John Maynard Keynes

“ In a régime of free trade and free economic intercourse it would be of little consequence that iron lay on one side of a political frontier, and labour, coal, and blast furnaces on the other. But as it is, men have devised ways to impoverish themselves and one another ”

“ On the other hand, France, having recovered the deposits of Lorraine, may be expected to aim at replacing as far as possible the industries which Germany had based on them by industries situated within her own frontiers. Much time must elapse before the plant and the skilled labour could be developed within France, and even so she could hardly deal with the ore unless she could rely on receiving the coal from Germany. The uncertainty, too, as to the ultimate fate of the Saar will be disturbing to the calculations of capitalists who contemplate the establishment of new industries in France. ”

“ Yet if Germany can find coal for the neighbouring neutrals, France and Italy may loudly claim that in this case she can and must keep her treaty obligations. In this there will be a great show of justice, and it will be difficult to weigh against such claims the possible facts that, while German miners will work for butter, there is no available means of compelling them to get coal the sale of which will bring in nothing, and that if Germany has no coal to send to her neighbours she may fail to secure imports essential to her economic existence. ”

“ If there is any approximate truth in Mr Hoover's calculation that the coal output of Europe has fallen by one-third, a situation confronts us where distribution must be effected with evenhanded impartiality in accordance with need, and no incentive can be neglected towards increased production and economical methods of transport. ”

“ But in the no less extraordinary conditions of today's industry it is not without advantages as a means of stimulating production. The butter-shifts of the Ruhr [44] show how far modern Europe has retrograded in the direction of barter, and afford a picturesque illustration of the low economic organisation to which the breakdown of currency and free exchange between individuals and nations is quickly leading us. But they may produce the coal where other devices would fail. ”

“ Germany will have to pay to foreigners for the carriage of her trade such charges as they may be able to exact, and will receive only such conveniences as it may suit them to give her. The prosperity of German ports and commerce can only revive, it would seem, in proportion as she succeeds in bringing under her effective influence the merchant marines of Scandinavia and of Holland. ”

“ The Allied governments gave it, in any case, no serious consideration, and I doubt if anything which the German delegation could have said at that stage of the proceedings would have much influenced the result.
The commonest virtues of the individual are often lacking in the spokesmen of nations; a statesman representing not himself but his country may prove, without incurring excessive blame -- as history often records -- vindictive, perfidious, and egotistic. ”

“ By voting Polish, a locality can escape liability for the indemnity and for the crushing taxation consequent on voting German, a factor not to be neglected. On the other hand, the bankruptcy and incompetence of the new Polish state might deter those who were disposed to vote on economic rather than on racial grounds. It has also been stated that the conditions of life in such matters as sanitation and social legislation are incomparably better in Upper Silesia than in the adjacent districts of Poland, where similar legislation is in its infancy. ”

“ The execution of this programme in detail will throw on the reparation commission a peculiar task, as it will become possessor of a great number of rights and interests over a vast territory owing dubious obedience, disordered by war, disruption, and Bolshevism. The division of the spoils between the victors will also provide employment for a powerful office, whose doorsteps the greedy adventurers and jealous concession-hunters of twenty or thirty nations will crowd and defile. ”

“ If France and Italy are to make good their own deficiencies in coal from the output of Germany, then northern Europe, Switzerland, and Austria, which previously drew their coal in large part from Germany's exportable surplus, must be starved of their supplies. Before the war 13.4 million tons of Germany's coal exports went to Austria-Hungary. Inasmuch as nearly all the coalfields of the former empire lie outside what is now German Austria, the industrial ruin of this latter state, if she cannot obtain coal from Germany, will be complete. ”

“ Allowing for the loss of territory and the loss of efficiency, Germany cannot export coal in the near future (and will even be dependent on her treaty rights to purchase in Upper Silesia) , if she is to continue as an industrial nation. Every million tons she is forced to export must be at the expense of closing down an industry. With results to be considered later this within certain limits is possible. But it is evident that Germany cannot and will not furnish the Allies with a contribution of 40 million tons annually. ”

