and the further the Peace Conference developed and the more difficult loomed the economic problems, the more furious his riding. On April 23, he came into the Council of Four with one of his characteristic announcementswhich so often seemed to be the result of a sudden shock of discovery. He declared:

"No trade was at present moving anywhere in Europe." This, of course, was disastrous to Great Britain.

And this, as he said, "brought him to the question of a scheme for restarting Europe."

All along he had been following for the most part the advice of reactionary leaders. But he now turned avidly to the liberals. He sprung upon the Council the famous financial plan of Keynes and recommended its immediate adoption. He was suddenly as keen for restarting Europe as he had been passionate shortly before in demanding that Germany "pay to the last farthing."

The Keynes plan, whatever its lesser defects or implications, was at least a genuine attempt to grapple with a real problem and to do it on a broad coöperative basis.1 It provided, in brief, for a huge bond issue by the enemy and new states, guaranteed by the Allied and neutral powers, of the proceeds of which four fifths should be applied to payment of reparations and one fifth be left available for the purchase of raw materials. These bonds, moreover, were to be acceptable at par "in payment of all indebtedness between any of the Allied and Associated governments." Here was a "joker" so far as America was concerned-for, passed from hand to hand, these bonds would wipe out a large share of the inter-allied debts, leaving the ultimate creditors (mainly the United States) creditors directly of Germany. While this would accomplish after a fashion the project the 1See Volume III, Document 48, for full text of Keynes plan.

British had constantly in mind of getting rid of this huge burden of international debts as a hindrance to the resumption of normal conditions of international tradeit would leave America "holding the bag." Outright cancellation of these debts they hardly ventured to advocate at the time. Hints to the United States Government in December, 1918, had been promptly discouraged and were not revived in express terms until toward the close of 1919. But this question of the debts hung constantly over the Conference, as it has hung over the world ever since, as one demanding a bold solution if the financial rehabilitation of the nations was to be at all thoroughgoing. But the Keynes plan, which will be more fully considered elsewhere, met with no success. In any

event, it would not have worked if the other elements of the economic settlements had not been dealt with upon sound principles. For how expect a liberal solution of the debt problem with America ultimately assuming the chief burden when at the same time the British and French were demanding reparations that would practically make it impossible for Germany ever to pay those debts? Lloyd George would not accept the plain logic of the situation! Keynes's plan for the debts must be accompanied by Keynes's low estimate of reparations.

While this fatal double-mindedness was paralyzing the British position on the economic settlements at Paris, the liberals were nevertheless pushing their ideas wherever they could—struggling just as President Wilson did in the political field, though with less power and less comprehensiveness of vision.

For example, they had enough influence to get a commission appointed by the Council of Ten as early as January 23, through a British resolution, “to inquire into the question of the international régime of Ports, Water

ways, and Railways." The British members of this Commission were the Honourable Arthur L. Sifton (Minister of Customs and Inland Revenue of Canada) and Sir Hubert Llewellyn Smith (Permanent Secretary to the Board of Trade). Both were able and persistent men with a clear idea in view of the situation and the issues at stake. Their programme was expressed in a resolution submitted in the second meeting of the Commission, on February 10, of which the first paragraph read:

The High Contracting Parties declare themselves in favour of the principle of freedom of transit for persons, goods, ships (and aircraft) by land, water (or air), across territories belonging to or controlled by them.

This was assuredly an advanced, even a radical economic position to take, but in the face of all opposition the British maintained it throughout the Conference. On June 4, Balfour said eloquently "that the Conference was trying to rebuild the world. One of the methods was to open all international waterways to the world." These sweeping statements were among the most liberal economic proposals ever brought before this or any other conference. They would go far toward annulling the economic hindrances of political frontiers. But it is necessary to note their limitations. That they would confer a great general benefit upon the world may be taken for granted; but they implied renunciation of rights by the Continental nations without any corresponding sacrifice on the part of the British Empire. Europe would be thrown wide open to British commerce and would at the same time be held tributary in large measure to the British Empire through its control of shipping and raw materials. The fitting complement to 'Secret Minutes, Council of Five, June 4, p. 10.

equality of treatment on the waterways and railways of Europe would have been equality of rights in utilization of the British merchant marine or in access to the natural resources of the Empire. Such propositions, however, would have found no favour even among the liberal elements of the British delegation.

While there were thus these champions of the New among the British delegation at Paris-and more truly awake than those of any other delegation-their efforts were offset and neutralized by the reactionaries. But as compared with the economic policies of certain other countries at Paris that of Great Britain stands out as a shining example. She at least had some vision of the New World; she at least advocated some positive and constructive means for meeting economic chaos. If her policy sought too markedly to increase her own power in the economic field, or to improve the general situation for her own benefit, there were other nations which seemed actually to strive to make the general situation worse in order to improve their own relative positions. The policies of all the Continental Allies were more or less of this negatively selfish character-as will presently be shown.

CHAPTER XXXVIII

THE ECONOMIC POLICIES OF CONTINENTAL EUROPE:
FRANCE, ITALY, AND THE SMALL NATIONS-
AND OF JAPAN AT PARIS

F

I. FRANCE

RANCE was obsessed with the political settle

ments at Paris, and considered economic prob

lems chiefly in the light of the future political security, greatness, and glory of France. There was no such muddle of old and new economic views in the French delegation as in the British. The French official policy was all Old, and, if clear, narrow, short-sighted, and self-contradictory. Whatever of the New existed in France-mainly among the labour and socialist leaders-was entirely off-stage and, unlike the British liberal opinion, had no appreciable influence upon governmental policy. The essential French economic policy was one of national individualism pushed to its extreme limits. The political security of France transcended in importance the general reconstruction of Europe. She maintained with obstinate tenacity the contention that her relative position must be made stronger than that of Germany even if the absolute standard of both, and of the whole world, be pulled down in the process.

France was in a wholly different economic position from England. England's very life depended upon foreign trade, and foreign trade upon peaceful and generally coöperative international relationships; but France lives largely within herself. She is economically more