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The actual substance of this proposal was not unreasonable and probably as good as the Allies will ultimately secure. But the figures were far below even those of the Brussels experts, and the mode of putting it forward naturally provoked prejudice. It was summarily rejected.

Two days later Mr. Lloyd George read to the German Delegation a lecture on the guilt of their country, described their proposals as "an offense and an exasperation," and alleged that their taxes were "ridiculously low compared with Great Britain's." He then delivered a formal declaration on behalf of the Allies that Germany was in default in respect of "the delivery for trial of the criminals who have offended against the laws of war, disarmament, and the payment in cash or kind of ,000,000,000"; and concluded with an ultimatum to the effect that unless he heard by Monday "that Germany was either prepared to accept the Paris Decisions or to submit proposals which would be in other ways an equally satisfactory discharge of her obligations under the Treaty of Versailles ," the Allies would proceed to the occupation of Duisberg, Ruhrort, and D?sseldorf on the right bank of the Rhine, a levy on all payments due to Germany on German goods sent to Allied countries, the establishment of a line of Customs between the occupied area of Germany and the rest of Germany, and the retention of the Customs paid on goods entering or leaving the occupied area.

During the next few days negotiations proceeded, to no purpose, behind the scenes. At midnight on March 6, M. Loucheur and Lord D'Abernon offered the Germans the alternative of a fixed payment of 0,000,000 for 30 years and an export proportion of 30 per cent. The formal Conference was resumed on March 7. "A crowd gathered outside Lancaster House in the morning and cheered Marshal Foch and Mr. Lloyd George. Shouts of 'Make them pay, Lloyd George!' were general. The German delegates were regarded with curiosity. General von Seeckt wore uniform with a sword. He wore also an eyeglass in the approved manner of the Prussian officer and bore himself as the incarnation of Prussian militarism. Marshal Foch, Field-Marshal Sir Henry Wilson, and the other Allied soldiers also wore uniform."

The rupture of the negotiations was received in Paris "with a sigh of relief," and orders were telegraphed by Marshal Foch for his troops to march at 7 A.M. next morning.

No new Reparation scheme, therefore, emerged from the Conference of London. Mr. Lloyd George's acquiescence in the Decisions of Paris had led him too far. Some measure of personal annoyance at the demeanor of the German representatives and the failure of what, in its inception, may have been intended as bluff, had ended in his agreeing to an attempt to enforce the Decisions by the invasion of Germany. The economic penalties, whether they were legal or not, were so obviously ineffective for the purpose of collecting money, that they can hardly have been intended for that purpose, and were rather designed to frighten Germany into putting her name to what she could not, and did not intend to perform, by threatening a serious step in the direction of the policy, openly advocated in certain French quarters, of permanently detaching the Rhine provinces from the German Commonwealth. The grave feature of the Conference of London lay partly in Great Britain's lending herself to a furtherance of this policy, and partly in contempt for the due form and processes of law.

For it was impossible to defend the legality of the occupation of the three towns under the Treaty of Versailles. Mr. Lloyd George endeavored to do so in the House of Commons, but at a later stage of the debate the contention was virtually abandoned by the Attorney-General.

The allegation of default in paying the 20 milliard gold marks was manifestly untenable at that date ; for according to the Treaty, Germany had to pay this sum by May 1, 1921, "in such instalments and in such manner as the Reparation Commission may fix," and in March 1921 the Reparation Commission had not yet demanded these cash payments. But assuming that there had been technical default in respect of the war criminals and disarmament , it was our duty to state our charges precisely, and, if penalties were threatened, to make these penalties dependent on a failure to meet our charges. We were not entitled to make vague charges, and then threaten penalties unless Germany agreed to something which had nothing to do with the charges. The Ultimatum of March 7 substituted for the Treaty the intermittent application of force in exaction of varying demands. For whenever Germany was involved in a technical breach of any one part of the Treaty, the Allies were, apparently, to consider themselves entitled to make any changes they saw fit in any other part of the Treaty.

