POWERS and duties of very wide extent are entrusted to the Reparation Commission by the Peace Treaty. Its function is to assure for the Entente for a generation or more the maximum indemnity which it will be possible to squeeze out of Germany. This at once brings us to the fundamental condition of the problem, which is that this situation creates a powerful community of interest between the Entente and Germany, even though that interest be one-sided. For it is at once evident - as the general memorandum accompanying the treaty states - that Germany's economic activity and capacity for production must not be strangled. Indeed, more than this, our economic vigor must be restored by supplying us with raw materials and provisions, something likewise provided for in the Peace Treaty. So far, to be sure, we have no indication of the source from whence these are to come and have witnessed no deliveries. We need such things urgently. I do not share the government's optimism as to their speedy arrival.

This community of interest, which resembles that existing between a creditor and an insolvent debtor to whom he has advanced money as receiver, therefore centres in the desire of this creditor to increase the debtor's ability to pay what he owes. All clearsighted men will recognize this as soon as the economic provisions of the treaty are removed from the field of theoretical discussion to that of practical application.

The former French Minister of Finance, Klotz, recently described the situation by saying: 'France has become Germany's banker, to whom it has advanced already twenty-five billion francs in the sums that it has spent for restoring its war-devastated territories.' The main thing now is to work out practical measures for dealing with this theoretical situation.

First of all, let us sketch briefly the essential conditions required in order that Germany may be able to comply with its obligations-obligations which no one who knows our people intimately doubts our desire honestly to fulfill. We may be perfectly aware that it never will be possible for us to fulfill many of these conditions, but that is something to be demonstrated after confidence between all parties has been reëstablished.

The first principal requisite is settled government in Germany itself. The only form of settled government possible as things are at present is a democratic republic. Consequently, the first task is to perfect and strengthen this form of political organization. It is the only kind of government which guarantees the degree of order and security necessary for a resumption of production. The Entente cannot hope to get a thing either from a Bolshevist Germany, or from a Germany torn by civil wars and seduced by chauvinist or imperialist visions. Consequently, the Allied governments must avoid doing anything that will imperil the existence of the

›resent government. The republic is till young and suffering from various nfantile diseases. It is threatened by ooth Conservatives and Radicals. It igorously repelled the attempted inurrection on January 13, but the ation is honeycombed with rebellion nd treason. Those terms are none too trong to apply to the irresponsible trike agitation. The Entente must hot deprive us of sufficient military Forces to protect our threatened public order, and it will have to postpone its emand that we disarm entirely.

Germany cannot fulfill its obligations except as a complete industrial state. It has already been deprived of Memel, Danzig, Alsace-Lorraine, West Prussia, Posen, and the Saar district. The fate of Eupen, Malmedy, Schleswig, and Upper Silesia is still to be decided. Already we know that - we have lost our merchant marine, our colonies, our warehouses and depots overseas, and our investments abroad. No one can tell to-day, even approximately, the extent to which our productive capacity has been diminished by these losses. We know that our credit balance has vanished with the destruction of all sources of income from other countries, and that we have been rendered far more dependent than hitherto upon foreign products —such, for instance, as potatoes from Posen and iron ore from Lorraine. Nothing threatens the success of the Entente in collecting compensation from us more than this very exchange situation. That renders us unable to *pay our enemies in the foreign currency agreed upon, and this in turn has depressed the exchange of those countries themselves. To see this, one need only compare the parallel curve of depreciation exhibited by the franc and the mark in neutral countries. For naturally, what Germany cannot pay France, that country, which is heavily

VOL. 18-NO. 910

obligated to other countries, must provide from its own pocket. So the community of interest caused by the common fall of exchange is very close, and is equally serious for all parties. This makes it all the more imperative for the Entente to renounce its efforts to divide our country, to parcel Germany out, to make the Rhine a frontier, and to administer the occupied territories as if they were conquered lands. But all the ordnances which the Supervisory Committee is enforcing in the Rhine provinces and the Palatinate are conceived in that unjust spirit. Those ordnances are crippling German production and paralyzing the spirit of industry in our country. The German people will never tolerate a 'cake and whip' policy. If such a policy is intended to weaken our country politically, it will prove unsuccessful in that respect; but it is very likely to reduce our productive capacity and our financial strength.