“ It seems certain, calculating on the present passions and impulses of European capitalistic society, that the effective iron output of Europe will be diminished by a new political frontier (which sentiment and historic justice require) , because nationalism and private interest are thus allowed to impose a new economic frontier along the same lines. ”

“ But in addition, the mining plant is in bad condition (due to the lack of certain essential materials during the blockade) , the physical efficiency of the men is greatly impaired by malnutrition (which cannot be cured if a tithe of the reparation demands are to be satisfied -- the standard of life will have rather to be lowered) , and the casualties of the war have diminished the numbers of efficient miners. The analogy of English conditions is sufficient by itself to tell us that a pre-war level of output cannot be expected in Germany. ”

“ The skilled exploitation of the great coalfields of the Ruhr, Upper Silesia, and the Saar, alone made possible the development of the steel, chemical, and electrical industries which established her as the first industrial nation of continental Europe. ”

“ Nowadays money in Central and south-eastern Europe is seldom a true measure of value in exchange, and will not necessarily buy anything, with the consequence that one country, possessing a commodity essential to the needs of another, sells it not for cash but only against a reciprocal engagement on the part of the latter country to furnish in return some article not less necessary to the former. ”

“ But the coal clauses will not be lost sight of so easily -- for the reason that it will be absolutely vital in the interests of France and Italy that these countries should do everything in their power to exact their bond. As a result of the diminished output due to German destruction in France, of the diminished output of mines in the United Kingdom and elsewhere, and of many secondary causes, such as the breakdown of transport and of organisation and the inefficiency of new governments, the coal position of all Europe is nearly desperate ”

“ The Germans, it should be added, have pointed out that the same economic argument which adds the Saar fields to France, allots Upper Silesia to Germany. For whereas the Silesian mines are essential to the economic life of Germany, Poland does not need them. Of Poland's pre-war annual demand of 10.5 million tons, 6.8 million tons were supplied by the indisputably Polish districts adjacent to Upper Silesia, 1.5 million tons from Upper Silesia (out of a total Upper Silesian output of 43.5 million tons) , and the balance from what is now Czechoslovakia. ”

“ Yet if these feelings and these rights are allowed to prevail beyond what wisdom would recommend, the reactions on the social and economic life of Central Europe will be far too strong to be confined within their original limits. ”

“ The motives which will govern France's eventual policy are not entirely concordant. While Lorraine comprised 75% of Germany's iron ore, only 25 % of the blast furnaces lay within Lorraine and the Saar basin together, a large proportion of the ore being carried into Germany proper. Approximately the same proportion of Germany's iron and steel foundries, namely 25 per cent, were situated in Alsace-Lorraine. For the moment, therefore, the most economical and profitable course would certainly be to export to Germany, as hitherto, a considerable part of the output of the mines. ”

“ The economic frontiers which are to be established between the coal and the iron upon which modern industrialism is founded will not only diminish the production of useful commodities, but may possibly occupy an immense quantity of human labour in dragging iron or coal, as the case may be, over many useless miles to satisfy the dictates of a political treaty or because obstructions have been established to the proper localisation of industry.
III There remain those treaty provisions which relate to the transport and the tariff systems of Germany. ”

“ So far there is much to be said for the treaty. Freedom of through transit is a not unimportant part of good international practice and should be established everywhere. The objectionable feature of the commissions lies in their membership. In each case the voting is so weighted as to place Germany in a clear minority. On the Elbe commission Germany has four votes out of ten; on the Oder commission three out of nine; on the Rhine commission four out of nineteen; on the Danube commission, which is not yet definitely constituted, she will be apparently in a small minority. ”

“ One-third of Germany's population lives in towns of more than 20,000 inhabitants, an industrial concentration which is only possible on a foundation of coal and iron. In striking, therefore, at her coal supply, the French politicians were not mistaking their target. It is only the extreme immoderation, and indeed technical impossibility, of the treaty's demands which may save the situation in the long run. ”

