3. United States Claims Against European Governments

The United States was the largest lender of the war and the post-war periods, although the loans made by Great Britain were only a little less than those made by the United States. The loans to European Governments under the Liberty Loan Acts were: 1

These loans placed nine European governments in the debt of the United States to the extent of more than nine billion. Later they were supplemented by the sale, to these and other European countries, of surplus war material in a total amount of $574.8 million.2

The net result is an economic advantage in favour of the United States of such magnitude that if all of these nations should pay four per cent interest and one per cent toward the amortization of the debt, the Treasury of the United States would be in receipt of more than half a billion dollars per year or enough to carry one-fifth of the total federal budget.

4. The British Debt Settlement &

The situation is well illustrated by the British debt settlement which is evidently regarded both by the British and American Treasury officials as a fair adjustment of these interallied financial relations.

1 U. S. "Statistical Abstract," 1922, p. 555.

2 Ibid., p. 556.

U. S. World War Foreign Debt Commission, "Great Britain, Proposal, etc."

By mutual agreement, the principal of the British debt to the United States Government was fixed at $4.6 billion, for which the British Government issues 3-32 per cent bonds at par. Beside paying interest on the bonds the British Government agrees to pay the principal in annual instalments on a fixed schedule, according to which the payments for the first ten years average about $160 million per year and for the following fifty-two years about $180 million per year. Under this arrangement the British Government will pay back $4.6 billion of principal and $6.5 billion of interest, making a total of $11.1 billion. The last payment is due in 1984.

The total net income of the British state for 1923 was 910.8 million pounds Sterling. On the basis of the debt settlement, the demands of the United States for the year 1923 will equal about 3.6 per cent of the total British revenue. Should the revenue remain approximately the same during the next sixtytwo years, it will require the equivalent of the total British revenue for two and a quarter years to meet its obligations under the debt settlement plan.

Should the British debt settlement be accepted as a precedent, and a similar arrangement be made with France, Italy and Belgium, the United States would receive, from the treasuries of these four countries alone, about $425 million annually, the last payments being made somewhere about 1985 or 1990. The total volume of these payments, interest and principal, if made in full, would exceed $25 billion.

Britain, France, Italy, and Belgium were the four principal allies of the United States in the War of 1917. The United States fought with them and rendered them economic assistance. The cost to these nations of the economic assistance rendered by the United States will exceed four hundred millions per year for the next half century.

Historically, it is no uncommon thing for the victor to impose onerous burdens upon the vanquished. But there is no modern instance where it has cost four nations $25 billion to call in a sympathetic ally.

There is, of course, no certainty that the debts will be paid, either as to principal or interest. Yet, as the United States Secretary of the Treasury (Mr. Mellon) has repeatedly pointed out, these debts represent business obligations, and should they be scrapped, a serious blow would be struck at the whole creditor-debtor relation upon which modern business rests. If this point of view is finally accepted, and if the British Debt Settlement is followed in principle, sixteen European nations will remain official debtors to the United States until nearly the end of the present century, and capitalist empires, in their future dealings with one another, will be able to point to this very important instance as a precedent for future exactions along similar lines.

5. Stripping Economic Rivals

So much for the relation which recent imperial practice establishes among allies who lend and borrow. As a result of the late war the great nations of Europe are actual or potential tribute payers to the United States for at least two generations. The same principle of creditor and debtor, worked out in far more elaborate detail, appears in the treatment accorded to the defeated enemy nations by the victorious Allies. This is particularly true of Germany, which was the strongest, economically, of the defeated nations.

Austria-Hungary was dismembered as a result of the war. Turkey was stripped and humiliated. Germany alone remained to carry the economic burdens which the Allies chose to impose. While the populations of the Allied countries were assured that the war was being waged against militarism and as a means of preserving world peace, the secret treaties, signed in 1915, 1916 and 1917 between the representatives of the various Allied Governments made it very clear that the Allies were seeking important economic advantages.

The Treaty which brought Italy into the War on the side of the Allies (April 26, 1915) contained specific provisions for a loan of $250 million and for the cession of certain territory

lying along the Adriatic to Italy. The sixteen articles of this treaty are very precise as to the exact nature of the economic gains which Italy is to receive.1

A note from the Minister of Foreign Affairs to the French Ambassador at Petrograd notes that the Government of the Republic intends to demand, among other peace terms, Alsace and Lorraine. "At the same time strong economic demands must be taken into consideration so as to include within French territory the whole of the industrial iron basin of Lorraine and the whole of the industrial coal basin of the valley of the Saar." Later, in a secret telegram to the Russian Ambassador in Paris the aspirations of France are described as including Alsace and Lorraine, the Saar and the establishment of an independent state in the German trans-Rhenish territory.2

The same Russian publication gives the essence of the treaty by which it was proposed to divide Turkey, and in addition, the economic offers that were made to Italy and to Greece as a price for joining the cause of the Allies."

Had there remained any doubt as to the economic plans and ambitions of the Allied powers, it was dispelled by the provisions of the Treaty of Versailles. This point has been sufficiently elaborated in a number of books, among which "The Economic Consequences of the Peace" and "Germany's Capacity to Pay" are as well-reasoned and as clear as any others

5

Keynes points out that the German economic system before the war depended on three main factors:

1. Overseas commerce, represented by the merchant marine, the colonies, foreign investments and overseas business connections;

2. The exploitation of German coal and iron resources, with the interests built on them.

1 Russia, "Secret Diplomatic Documents," p. 13 ff.

2 Ibid., pp. 19-20.

8 Ibid., p. 11 ff., 21 ff.

4 Keynes, "Economic Consequences of the Peace." Moulton & McGuire, "Germany's Capacity to Pay."

3. The transport and traffic systems inside of Germany. Moulton and McGuire carry this argument one step farther, and show that, through transport, banking, commerce and investment Germany was a heavy buyer and seller in Britain, France, Belgium, Italy, Russia, the Balkans and so on, so that German business was an essential link in the chain of European business.

Two forces contended at the Treaty Table-one that desired to render Germany economically impotent, and the other that desired to make Germany pay for the war. While neither side won a complete victory, the Treaty contained all of the provisions that were considered necessary to destroy the efficiency of German economic life:

1. Germany ceded to the Allies all of her merchant vessels, built and building, of more than 1600 gross tons; half of those between 1000 and 1600 tons, and a quarter of those under 1000 tons; all of the over-seas possessions, thus practically destroying the elaborate commercial system which Germany had erected, and upon which she depended for the purchase of her raw materials and imported food.

2. The iron of Lorraine, the coal of the Saar for a long period, the coal of Upper Silesia, were lost to Germany under the Treaty. In addition, heavy mortgages were laid on the coal of the Ruhr. In 1913, three-quarters of the iron produced in Germany came from Lorraine, while Upper Silesia, the Saar and the Ruhr provided four-fifths of Germany's coal. The Treaty therefore dealt a severe blow to German heavy industry.

3. Under the Dawes Plan the railroads of Germany, which were formerly state owned, pass under the control of a private company.

6. A Technique of Exploitation

Ostensibly the Treaty was sufficiently rigorous to destroy Germany's capacity to compete, particularly in the heavy industries. Actually, German heavy industry came back with astonishing rapidity, threatening to take from the French iron masters 1 Moulton & McGuire, supra.