The next two months were stormy. The Sanctions embittered the situation in Germany without producing any symptoms of surrender in the German Government. Towards the end of March the latter sought the intervention of the United States and transmitted a new counter-proposal through the Government of that country. In addition to being straightforward and more precise, this offer was materially better than that of Dr. Simons in London at the beginning of the month. The chief provisions were as follows:

If this is compared with Dr. Simons's first offer, it will be seen that it is at least 50 per cent better, because there is no longer any talk of deducting from the total of ,500,000,000 an alleged sum of ,000,000,000 in respect of deliveries prior to May 1, 1921. If we assume an international loan of ,250,000,000, costing 8 per cent for interest and sinking fund, the German offer amounted to an immediate payment of 0,000,000 per annum, with a possibility of an increase later in proportion to the rate of Germany's economic recovery.

The United States Government, having first ascertained privately that this offer would not be acceptable to the Allies, refrained from its formal transmission. On this account, and also because it was overshadowed shortly afterwards by the Second Conference of London, this very straightforward proposal has never received the attention it deserves. It was carefully and precisely drawn up, and probably represented the full maximum that Germany could have performed, if not more.

But the offer, as I have said, made very little impression; it was largely ignored in the press, and scarcely commented on anywhere. For in the two months which elapsed between the First and Second Conferences of London there were two events of great importance, which modified the situation materially.

The first of these was the result of the Silesian plebiscite held in March 1921. The earlier German Reparation offers had all been contingent on her retention of Upper Silesia; and this condition was one which, in advance of the plebiscite, the Allies were unable to accept. But it now appeared that Germany was in fact entitled to most of the country, and, possibly, to the greater part of the industrial area. But this result also brought to a head the acute divergence between the policy of France and the policy of the other Allies towards this question.

The decision of the Reparation Commission and the arrival of the date, May 1, 1921, fixed in the Treaty for the promulgation of a definite Reparation scheme, provided a sufficient ground for reopening the whole question. Germany had refused the Decisions of Paris; the Sanctions had failed to move her; the r?gime of the Treaty was therefore reinstated; and under the Treaty it was for the Reparation Commission to propose a scheme.

In these circumstances the Allies met once more in London in the closing days of April 1921. The scheme there concerted was really the work of the Supreme Council, but the forms of the Treaty were preserved, and the Reparation Commission were summoned from Paris to adopt and promulgate as their own the decree of the Supreme Council.

The Conference met in circumstances of great tension. M. Briand had found it necessary to placate his Chamber by announcing that he intended to occupy the Ruhr on May 1. The policy of violence and illegality, which began with the Conference of Paris, had always included hitherto just a sufficient ingredient of make-believe to prevent its being as dangerous as it pretended to the peace and prosperity of Europe. But a point had now been reached when something definite, whether good or bad, seemed bound to happen; and there was every reason for anxiety. Mr. Lloyd George and M. Briand had walked hand-in-hand to the edge of a precipice; Mr. Lloyd George had looked over the edge; and M. Briand had praised the beauties of the prospect below and the exhilarating sensations of a descent. Mr. Lloyd George, having indulged to the full his habitual morbid taste for looking over, would certainly end in drawing back, explaining at the same time how much he sympathized with M. Briand's standpoint. But would M. Briand?

In this atmosphere the Conference met, and, considering all the circumstances, including the past commitments of the principals, the result was, on the whole, a victory for good sense, not least because the Allies there decided to return to the pathway of legality within the ambit of the Treaty. The new proposals, concerted at this Conference, were, whether they were practicable or not in execution, a lawful development of the Treaty, and in this respect sharply distinguished from the Decisions of Paris in the January preceding. However bad the Treaty might be, the London scheme provided a way of escape from a policy worse even than that of the Treaty,--acts, that is, of arbitrary lawlessness based on the mere possession of superior force.