“ This wholesale expropriation of private property is to take place without the Allies affording any compensation to the individuals expropriated, and the proceeds will be employed, first, to meet private debts due to Allied nationals from any German nationals, and second, to meet claims due from Austrian, Hungarian, Bulgarian, or Turkish nationals. Any balance may either be returned by the liquidating Power direct to Germany, or retained by them. If retained, the proceeds must be transferred to the reparation commission for Germany's credit in the reparation account. ”

“ If 40 million tons of this are to be exported to the Allies, there remain 60 million tons for Germany herself to meet her own domestic consumption. Demand as well as supply will be diminished by loss of territory, but at the most extravagant estimate this could not be put above 29 million tons. [40] Our hypothetical calculations, therefore, leave us with post-war German domestic requirements, on the basis of a prewar efficiency of railways and industry, of 110 million tons against an output not exceeding 100 million tons, of which 40 million tons are mortgaged to the Allies. ”

“ The Allied government exercising authority in any former German colony 'may make such provisions as it thinks fit with reference to the repatriation from them of German nationals and to the conditions upon which German subjects of European origin shall, or shall not, be allowed to reside, hold property, trade or exercise a profession in them'. [9] All contracts and agreements in favour of German nationals for the construction or exploitation of public works lapse to the Allied governments as part of the payment due for reparation. ”

“ Those Allied ministers who have told their peoples that she can have certainly deceived them for the sake of allaying for the moment the misgivings of the European peoples as to the path along which they are being led. ”

“ Upper Silesia, a district without large towns, in which, however, lies one of the major coalfields of Germany with a production of about 23% of the total German output of hard coal, is, subject to a plebiscite, [33] to be ceded to Poland. Upper Silesia was never part of historic Poland; but its population is mixed Polish, German, and Czechoslovakian, the precise proportions of which are disputed. [34] Economically it is intensely German; the industries of eastern Germany depend upon it for their coal ”

“ During fifteen years we are going to work on them, to attack them from every point, till we obtain from them a declaration of love. It is evidently a less brutal proceeding than the coup de force which detached from us our Alsatians and Lorrainers. But if less brutal, it is more hypocritical. We know quite well between ourselves that it is an attempt to annex these 600,000 Germans. ”

“ If Germany's total production exceeds the present level of about 108 millions a year, 60% of the extra production, up to 128 millions, shall be delivered to the Entente, and 50% of any extra beyond that, until the figure provided in the peace treaty is reached. If the toil production falls below 108 millions the Entente will examine the situation, after hearing Germany, and take account of it.'↑ 21,136,265 tons out of a total of 28,607,903 tons. The loss of iron ore in respect of Upper Silesia is insignificant. ”

“ The reparation commission is empowered up to 1 May 1921 to demand payment up to £31,000 million in such manner as they may fix, 'whether in gold, commodities, ships, securities or otherwise'. [22] This provision has the effect of entrusting to the reparation commission for the period in question dictatorial powers over all German property of every description whatever. They can, under this article, point to any specific business, enterprise, or property, whether within or outside Germany, and demand its surrender ”

“ Further, it is difficult to apply on a contractual basis those passages which deal with spirit, purpose, and intention; every man must judge for himself whether, in view of them, deception or hypocrisy has been practised. But there remain, as will be seen below, certain important issues on which the contract is unequivocal. ”

“ They require less attention, because they are in large measure inevitable. Almost exactly 75% of the iron ore raised in Germany in 1913 came from Alsace-Lorraine. [47] In this the chief importance of the stolen provinces lay.
There is no question but that Germany must lose these orefields. The only question is how far she is to be allowed facilities for purchasing their produce. The German delegation made strong efforts to secure the inclusion of a provision by which coal and coke to be furnished by them to France should be given in exchange for minette from Lorraine. ”