The Intelligent Mans Review Of Europe To Day

THE

INTELLIGENT MAN'S REVIEW
OF EUROPE TO-DAY

DR. B.R AMBEDKAR OPEN UNIVERSITY

UNIVERSITY - LIBRARY

N15B99

PREFACE

JLo SURVEY the affairs of contemporary Europe is
bound to be a troublesome matter ; for in the world to-day
the pace of change is disconcertingly rapid for the author,
who must suffer an interval between the writing of his book,
or even the passing of the final proofs, and the circulation
of it to the public. He cannot avoid the danger that some of
his facts may be facts no longer by the time his book appears,
and, worse still, that some of his ventures into prophecy —
for he cannot wholly avoid prophesying — may have been
falsified already by the course of events. There are some who
feel, on these grounds, that contemporary " history " should
not be written, or should be left to the newspapers. But we
believe that intelligent people do want a convenient sum-
mary of contemporary happenings and forces ; and that,
risky as the attempt to sum them up may be, the risk is well
worth taking in the interest of a wider diffusion of inter-
national understanding.

In one sense, our task of revision has been simpler than
it might have been, though, in this matter, we are sorry for
it ; for our good fortune is not the world's. This book had to
be written in the months immediately before the meeting of
the World Economic Conference. Until the Conference met,
some people hoped that it would lay the foundations fat^»
new period of world prosperity and a new system of inter-
national collaboration in the economic field. If this had in
fact happened, we might have had to face the need for a
hurried last-minute revision of the economic section of this
book. But as things have turned out, the proceedings of the
Conference have hardly caused us to alter a single phrase,
and have certainly called for no revision of our general con-
clusions about the world economic situation. For the Con-
ference has served, not to persuade the nations to act to-
gether, but rather to illustrate the Tutility of such great
gatherings except when they come together for a clearly
defined purpose, and on a basis of skilled and careful
preparation. It has, moreover, brought plainly to the sur-
face the depth and difficulty of the economic, as well as the

6 PREFACE

political, antagonisms which hold the great countries apart.
Economic Nationalism remains as strong as ever, or
stronger, for it has been reinforced by recent developments
in the United States, where President Roosevelt has been
driven by the refusal of other countries to co-operate with
him in an international policy of reflation to base his
hopes of recovery purely on the domestic market. More-
over, current events in Europe make remoter than ever
the prospect of overcoming it by an appeal to the spirit of
international common sense.

Especially, the World Economic Conference has shown
that fear, rather than hope, is still the dominant feeling
among politicians in economic as well as in political affairs.
The fear of inflation among the countries still on the gold
standard, the fear of expenditure, even on the most useful
productive objects, among the devotees of balanced budgets,
the fear of imports among every sect of Protectionists and
Economic Nationalists, the fear of higher costs among em-
ployers, the fear of too much production among the advocates
of restrictive schemes — these and other fears have been the
burden of one Conference oration after another. The conse-
quence is that nothing can be done — at the Conference ;
and the statesmen go home to do, in their own countries, yet
* .xiore of the things they were called together to prevent.

In one country only — the United States — are active meas-
ures being taken in the hope of ending the depression ; and
the affairs of that country fall, except incidentally, outside
the scope of this book. What has become clear is that Presi-
dent Roosevelt, whether his experiment in controlled Capi-
talism be destined to succeed or fail, is likely to be left to try
it out alone, with no help from Europe. The gold-standard
countries obstruct him, though they will be ready enough to
take the profit of his success, if he does succeed ; and Great
Britain, poised between Europe and America, will sit on the
fence till it breaks under her weight, on the one hand declar-
ing her desire to raise world prices, and on the other pro-
claiming a policy of" national economy " which thrusts off
upon others the entire burden of any action likely tc* bring

PREFACE 7

the desired result about. As we write, there is, largely owing
to events in America, some real improvement in commodity
prices and even in employment ; but this is precarious and
speculative, for it is based rather on the anticipation of what
America is going to do than on any real change in economic
conditions apart from the American reflation. But there is at
any rate this of hope about the American situation. Mr.
Roosevelt is seriously trying to raise wages, and does seem
to realise that, without this, mere reflation of credit is cer-
tain to lead on, by way of speculation, to a fresh collapse.

Indeed, if Europe be considered apart, the outlook has
grown much more threatening since we began to write this
book ; for the Nazi coup came while we were in the middle
of it, bringing a renewed threat of European war, intense
though not perhaps immediate, and throwing into sharper
relief the manifest failure of the Disarmament Conference.
As we write this preface, the much amended Four-Power
Pact — to be known henceforward as the Pact of Rome —
has just been signed after negotiations which have pro-
foundly altered its significance since the original draft was
put forward by Signor Mussolini ; for it is no longer pri-
marily an instrument for the revision of the Treaties of
Peace, but rather, for the moment at least, of Franco-
Italian rapprochement. The new Pact may even be m,!i
to lessen the war-danger, less because it indicates any
change in the temper of Nazi Germany than because there
does seem to be a slackening of the tension between
Italy and France. Moreover, the Pacts of Non-Aggression
recently made between the U.S.S.R. and most of her neigh-
bours considerably diminish the danger of war in Eastern
Europe. But the Nazi struggle for Austria goes on ; and the
fears of Poland and the Little Entente have by no means
been stilled by the reassurances that the Pact excludes
Treaty revision save on a basis of Agreement, and under
the conditions laid down in the League Covenant.