Those districts have become the centre of a demoralizing, illicit traffic, а sort of international smuggling headquarters. We now know it as "The Hole of the West,' that breach in our frontiers through which the economic resources of Germany are trickling away, where every opportunity is afforded for absconding with such property as can be realized upon, and thus withdrawing it from the tax jurisdiction of the German Government. It is through this unprotected frontier that German goods are getting out, and that luxuries and trash are being imported which increase our debts to other countries and accelerate the decline in our exchange. If we are prevented from collecting duties in gold upon all our imports, raising our taxes, controlling the trade passing our own borders, and are unable to stop this smuggling this smuggling - which profits nobody but a few gamblers we cannot re

store our credit balance or put our national finances on a solid basis. Until we can do these things, our exchange will continue as bad as it is now. If it does continue on its present impossible basis, the Entente will never be able to collect compensation from our country.

Mr. Hoover's statement has eliminated the hope that either we or the Entente may get credit from the United States to restore our exchange. The only way that is left is to reestablish a favorable balance in our foreign trade. This is impossible unless we can sell our goods at just prices. Such prices are imperative in case of the things we are required to deliver our opponents in kind—coal, raw materials, and ships. These are now credited to the compensation we must pay, but not at market prices. Such goods should be credited to us at their true market quotations.

This is more than a simple demand of justice. To credit these deliveries in marks without allowing for the difference in exchange robs Germany of the very conditions of existence. Remember, we must pay for these goods in Germany in order to get them to deliver to the Allies. In order to do this, we are constantly increasing our public debt. If, for instance, we do not get true market prices for our coal, we shall soon be rendered incapable of delivering that coal. In all candor, the requirement that we deliver up to 42,500,000 tons of coal a year is probably the worst economic blunder, strictly from the Entente point of view, which the Allies could have committed. It is calculated to paralyze the industrial recovery of Germany and absolutely to prevent our producing goods for export. It is preventing our railways from resuming normal operation. It is stopping the construction of buildings and machinery.

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We must, therefore, strive to open the eyes of our opponents to the fact that our mutual interest demands that we deliver manufactured goods instead of raw materials to our neighbors. Quite apart from the fact that just now We France is not able to transport the re coal which we deliver to her, is the We additional fact that we cannot provide mer the amount which we have agreed. the No matter how much we may desire it, ay it is simply an impossibility. The si Commission, which has every facility for ascertaining the facts, must speedily the come to this conclusion of its own accord. If we are to resume production, we have got to have coal and raw materials. Unless we do resume pro-ru duction, we cannot possibly pay the Entente what we have agreed to pay.

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But there is one thing which is even more important than raw materials in restoring our national solvencythat is a spirit of willing industry among our own people. You cannot have this spirit until you offer them the hope of some reward for their labor, unless you open to them the prospect of eventually liberating themselves from the crushing load which now oppresses them. Therefore, the amount of compensation or indemnity we are to pay should be fixed as soon as possible. This amount must be within the bounds of reason. I still believe that our offer at Versailles to pay the Entente 100,000,000,000 marks in gold, under the conditions annexed to the proposal at that time, would have afforded a very desirable settlement from the point of view of the Allies. At that time, German ex- de change was much higher than now. To-day it would be impossible to make Th such a tender with the honest expectation of carrying out what we promised. E The 100,000,000,000 gold marks which ha we then promised as an annual maximum would mean to-day more than 12,

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00,000,000 in paper. We could not raise hat amount. It would be impossible. Jur people, in a word, must see some prospect of eventual liberation. If hat is denied them they will not work. We shall merely have universal deression, stagnation, and collapse. We should also have a frank statenent that we shall be provided with he things we must have in order to pay our debt. This may not be given is from sympathy, which we can hardly expect, but from self-interest. Up to che present we have had no explicit statement to encourage us. Instead of hat we have so far got nothing but ebuffs and insults in the form of prutal notes and arbitrary attacks. To regard peace as merely a subsequent phase of the war is false in principle, and it does not profit the Entente to adopt such a policy.

