function for the benefit of her workers. It
 is useless at the present time to elaborate such schemes in
 further detail. A great change is necessary in public opinion
 before the proposals of this chapter can enter the region of
 practical politics, and we must await the progress of events as
 patiently as we can.


     I have said very little of Russia in this book. The broad
 character of the situation there needs no emphasis, and of the
 details we know almost nothing authentic. But in a discussion as
 to how the economic situation of Europe can be restored there are
 one or two aspects of the Russian question which are vitally
     From the military point of view an ultimate union of forces
 between Russia and Germany is greatly feared in some quarters.
 This would be much more likely to take place in the event of
 reactionary movements being successful in each of the two
 countries, whereas an effective unity of purpose between Lenin
 and the present essentially middle-class government of Germany is
 unthinkable. On the other hand, the same people who fear such a
 union are even more afraid of the success of Bolshevism; and yet
 they have to recognise that the only efficient forces for
 fighting it are, inside Russia, the reactionaries, and, outside
 Russia, the established forces of order and authority in Germany.
 Thus the advocates of intervention in Russia, whether direct or
 indirect, are at perpetual cross-purposes with themselves. They
 do not know what they want; or, rather, they want what they
 cannot help seeing to be incompatibles. This is one of the
 reasons why their policy is so inconstant and so exceedingly
     The same conflict of purpose is apparent in the attitude of
 the council of the Allies at Paris towards the present government
 of Germany. A victory of Spartacism in Germany might well be the
 prelude to revolution everywhere: it would renew the forces of
 Bolshevism in Russia, and precipitate the dreaded union of
 Germany and Russia; it would certainly put an end to any
 expectations which have been built on the financial and economic
 clauses of the treaty of peace. Therefore Paris does not love
 Spartacus. But, on the other hand, a victory of reaction in
 Germany would be regarded by everyone as a threat to the security
 of Europe, and as endangering the fruits of victory and the basis
 of the peace. Besides, a new military power establishing itself
 in the East, with its spiritual home in Brandenburg, drawing to
 itself all the military talent and all the military adventurers,
 all those who regret emperors and hate democracy, in the whole of
 Eastern and Central and south-eastern Europe, a power which would
 be geographically inaccessible to the military forces of the
 Allies, might well found, at least in the anticipations of the
 timid, a new Napoleonic domination, rising, as a phoenix, from
 the ashes of cosmopolitan militarism. So Paris dare not love
 Brandenburg. The argument points, then, to the sustentation of
 those moderate forces of order which, somewhat to the world's
 surprise, still manage to maintain themselves on the rock of the
 German character. But the present government of Germany stands
 for German unity more perhaps than for anything else; the
 signature of the peace was, above all, the price which some
 Germans thought it worth while to pay for the unity which was all
 that was left them of 1870. Therefore Paris, with some hopes of
 disintegration across the Rhine not yet extinguished, can resist
 no opportunity of insult or indignity, no occasion of lowering
 the prestige or weakening the influence of a government with the
 continued stability of which all the conservative interests of
 Europe are nevertheless bound up.
     The same dilemma affects the future of Poland in the role
 which France has cast for her. She is to be strong, Catholic,
 militarist, and faithful, the consort, or at least the favourite,
 of victorious France, prosperous and magnificent between the
 ashes of Russia and the ruin of Germany. Roumania, if only she
 could be persuaded to keep up appearances a little more, is a
 part of the same scatter-brained conception. Yet, unless her
 great neighbours are prosperous and orderly, Poland is an
 economic impossibility with no industry but Jew-baiting. And when
 Poland finds that the seductive policy of France is pure
 rhodomontade  and that there is no money in it whatever, nor
 glory either, she will fall, as promptly as possible, into the
 arms of somebody else.
     The calculations of 'diplomacy' lead us, therefore, nowhere.
 Crazy dreams and childish intrigue in Russia and Poland and
 thereabouts are the favourite indulgence at present of those
 Englishmen and Frenchmen who seek excitement in its least
 innocent form, and believe, or at least behave as if foreign
 policy was of the same genre as a cheap melodrama.
     Let us turn, therefore, to something more solid. The German
 government has announced (30 October 1919) its continued adhesion
 to a policy of non-intervention in the internal affairs of
 Russia, 'not only on principle, but because it believes that this
 policy is also justified from a practical point of view'. Let us
 assume that at last we also adopt the same standpoint, if not on
 principle, at least from a practical point of view. What are then
 the fundamental economic factors in the future relations of
 Central to Eastern Europe?
     Before the war Western and Central Europe drew from Russia a
 substantial part of their imported cereals. Without Russia the
 importing countries would have had to go short. Since 1914 the
 loss of the Russian supplies has been made good, partly by
 drawing on reserves, partly from the bumper harvests of North
 America called forth by Mr Hoover's guaranteed price, but largely
 by economies of consumption and by privation. After 1920 the need
 of Russian supplies will be even greater than it was before the
 war; for the guaranteed price in North America will have been
 discontinued, the normal increase of population there will, as
 compared with 1914, have swollen the home demand appreciably, and
 the soil of Europe will not yet have recovered its former
 productivity. If trade is not resumed with Russia, wheat in
 1920-1 (unless the seasons are specially bountiful) must be
 scarce and very dear. The blockade of Russia lately proclaimed by
 the Allies is therefore a foolish and short-sighted proceeding;
 we are blockading not so much Russia as ourselves.
     The process of reviving the Russian export trade is bound in
 any case to be a slow one. The present productivity of the
 Russian peasant is not believed to be sufficient to yield an
 exportable surplus on the pre-war scale. The reasons for this are
 obviously many, but amongst them are included the insufficiency
 of agricultural implements and accessories and the absence of
 incentive to production caused by the lack of commodities in the
 towns which the peasants can purchase in exchange for their
 produce. Finally, there is the decay of the transport system,
 which hinders or renders impossible the collection of local
 surpluses in the big centres of distribution.
     I see no possible means of repairing this loss of
 productivity within any reasonable period of time except through
 the agency of German enterprise and organisation. It is
 impossible geographically and for many other reasons for
 Englishmen, Frenchmen, or Americans to undertake it; we have
 neither the incentive nor the means for doing the work on a
 sufficient scale. Germany, on the other hand, has the experience,
 the incentive, and to a large extent the materials for furnishing
 the Russian peasant with the goods of which he has been starved
 for the past five years, for reorganising the business of
 transport and collection, and so for bringing into the world's
 pool, for the common advantage, the supplies from which we are
 now so disastrously cut off. It is in our interest to hasten the
 day when German agents and organisers will be in a position to
 set in train in every Russian village the impulses of ordinary
 economic motive. This is a process quite independent of the
 governing authority in Russia; but we may surely predict with
 some certainty that, whether or not the form of communism
 represented by Soviet government proves permanently suited to the
 Russian temperament, the revival of trade, of the comforts of
 life and of ordinary economic motive are not likely to promote
 the extreme forms of those doctrines of violence and tyranny
 which are the children of war and of despair.
     Let us then in our Russian policy not only applaud and
 imitate the policy of non-intervention which the government of
 Germany has announced, but, desisting from a blockade which is
 injurious to our own permanent interests, as well as illegal, let
 us encourage and assist Germany to take up again her place in
 Europe as a creator and organiser of wealth for her eastern and
 southern neighbours.
     There are many persons in whom such proposals will raise
 strong prejudices. I ask them to follow out in thought the result
 of yielding to these prejudices. If we oppose in detail every
 means by which Germany or Russia can recover their material
 well-being, because we feel a national, racial, or political
 hatred for their populations or their governments, we must be
 prepared to face the consequences of such feelings. Even if there
 is no moral solidarity between the nearly related races of
 Europe, there is an economic solidarity which we cannot
 disregard. Even now, the world markets are one. If we do not
 allow Germany to exchange products with Russia and so feed
 herself, she must inevitably compete with us for the produce of
 the New World. The more successful we are in snapping economic
 relations between Germany and Russia, the more we shall depress
 the level of our own economic standards and increase the gravity
 of our own domestic problems. This is to put the issue on its
 lowest grounds. There are other arguments, which the most obtuse
 cannot ignore, against a policy of spreading and encouraging
 further the economic ruin of great countries.