For Nazism, denying every standard of civilised conduct
and government, is still running its revolutionary course in
Germany, persecuting Communists, Socialists, Jews, and

8 PREFACE

even Catholics, and breathing the sound and fury of im-
pending war. Nazism may indeed settle down as a force in
the affairs of Europe, as Italian Fascism seems to have
done ; but it will be far harder to quieten a Germany smart-
ing under defeat and full of irredentist aspirations than
an Italy merely disappointed of overweening Imperialist
ambitions. Moreover, while Nazism has smashed German
Social Democracy past repair, and dealt a heavy blow at
European Socialism as a whole, who knows what forces of
revenge and revolution are preparing within the new
Germany of to-day ?

Before this book appears, much more may have hap-
pened. The Nazi Revolution, President Roosevelt's con-
trolled Capitalism — these will both have moved on to new
stages. Dr. Dollfuss may be still in power in Austria — who
shall say ? Japan may have coveted a fresh slice of Chinese
or Russian territory- ; and we may be able to see better how
the great Russian experiment is faring in its present difficult
phase. These things we must leave, only hoping that we
have given our readers, within the scope of our book,
reasonable means of estimating the significance of new
developments as they arise, and that in doing this, if we have
not concealed, we have not unduly obtruded our own opin-
ir^ns, or allowed them to distort our picture of the facts.

For the use of most of the maps in this book — some of
them amended to suit our purpose — we have to thank Mr.
J. F. Horrabin ; for, with his maps to be had, who would
wish to use others ? Certain of his maps have appeared in
Mr. H. G. Wells's Outline of History ; and we have to thank
Messrs. Cassell for the use of the plates. Others are from Mr.
Horrabin's excellent Plebs Outlines, or from his Plebs Adas,
and here again our thanks are due to the publishers.
Finally, in a book of this sort, errors are inevitable. We hope
they are not too many ; but we apologise for them, and
shall be glad to be told where they occur.

G. D. H. C.

HAMPSTEAD, M. I. C.

July 1933. »

CONTENTS

Foreword page 13

Part I. HISTORICAL OUTLINE

§i What is Europe ? 17

2 Europe in the Time of Charlemagne 25

3 Medieval Europe 35

4 From the Fifteenth to the Eighteenth Century 54

5 The French Revolution and After 77

6 The Age of Imperialism 108

7 The European War 121

8 The Post- War Map of Europe 124

Part II. THE COUNTRIES OF EUROPE

§i Populations and Occupations 135

2 Eastern Europe 143

3 Finland, Estonia, Latvia, Lithuania 152

4 Poland i&jj,

5 Roumania 179

6 The Balkans 186

7 Hungary, Austria, Switzerland 208

8 Czechoslovakia 224

9 Germany 233
10 Scandinavia 280
n Belgium and Holland 291

12 France 299

13 Spain and Portugal 315

14 Italy 336

15 Great Britain 344
i£ The U.S.S.R. 369

IO CONTENTS

Part III. ECONOMIC CONDITIONS IN EUROPE

§i The Economic Situation after the War page 395

2 The World Slump 421

3 The Situation of European Agriculture 437

4 The Debtor Countries of Europe 456

5 The European Monetary Problem 467

6 Proposals for Raising the Price-Level 476

7 Proposals for Restoring the Gold Standard 488

8 The Slump in European Industry 498

9 The Great Industrial Countries 519
i o The Strangling of European Trade 536
1 1 Wages in Europe 55 1

Part IV. EUROPEAN POLITICAL SYSTEMS

§i The New Constitutions of Post- War Europe 565

2 Politics in Great Britain 585

3 Politics in France 602

4 Fascism in Italy 610

5 Fascism in Germany 638

6 The Challenge of Communism 652

7 European Socialism 675

Part V. EUROPEAN INTERNATIONAL RELA-
TIONS

§i Disarmament and Security 698

2 The League of Nations 749

3 The International Labour Organisation 790

Part VI. THE EUROPEAN OUTLOOK 807

Bibliography 835

Index 843

LIST OF TABLES, CHARTS, AND DIAGRAMS

Part I.

Monarchies and Republics in Europe page 129

Part II.

Populations of Europe in 1930 137

Occupations of the Peoples of Europe 142

Part III.