In one respect the Second Ultimatum of London was lawless; for it included an illegal threat to occupy the Ruhr Valley if Germany refused its terms. But this was for the sake of M. Briand, whose minimum requirement was that he should at least be able to go home in a position to use, for conversational purposes, the charms of the precipice from which he was hurrying away. And the Ultimatum made no demand on Germany to which she was not already committed by her signature to the Treaty.

For this reason the German Government was right, in my judgment, to accept the Ultimatum unqualified, even though it still included demands impossible of fulfilment. For good or ill Germany had signed the Treaty. The new scheme added nothing to the Treaty's burdens, and, although a reasonable permanent settlement was left where it was before,--in the future,--in some respects it abated them. Its ratification, in May 1921, was in conformity with the Treaty, and merely carried into effect what Germany had had reason to anticipate for two years past. It did not call on her to do immediately--that is to say, in the course of the next six months--anything incapable of performance. It wiped out the impossible liability under which she lay of paying forthwith a balance of ,000,000,000 due under the Treaty on May 1. And, above all, it obviated the occupation of the Ruhr and preserved the peace of Europe.

There were those in Germany who held that it must be wrong that Germany should under threats profess insincerely what she could not perform. But the submissive acceptance by Germany of a lawful notice under a Treaty she had already signed committed her to no such profession, and involved no recantation of her recent communication through the President of the United States as to what would eventually prove in her sincere belief to be the limits of practicable performance.

In the existence of such sentiments, however, Germany's chief difficulty lay. It has not been understood in England or in America how deep a wound has been inflicted on Germany's self-respect by compelling her, not merely to perform acts, but to subscribe to beliefs which she did not in fact accept. It is not usual in civilized countries to use force to compel wrongdoers to confess, even when we are convinced of their guilt; it is still more barbarous to use force, after the fashion of inquisitors, to compel adherence to an article of belief because we ourselves believe it. Yet towards Germany the Allies had appeared to adopt this base and injurious practice, and had enforced on this people at the point of the bayonet the final humiliation of reciting, through the mouths of their representatives, what they believed to be untrue.

But in the Second Ultimatum of London the Allies were no longer in this fanatical mood, and no such requirement was intended. I hoped, therefore, at the time that Germany would accept the notification of the Allies and do her best to obey it, trusting that the whole world is not unreasonable and unjust, whatever the newspapers may say; that Time is a healer and an illuminator; and that we had still to wait a little before Europe and the United States could accomplish in wisdom and mercy the economic settlement of the war.

EXCURSUS I

COAL

The question of coal has always considerable importance for Reparation, both because it is a form in which Germany can make important payments, and also because of the reaction of coal deliveries on Germany's internal economy. Up to the middle of 1921 Germany's payments for Reparation were almost entirely in the form of coal. And coal was the main topic of the Spa Conference, where for the first time the Governments of the Allies and of Germany met face to face.

This is a convenient point at which to record the subsequent history of the coal deliveries. During the next six months Germany very nearly fulfilled the Spa Agreement, her deliveries towards the 2,000,000 tons per month being 2,055,227 tons in August, 2,008,470 tons in September, 2,288,049 tons in October, 1,912,696 tons in November, 1,791,828 tons in December, and 1,678,675 tons in January 1921. At the end of January 1921 the Spa Agreement lapsed, and since that time Germany has had to continue her coal deliveries without any payment or advance of cash in return for them. To make up for the accumulated deficit under the Spa Agreement, the Reparation Commission called for 2,200,000 tons per month in February and March, and continued to demand this figure in subsequent months. Like so much else, however, this demand was only on paper. Germany was not able to fulfil it, her actual deliveries during the next six months amounting to 1,885,051 tons in February 1921, 1,419,654 tons in March, 1,510,332 tons in April, 1,549,768 tons in May, 1,453,761 tons in June, and 1,399,132 tons in July. And the Reparation Commission, not really wanting the coal, tacitly acquiesced in these quantities. During the first half of 1921 there was, in fact, a remarkable reversal of the situation six months earlier. In spite of the British Coal Strike, France and Belgium, having replenished their stocks and suffering from a depression in the iron and steel trades, were in risk of being glutted with coal. If Germany had complied with the full demands of the Reparation Commission the recipients would not have known what to do with the deliveries. Even as it was, some of the coal received was sold to exporters, and the coal miners of France and Belgium were in danger of short employment.