     I see few signs of sudden or dramatic developments anywhere.
 Riots and revolutions there may be, but not such, at present, as
 to have fundamental significance. Against political tyranny and
 injustice revolution is a weapon. But what counsels of hope can
 revolution offer to sufferers from economic privation which does
 not arise out of the injustices of distribution but is general?
 The only safeguard against revolution in Central Europe is indeed
 the fact that, even to the minds of men who are desperate,
 revolution offers no prospect of improvement whatever. There may,
 therefore, be ahead of us a long, silent process of
 semi-starvation, and of a gradual, steady lowering of the
 standards of life and comfort. The bankruptcy and decay of
 Europe, if we allow it to proceed, will affect everyone in the
 long run, but perhaps not in a way that is striking or immediate.
     This has one fortunate side. We may still have time to
 reconsider our courses and to view the world with new eyes. For
 the immediate future events are taking charge, and the near
 destiny of Europe is no longer in the hands of any man. The
 events of the coming year will not be shaped by the deliberate
 acts of statesmen, but by the hidden currents, flowing
 continually beneath the surface of political history, of which no
 one can predict the outcome. In one way only can we influence
 these hidden currents -- by setting in motion those forces of
 instruction and imagination which change opinion. The assertion
 of truth, the unveiling of illusion, the dissipation of hate, the
 enlargement and instruction of men's hearts and minds, must be
 the means.
     In this autumn of 1919 in which I write, we are at the dead
 season of our fortunes. The reaction from the exertions, the
 fears, and the sufferings of the past five years is at its
 height. Our power of feeling or caring beyond the immediate
 questions of our own material well-being is temporarily eclipsed.
 The greatest events outside our own direct experience and the
 most dreadful anticipations cannot move us.