But mere willingness to work and means to work with do not constitute production. We must have a third thing

credit. We can never receive credit if the Entente imposes upon us annual payments which render us

nationally insolvent and prevent our ever balancing our budget. We must bear in mind that the principal purpose in view in restoring our public finances to a sound basis is to stop the present ruinous inflation. We have now at least 100,000,000,000 marks of paper in circulation. What is there behind it? Nothing but our national credit. Deprive the government of its ability to pay the annual interest and its debts, and you deprive our money of its value. You bring to the ground with a crash every one of our credit institutions, and the result will be to paralyze production. paralyze production. Our imperial budget contains two principal items interest upon bonds and allowances to war invalids. Both of these must be provided for, otherwise we cannot continue going. We shall have no source of credit and we shall have no peace in our own country. The Reparation Commission must inspire us with confidence in its wisdom and reasonableness. It will be easier and more profitable for it to operate with the good will of the Germans than by measures of compulsion.

I KNOW good Frenchmen who are in despair at the difficulties which face us, and have lost faith in our alliances. They say: 'See our position; for months we have been wrangling with England in Asia Minor. Mr. Wilson has so completely forgotten us that he only recalls us now in a cloudy dream, where he confuses us with Germany

to the point of accusing us of Imperialism. Italy, to win whose favor

we have alienated the President of the

United States, now appeals to the Supreme Economic Council to fix our war indemnity at a very moderate sum. Whatever way we face, we encounter only indifferent glances or eyes that avoid our own. What else

could we expect? As soon as peace was signed, the Allied Nations betook themselves home crowned with laurels and eager to reap all the fruits of victory. France, whose sacrifices surpassed those of other nations, stood face to face with ten ruined departments and fourteen hundred thousand graves. It tried to sound the abyss between its national income and expenditures without striking bottom. Crushed by its debts, bereft of its workers, stripped of raw materials, fuel, and food, it has gradually lost, in the eyes of its friends, the halo of glory which formerly inspired their admiration, and has fallen in their opinion to the rank of a poor relation whose indiscretions and importunities they resent.'

Let us suggest to those who hold these gloomy views that even in the stress of war our alliances resisted strains which were at times more dangerous than those they now experience. That happened when the British Government hesitated to undertake and later wished to abandon

the Saloniki expedition, which enabled us in 1918 to open the first breach in our enemy's defense. It also occurred when England, France, and Russia, early in 1915, tried to reconcile the conflicting claims of the Italians and the Slavs in the Adriatic; and again when the Entente tried to agree upon a common plan of action in Greece, Roumania, and Asia Minor. In addition, there were so many other diplomatic, military, economic, and financial complications, that it seemed at last as though the alliance had become a natural condition bound to continue by its own motion regardless of the temporary friction and discord of the governments which composed it. I recall the apt remark of one of our premiers: 'Since this war I have lost much of my admiration for Napoleon.

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He was fighting a coalition and now I si know what an ineffective thing a coal the tion is.' Shall we ever forget those de hours of torture and agony when in the very midst of decisive battles national self-interest awoke among the Allied Nations and brutally opposed meas ures for their common interest. One A of Clemenceau's titles to the imperish Le able gratitude of France is that from to the end of 1917 up to the armistice, fa he not only reinspired our country, fr cast down by the spectre of defeat and weakened by treason at home, but of guarded with the most jealous solici tude the integrity of our alliances.

This latter care remained his chief preoccupation throughout the nego tiations for peace. The vivid sketch that Mr. Keynes has drawn of these proceedings, in one of the most striking chapters of his famous book, seems to me unjust in some respects to our great Premier. It is not true that M. Clemenceau displayed no interest in matters that did not directly concem ourselves. I have seen personally, a hundred times, his constant vigilance for the common fortunes of the Entente.

I can understand very well that in the presence of the infinitely complex problems presented by the peace, the chiefs of the negotiating nations were tempted to try short cuts for the purpose of simplifying and accelerating their labors. But without taking the time to inquire just now whether they may not have gone astray in thes attempts, I merely venture to suggest that it may be well again to verify our bearings. Are we to expect the Supreme Council, which will hold its sessions in England, to furnish a sure and certain support for the Entente? Every day some new incident warns us of the falsity of that assumption Whether they meet at London or Paris our premiers at their hasty ses