DISCOVERY 



145 



Government, by unfavourable foreign exchanges (them- 

 selves largely due to inflation), by transport difficulties 

 and by artificial trade barriers. If these troubles 

 can be overcome, high prices and the consequent 

 tendency for profiteering will be eliminated simul- 

 taneously. 



Before discussing, however, the possible cures for 

 our present economic troubles, I want to widen the 

 survey to embrace a brief review of Continental 

 conditions. I do so, partly because many of the 

 countries on the Continent of Europe are faced with 

 the same economic problems as ourselves, but in a much 

 more extreme form, and partly because we are essen- 

 tially an industrial and commercial country, dependent 

 for many of the comforts and necessaries of hfe upon 

 our foreign trade. Consequently, if the bulk of our 

 customers and of our sources of supply on the Con- 

 tinent of Europe are at present suffering from more 

 or less acute economic disorganisation, it cannot but 

 have a prejudicial effect on our own welfare. 



Mr. J. M. Keynes, in his recent book, The Economic 

 Consequences of the Peace} has given us a ^'ivid picture 

 of economic conditions and prospects in some of the 

 principal countries of Continental Europe. As the 

 title of the book suggests, he emphasises the economic 

 problems resulting from the terms of the peace, rather 

 than the problems which may be attributed directly 

 to the war, though it is not always easj' to distinguish 

 the two sets of problems. If the facet of the jewel 

 which strikes us most forcibly in this country is that 

 which shows high prices, the facet revealing scarcity 

 attracts considerably more attention in France, 

 Italy, and Belgium, whereas in Germany and Austria 

 it is the dominant consideration. Prices are in many 

 cases appallingly high in these countries, but scarcity, 

 to the point almost of the complete absence of many 

 of the comforts and even necessaries of hfe, is the 

 aspect of the problem which impresses itself most 

 forcibly upon the inhabitants. More or less extreme 

 scarcity, combined with a flood of paper money, 

 compared with which our over-issues of currency 

 notes appear quite modest, would alone easily account 

 for the tremendously high prices which prevail ; but 

 the other contributory causes mentioned above in 

 connection with our own problem of high prices are 

 ^ also present on the Continent in aggravated forms — 

 unsound public finance, unfavourable foreign ex- 

 changes, transport difficulties and artificial trade 

 barriers. 

 t The existence of all these phenomena on the Con- 

 l tinent can be regarded to a considerable extent as 

 I direct or indirect results of the war, even as they are 

 in this country. 

 The devastation of large areas and the destruction 

 » Published by MacmUlan & Co., 85. td. net. 



of mines, works, and farms, together with the lack 

 of manures and artificial feeding-stuffs, accounts 

 for some of the special scarcity on the Continent. 

 Further, the disorganisation and congestion on the 

 Continental railways, together with the wearing out 

 of their rolling stock and running tracks, is much 

 more serious than with us. But undoubtedly part 

 of the acuteness of the economic ills from which so 

 much of the Continent is suffering may be attributed 

 to certain terms contained in the Peace Treaty. For 

 a detailed examination of the question I must refer 

 the reader to Mr. Keynes's book. Here I can only 

 touch on the matter quite briefly. The dominant 

 motives underlying the peace negotiations, if we accept 

 Mr. Keynes's analysis of the Versailles Conference, 

 were pohtical and territorial rather than economic. 

 Some readers may, and others may not, accept this 

 view, but in any case there seems little or no doubt 

 that certain of the provisions of the Treaty, whether 

 they were inserted for economic or for other reasons, 

 are almost bound to have a prejudicial effect on the 

 economic recovery of Europe after its five years of 

 war and destruction. Attention may be drawn to 

 just a few points. Under the heading of reparation, 

 an immense indemnity of uncertain amount is to be 

 paid by German}'. In the first place, the uncertainty 

 of the amount Germany is called upon to pay cannot 

 fail to have a bad effect upon the productiveness 

 of German industry, as the Germans, reahsing that 

 any surplus produced is to be handed over to the 

 Reparation Commission, are not hkely to produce 

 any surplus. In the second place, the possibihty of 

 receiving large sums by way of reparation encourages 

 the Continental Finance Ministers to continue the 

 unsound financial policy adopted during the war, of 

 placing far too much reliance on loans and on over- 

 issues of paper money. In the third place, if the 

 great indemnity were to be paid, it could only be 

 achieved by Germany developing an enormous export 

 trade, either with the Entente Powers or with neutral 

 countries, which would hardly be in the interests of 

 our export industries. 



As a matter of fact, this last contingency seems 

 hardly likely to arise, because the same Treaty, which 

 contains terms about a great indemnity, contains 

 other terms which make the payment of such an 

 indemnity almost impossible. It is hardly feasible 

 both to kill the goose which lays the golden eggs 

 and to receive a regular supply of the golden eggs. 

 Yet that is apparently what the Treaty attempts to 

 do, because in addition to imposing the indemnity, 

 it aims at very seriously restricting, if not actually 

 destroying, the economic life of Germany. The loss 

 of an important part of its coal and iron ore deposits 

 on the one hand, and of the bulk of its mercantile 



