Sir George Paish has done invaluable work in putting the financial facts with a precision but also with a picturesque force that makes us sit up and take lively notice. There is Mr. J. M. Keynes, C.B., whom I remember at Paris, and whose book The Economic Consequences of the Peace develops, with the mastery of an expert and the authority of a man who was behind the scenes, a particular theme which others (myself, for example) were only able to treat broadly and to an incredulous public in our histories of the Peace Conference. M. Clemenceau's visit to London, whether it failed or not, is at least a healthy sign that the statesmen are beginning dimly to discern the importance of solidarity. Solidarity or ruin! They are, however, far from understanding the plain truth, and I wonder whether even now it is worth while writing this brutal verity.

The brutal verity is simply this: that Europe as a whole can never pay its debts and we had better recognize it as quickly as possible instead of floundering in a sea of debts. Call it bankruptcy if you please: call it a financial readjustment: what's in a name? At any rate it involves the cancellation of debts. Sooner or later, in some form or other, we must come to that point, and a voluntary liquidation, or rather an amicable arrangement, is better than the shock and dislocation that will inevitably result if we do not agree with each other as nations and with each other as citizens.

I am afraid it will be some time a dangerously long time before we begin to see clearly how our fate is bound up with our neighbor'sespecially our financial fate. Suppose for a moment that France and Ger

deeper and deeper until they sink completely in the mire: do you suppose that England could complacently shake her insular head and cry with smiling scorn, 'Oh! these Continental neighbors!' Be sure of this: that what happens to them will happen in some Mutual confidence,

measure to us.

credit, a stable exchange, a sufficiency of capital, and an incentive to work are the vital conditions of commerce; and no nation can live unto itself.

I write with a multitude of figures which I have obtained from official sources spread out before me, but I do not think that to quote figures is the best way of bringing home the truth. We have grown accustomed to naughts. They convey nothing to us. There is a limit to the human imagination; if we have not the mathematical mind we are no more impressed by nine or twelve naughts than by six; if we have the mathematical mind we regard the figures as figures with which certain juggling feats can be performed on paper, and not as representing realities. They are symbols which are accepted for themselves and not for what they stand for. Beyond a milliard, says somebody, one ceases to calculate. It is just as useful to do as is done in astronomy, and when figures become so impossibly large to use conventional signs instead. If we talk of £20,000,000,000, or if we talk of X.Y.Z. the impression produced is much the

same.

That is one effect of the war. It has, whether for the common man or for the super-statesman, destroyed all ideas of monetary values. To play with milliards is to lose all practical sense of money. When it was blandly admitted at Westminster some time ago that a deficit of £250,000,000 was expected in the budget, did anyone take alarm? No, what is £250,000,000?

What would be £2,500,000,000? They never translate themselves into living things. If somebody wrote on the wall, 'Mane, Thecel, Pharès,' the phrase would be meaningless for a stolid British audience. So when later on it was announced that the deficit would be in reality £470,000,000 it did not seem a bit more dreadful.

Here is, however, the crux of the matter. If we cannot meet our current expenses, where are we? How long can we go on? There is only one end for those who, in the capital French phrase, cannot 'buckle their budget.' Finances cannot get themselves understood; but economics have an eloquence of their own. The finances of Austria do not concern the ordinary people of Austria, but the economic situation which results concerns them. They know that they are without work, they can appreciate, the fact that they are without food! And all their neighbors to the East, including Roumania and Hungary, if they have no head for figures have a stomach for food.

Here is a fact that may strike the most careless as revealing the dependence of Europe on America. (America forgets for the moment that she is in her turn dependent on Europe, but the truth will dawn upon her.) I found some of my Polish friends one day in a terrible state of indignation. 'America has grossly insulted us,' they told me. 'How?' I asked. And then they explained that an offer has just been made by which Poland should enjoy American credits at the price of American control. American experts here, American experts there, American experts everywhere, would show Poland how to manage; and would, of course, assure the repayment of American credits with Polish money. Just as if Poland were a dependency in Darkest Africa! If America will not

take an official mandate for Constantinople or for Armenia, she is busy seeking mandates in Western Europe. Political entanglements in the Near East are rejected; financial entanglements, which after all are much more likely to cause bitterness and to give America precisely the sort of interests which lead, in a world without a League of Nations, to war, are being woven by bankers. In return for help, America will govern Europe from the counting houses of New York.

A day or two after this incident a highly significant report of Mr. Frank Vanderlip, one of the greatest American financiers, made me open my eyes still wider. He actually proposed similar conditions to France. He believes in the imminent bankruptcy of Europe without American direction. I do not say he is wrong; but what I do say is that France, like Poland, is proud and will prefer to come very near to perishing rather than accept the terms proposed with such shocking frankness by the head of the First National City Bank.

There are two points which he makes which demonstrate his definite distrust not only of France but of Europe as a whole. First, if there is to be an American loan not a penny piece shall be given to any government. Governments are too incompetent, too corrupt, to be allowed to handle American dollars. Second, America must have her hand in the till. She must preside over the exchequer. It is obvious, of course, that whoever dictates the financial policy of a country is the real ruler of that country. America will be the Official Receiver. She must have a mortgage, a first claim upon the income of the borrowing country.