                 In each human heart terror survives
             The ruin it has gorged: the loftiest fear
             All that they would disdain to think were true:
             Hypocrisy and custom make their minds
             The fanes of many a worship, now outworn.
             They dare not devise good for man's estate,
             And yet they know not that they do not dare.
             The good want power but to weep barren tears.
             The powerful goodness want: worse need for them.
             The wise want love; and those who love want wisdom;
             And all best things are thus confused to ill.
             Many are strong and rich, and would be just,
             But live among their suffering fellow-men
             As if none felt: they know not what they do.

     We have been moved already beyond endurance, and need rest.
 Never in the lifetime of men now living has the universal element
 in the soul of man burnt so dimly.
     For these reasons the true voice of the new generation has
 not yet spoken, and silent opinion is not yet formed. To the
 formation of the general opinion of the future I dedicate this


 1. The figures for the United Kingdom are as follows:

    Monthly      Net imports     Exports     Excess of imports
    average      (£31,000)        (£31,000)        (£31,000)
  1913            54,930          43,770          11,160
  1914            50,097          35,893          14,204
 Jan-Mar. 1919   109,578          49,122          60,456
 April-June 1919 111,403          62,463          48,940
 July-Sept 1919  135,927          68,863          67,064

     But this excess is by no means so serious as it looks; for
 with the present high freight earnings of the mercantile marine
 the various 'invisible' exports of the United Kingdom are
 probably even higher than they were before the war, and may
 average at least £345 million monthly.

 2. President Wilson was mistaken in suggesting that the
 supervision of reparation payments has been entrusted to the
 League of Nations. As I pointed out in chapter 5, whereas the
 League is invoked in regard to most of the continuing economic
 and territorial provisions of the treaty, this is not the case as
 regards reparation, over the problems and modifications of which
 the reparation commission is supreme, without appeal of any kind
 to the League of Nations.

 3. These articles, which provide safeguards against the outbreak
 of war between members of the League and also between members and
 non-members, are the solid achievement of the covenant. These
 articles make substantially less probable a war between organised
 Great Powers such as that of 1914. This alone should commend the
 League to all men.

 4. It would be expedient so to define a 'protectionist tariff' as
 to permit (a) the total prohibition of certain imports; (b) the
 imposition of sumptuary or revenue customs duties on commodities
 not produced at home; (c) the imposition of customs duties which
 did not exceed by more than 5% a countervailing excise on similar
 commodities produced at home; (d) export duties. Further, special
 exceptions might be permitted by a majority vote of the countries
 entering the union. Duties which had existed for five years prior
 to a country's entering the union might be allowed to disappear
 gradually by equal instalments spread over the five years
 subsequent to joining the union.

 5. This allows nothing for interest on the debt since the
 Bolshevik Revolution.

 6. No interest has been charged on the advances made to these

 7. The actual total of loans by the United States up to date is
 very nearly £32,000 million, but I have not got the latest

 8. The figures in this table are partly estimated, and are
 probably not completely accurate in detail; but they show the
 approximate figures with sufficient accuracy for the purposes of
 the present argument. The British figures are taken from the
 White Paper of 23 October 1919 (Cmd. 377). In any actual
 settlement, adjustments would be required in connection with
 certain loans of gold and also in other respects, and I am
 concerned in what follows with the broad principle only. The sums
 advanced by the United States and France, which are in terms of
 dollars and francs respectively, have been converted at
 approximately par rates. The total excludes loans raised by the
 United Kingdom on the market in the United States, and loans
 raised by France on the market in the United Kingdom or the
 United States, or from the Bank of England.

 9. The financial history of the six months from the end of the
 summer of 1916 up to the entry of the United States into the war
 in April 1917 remains to be written. Very few persons, outside
 the half-dozen officials of the British Treasury who lived in
 daily contact with the immense anxieties and impossible financial
 requirements of those days, can fully realise what steadfastness
 and courage were needed, and how entirely hopeless the task would
 soon have become without the assistance of the United States
 Treasury. The financial problems from April 1917 onwards were of
 an entirely different order from those of the preceding months.

 10. Mr Hoover was the only man who emerged from the ordeal of
 Paris with an enhanced reputation. This complex personality, with
 his habitual air of weary Titan (or, as others might put it, of
 exhausted prize-fighter), his eyes steadily fixed on the true and
 essential facts of the European situation, imported into the
 councils of Paris, when he took part in them, precisely that
 atmosphere of reality, knowledge, magnanimity, and
 disinterestedness which, if they had been found in other quarters
 also, would have given us the Good Peace.

 11. Even after the United States came into the war the bulk of
 Russian expenditure in the United States, as well as the whole of
 that government's other foreign expenditure, had to be paid for
 by the British Treasury.

 12. It is reported that the United States Treasury has agreed to
 fund (i.e. to add to the principal sum) the interest owing them
 on their loans to the Allied governments during the next three
 years. I presume that the British Treasury is likely to follow
 suit. If the debts are to be paid ultimately, this piling up of
 the obligations at compound interest makes the position
 progressively worse. But the arrangement wisely offered by the
 United States Treasury provides a due interval for the calm
 consideration of the whole problem in the light of the after-war
 position as it will soon disclose itself.

Sign up for Brad Delong's (general) mailing list