The statistics of the aggregate German output of pit coal are now as follows, exclusive of Alsace-Lorraine, the Saar, and the Palatinate, in million tons:

The production of rough lignite rose from 87.1 million tons in 1913 to 93.8 in 1919, 111.6 in 1920, and 90.8 in the first three-quarters of 1921.

The German Government is in rather a dilemma in this matter. An increase in the coal tax is one of the most obvious sources for an increased revenue, and such a tax would be, from the standpoint of the exchequer, twice blessed, since it would increase correspondingly the Reparation credits. But on the other hand, such a proposal unites two groups against them, the industrialists, who want cheap coal for industry and the Socialists who want cheap coal for the domestic stove. From the revenue standpoint the tax would probably stand an increase from 20 per cent to 60 per cent; but from the political standpoint an increase from 20 per cent to 30 per cent is the highest contemplated at present, with a differential price in favor of domestic consumers.

The actual decision of the Allies, acting on the advice of the Council of the League of Nations to whom the matter had been referred, which we have discussed briefly above , divides the industrial triangle between the two claimants to it. According to an estimate of the Prussian Ministry of Trade 86 per cent of the total coal deposits of Upper Silesia fall to Poland, leaving 14 per cent to Germany. Germany retains a somewhat larger proportion of pits in actual operation, 64 per cent of the current production of coal falling to Poland and 36 per cent to Germany.

It is certainly the case that the future possibilities of lignite should not be overlooked. But there is a tendency at present, just as was the case with potash some little time ago, to exaggerate its importance greatly as a decisive factor in the wealth-producing capacity of Germany.

EXCURSUS II

THE LEGALITY OF OCCUPYING GERMANY EAST OF THE RHINE

The years 1920 and 1921 have been filled with excursions and with threats of excursions by the French Army into Germany east of the Rhine. In March 1920 France, without the approval of her Allies, occupied Frankfort and Darmstadt. In July 1920 a threat to invade Germany by the Allies as a whole was successful in enforcing the Spa Agreement. In March 1921 a similar threat was unsuccessful in securing assent to the Paris Decisions, and Duisberg, Ruhrort, and D?sseldorf were occupied accordingly. In spite of the objections of her Allies France continued this occupation when, by the acceptance of the second Ultimatum of London, the original occasion for it had disappeared, on the ground that so long as the Upper Silesian question was unsettled, it was in the opinion of Marshal Foch just as well to retain this hold. In April 1921 the French Government announced their intention of occupying the Ruhr, though they were prevented from carrying this out by the pressure of the other Allies. In May 1921 the Second Ultimatum of London was successfully enforced by a threat to occupy the Ruhr Valley. Thus, within the space of little more than a year the invasion of Germany, beyond the Rhine, was threatened five times and actually carried out twice.

We are supposed to be at peace with Germany, and the invasion of a country in time of peace is an irregular act, even when the invaded country is not in a position to resist. We are also bound by our adhesion to the League of Nations to avoid such action. It is, however, the contention of France, and apparently, from time to time, that of the British Government also, that these acts are in some way permissible under the Treaty of Versailles, whenever Germany is in technical default in regard to any part of the Treaty, that is to say, since some parts of the Treaty are incapable of literal fulfilment, at any time. In particular the French Government maintained in April 1921 that so long as Germany possessed any tangible assets capable of being handed over, she was in voluntary default in respect of Reparation, and that if she was in voluntary default any Ally was entitled to invade and pillage her territory without being guilty of an act of war. In the previous month the Allies as a whole had argued that default under Chapters of the Treaty, other than the Reparation Chapter, also justified invasion.