Perhaps it would be too much to expect more; the situation in which Europe finds herself after five years

on

of reckless spending and non-production and destruction, and perhaps, above all, the obliteration of the customary economic frontiers and the persistent territorial uncertainties, have jeopardized all; and how to restart life again with a mountainous accumulation of debts upon every back is a vast problem of doubtful solution. There was even a proposal in this search for securities to have a lien the famous pictures and art art treasures of Franceand other countries. That such precautions are being taken is deeply significant. They indicate an opinion which, however ungenerous, has to be reckoned with. No loans for countries which have not a sound system of taxation, or whose custom duties are not sufficiently productive! The consortium of lenders, after determining at the Hague the needs of each applicant country, to give, in return for the bond, not in cash but in kind! The only European Finance Minister on the Continent who is regarded favorably by Mr. Vanderlip is M. Delacroix, of Belgium; and it is, indeed, true that Belgium has made admirable progress and impresses all observers as one of the few European countries making enlightened efforts to escape the financial morass.

On France his judgment is rather harsh, but I cannot, as a man who constantly keeps his finger on the pulse of Paris, deny that he shows a good deal of discernment. I have faith in the courage and the laboriousness of France if she will only realize what must be done; but not only has the position been hidden from the people by the politicians; the politicians themselves do not grasp the truth. 'France is the least disposed of all nations to look the facts in the face,' he says. Now at last there is some appreciation of the reality. Do not let us exaggerate: everywhere I see it stated

that the budget for next year must be something like £2,000,000,000, because it is over a quarter of that amount for the next three months. That conclusion does not necessarily follow. What must be noted is that even at the pre-war rate of exchange the total income of France was barely equal to half such a budget. How could it then be met?

There are, however, exceptional charges such as credits for the devastated areas; and the military expenditure should come down with a run. Still, there is the big loan, which will add hundreds of millions sterling in annual charges to the budget; and even without providing for the redemption of the debt the limits of taxability of the French people must be reached. The pre-war budget of £168,000,000 will be absorbed at least three times over merely in the payment of interest! There are various calculations as to the amount of taxation per head which must be imposed, ranging from 1000 francs to 2000 francs. The lower amount is nearer the truth, but it is surely startling enough. I calculate that for the last year, in round figures, France has imported £1,000,000,000 in goods and exported £200,000,000. No wonder the exchange is against her, and renders necessary purchases more and more difficult! Her holdings abroad are now greatly diminished and it would be sound business to wipe off the slate, as utterly lost, much of the foreign loan, whether in Russia (£500,000,000) or in the Balkans. The first problem is precisely the 'buckling of the budget'— the making ends meet; and the bulging interest on loans is very difficult, indeed to wrap up in the budget.

In Germany, it is not necessary to examine the books. Two or three financial facts will suffice. The debt has multiplied forty-fold. Every week

figure than her imports (a task she could not accomplish before the war), we should refuse to allow her thus to collar the trade of the world? No, the less we expect from that quarter the wiser we shall be. We shall have to rush to the rescue to save her from bankruptcy, which means that she too will become a pauper and will go on the Poor Law of Europe. We should all follow very quickly. There was one logical and heartless method of making Germany pay-it was to strip her naked without pity, to leave her barer than a country over which locusts have passed, and then to have allowed her, without means of existence, to die in millions miserably.

To make life tolerable for any of us we all have need of each of us. There are things that this country can supply and things that the other country can make. But it would be too elementary for me to begin to point out that trade between the nations is a vital necessity. And it would be comically pedagogic for me to attempt to instruct anybody that trade is impossible without some sort of equality of exchange. Nor would I be forgiven (I hope) if I spent any time in demonstrating that to avoid general ruin we have to pool our resources, we have to hit upon a plan that will, when properly understood, commend itself to all the world, the rich as well as the poor countries. Even sensible private creditors do not willingly let die their bankrupt customers, and those who are in difficulties would surely agree to sink or swim together. (If they don't swim together they will certainly sink together.)

Here is the opportunity for the much-despised Financial League of Nations, which idealists and realists alike turned down in Paris, preferring to discuss who should have the enemy cables and the enemy colonies, and who should say the finest thing about

humanity's upward march. After all, in this imperfect world, existence is largely a question of cash-or of credit. There are other economic difficulties, of course; but money has certainly to be found. Without the speedy financial coöperation of all nations, strong and weak, rich and poor, the far-seeing Bolsheviki who prophesied chaos and bankruptcy and the end of the capitalist system in Europe by the springtime, will be able to boast that they told us so.

[Neue Freie Presse (Liberal National
Daily), January 21]

THE BOLSHEVIST ADVANCE ON

POLAND

WARSAW, January.

DENIKIN'S army has been crushed, just as the Poles have long foreseen. That general, following the path of Judenich and Kolchak, has disappeared from the calculations of the Entente. Some fragments of his devoted army may be collecting beyond the Don; but he has ceased to be a danger for the Red forces. Poland does not attach extreme importance to this defeat, because as I have just said it never had faith in the Denikin adventure. But the fact that Denikin's retreat has left unoccupied territories between the Polish east front and Bolshevist west front naturally produces alarm in official circles. The only thing to be done is to advance rapidly eastward in order to anticipate the overrunning of the Polish front by the Red armies, and to prevent such devastation and atrocities as occurred immediately after the armistice in 1918, throughout Podolia, Volhynia, and Eastern Galicia, when lawless bands of peasants spread anarchy and arson all through these regions. Such an advance, however, will inevitably result sooner or later in a