Though the respect shown for legality is now very small, the legal position under the Treaty deserves nevertheless an exact examination.

" In case of default by Germany in the performance of any obligation under this part of the present Treaty, the Commission will forthwith give notice of such default to each of the interested Powers, and will make such recommendations as to the action to be taken in consequence of such default as it may think necessary.

" The measures which the Allied and Associated Powers shall have the right to take in case of voluntary default by Germany, and which Germany agrees not to regard as acts of war, may include economic and financial prohibitions and reprisals, and in general such other measures as the respective Governments may determine to be necessary in the circumstances."

There is also a provision in Article 430 of the Treaty, by which any part of the occupied area which has been evacuated may be reoccupied if Germany fails to observe her obligations with regard to Reparation.

According to Article 17, in the event of a dispute between a member of the League and a State which is not a member of the League, the latter "shall be invited to accept the obligations of membership in the League for the purposes of such dispute, upon such conditions as the Council may deem just. If such invitation is accepted, the provisions of Articles 12 to 16 inclusive shall be applied, with such modifications as may be deemed necessary by the Council. Upon such invitation being given, the Council shall immediately institute an inquiry into the circumstances of the dispute, and recommend such action as may seem best and most effectual in the circumstances."

Articles 12 to 16 provide, amongst other things, for arbitration in any case of "disputes as to the interpretation of a Treaty; as to any question of international law; as to the existence of any fact which, if established, would constitute a breach of any international obligation; or as to the extent and nature of the reparation to be made for any such breach."

The Allies as signatories of the Treaty and of the Covenant are therefore absolutely precluded in the event of a breach or alleged breach by Germany of the Treaty, from proceeding except under the power given to the Reparation Commission as stated above, or under Article 17 of the Covenant. Any other act on their part is illegal.

In my opinion the protest addressed by the German Government to the Council of the League of Nations in March 1921 was correctly argued. But, as with the inclusion of pensions in the Reparation Bill, we reserve the whole stock of our indignation over illegality between nations for the occasions when it is the fault of others. I am told that to object to this is to overlook "the human element" and is therefore both wrong and foolish.

FOOTNOTES:

More exactly, out of 1,220,000 entitled to vote and 1,186,000 actual voters, 707,000 votes or seven-elevenths were cast for Germany, and 479,000 votes or four-elevenths for Poland. Out of 1522 communes, 844 showed a majority for Germany and 678 for Poland. The Polish voters were mainly rural, as is shown by the fact that in 36 towns Germany polled 267,000 votes against 70,000 for Poland, and in the country 440,000 votes against 409,000 for Poland.

Up to May 31, 1920, securities and other identifiable assets to the value of 8300 million francs and 500,000 tons of machinery and raw material had been restored to France , also 445,000 head of live stock.

Lord D'Abernon and Sir John Bradbury for Great Britain, Seydoux and Cheysson for France, d'Amelio and Giannini for Italy, Delacroix and Lepreux for Belgium, and, in accordance with custom, two Japanese. The German representatives included Bergmann, Havenstein, Cuno, Melchior, von Stauss, Bonn, and Schroeder.

The text of these Decisions is given in Appendix No. 2.

The full text is given in Appendix No. 4.

Compare this with the fixed payment of 0,000,000 and an export proportion of 26 per cent proposed in the second Ultimatum of London, only two months later.

A week or two later the German Government made a formal appeal to the League of Nations against the legality of this act; but I am not aware that the League took any action on it.

A few weeks later the Reparation Commission endeavored to put the action of the Supreme Council in order, by demanding one milliard marks in gold , that is to say, the greater part of the reserve of the Reichsbank against its note issue. This demand was afterwards dropped.

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