The Effect of the War on European and World
Production 401

General Indices of Primary Production, 1925-

1931 * 403
The Rise and Fall of European Industrial Produc-
tion, 1924-1932 406-7
The Fall of Agricultural Prices, 1924-1932 411
The Fall of Industrial Prices in Great Britain,

1924-1932 4H

Comparative Declines in Prices of Various Kinds
of Goods, 1929-1932 415

Estimated World Stocks of Certain Commodities,

1932 417
The Percentage Fall of Import and Export Values, ,
1928-1932 429
The Fall of Wholesale Prices, 1930-1933 431
European Prices, Currencies, etc., 1929-1933 433
European Production and Trade in Wheat 439
Price of Wheat in Various Countries 441
The World's Wheat-Producing Countries (Produc-
tion in 1929) 441
Shares of Various Countries in World Export
Trade in Wheat 441
European and World Production and Trade in
Certain Agricultural Products in 1930 447
Europe's Trade in Butter, Cheese, Eggs, Fruits,
Wine and Olive Oil, 1931 450-1
Europe's Trade in Meat, 1931 452-3

12 LIST OF TABLES, CHARTS AND DIAGRAMS

The Debtor Countries of Southern and Eastern
Europe pagt 459

Germany's Imports and Exports, 1924-1932 463

Growth of German Foreign Debts, 1924-1932 463
Currency Stabilisation after the War 471

Unemployment during the Depression 509

European Industrial Production, 1929 and 1932 511
Trade during the Depression 517

The Competition for Exports 523

Approximate Movement of Money and Real
Wages before and after the Depression 553

Earnings and Costs in the European Coal Industry 555

Part IV.

Governments and Parties in Europe 566-7

Part V.

Wfhat the Great Powers Spend on Armaments 699
Armament Expenditure as a Percentage of the

National Budget 699

Armament Expenditure per head of Population 699

Armies at Peace Strength 706

European Armies in 1 93 1 707

Fleets of the Powers, 1932 709

'Air Fleets of Europe, 1 932 7 1 1

LIST OF MAPS

Europe To-day at end of book

Part L

Europe in the Time of Charles V page 53

The Empire of Napoleon about 1810 83

Europe after the Congress of Vienna 91

Part II.

The Russian Frontier 146

The Polish Corridor 173

The Balkans 187

The Break-up of Austria-Hungary 209

Germany after the Peace Treaty of 1919 235

FOREWORD

THIS BOOK is being written at a time when the
economic life of every country in the world has been dislo-
cated by a trade slump of unprecedented severity, and
everywhere men in their deep distress are questioning the
very foundations of the economic and political systems
under which they live. By common consent, while other
continents are suffering as greatly as Europe from the
world-wide depression, it is in Europe that the troubles
go deepest, and the accustomed course of everyday life is
being most profoundly disturbed. Europe was the storm-
centre of the Great War : Europe has been the scene of the
most shattering and challenging Revolutions of the twen-
tieth century ; Europe is still the continent in which the
threat of renewed wars is chiefly centred, as well as the
place where new experiments in government and industry
are being carried out. Moreover, Europe, despite the con-
tinued dominance and even the marked recrudescence of
nationalist ideas, is also the area where slowly the new
ideas of peaceful and constructive internationalism are
taking root.

Internationalism, however, as the tragic history of the
League of Nations has already shown, cannot strike roots
save in a soil prepared for it by the growth of international
knowledge and understanding. The past few years have
given a sufficient demonstration of the helplessness of mere
Utopian internationalism in face of the slump. For nation
after nation, as the crisis has swept over its borders, has
sought to protect itself by purely national measures of
security, regardless of the fact that these measures for the
most part only make worse the world situation as a whole,
and react disastrously upon those who adopt them. Mount-
ing tariffs, drastic restrictions on foreign trade and on the
making of payments across national frontiers, can at the

14 FOREWORD

best only snatch for one country a partial and relative
advantage at the expense of the rest, and at the cost of in-
flicting still worse poverty on the world as a whole. Nor are
the political repercussions less disastrous ; for nations which
live in perpetual economic fear one of another are in-
capable of political collaboration, or of a belief in one
another's good faith. Rising armaments and repressive dic-
tatorships follow mounting tariffs ; and to the many futili-
ties of the League is added the crowning futility of the
Disarmament Conference.

Meanwhile, unemployment stalks across the world
unchecked. The agriculturist, unable to sell his product,
eats it, and relapses to the primitive for lack of the power
to buy industrial goods. The industrial nations, unable to
sell their wares, pass from economic into financial crisis, and
resort to desperate measures of " economy " in order to
make their budgets balance. Prices fall, and the burden of
international and internal debts, public and private, be-
comes unbearable in consequence of the changed value of
money. There is perpetual wrangling over these debts,
from reparations and war debts to ordinary commercial
obligations and farm mortgages ; and this wrangling
further embitters international relations. In the scramble
to sell, standards of living are forced down ; and a world
infinitely better equipped than ever before to supply the
means of living to all its inhabitants acquiesces helplessly
in a continuance of grinding poverty and unnecessary
distress.

Under these economic strains and stresses, systems of
political government give way. The established methods of
parliamentary government are more and more discredited
and undermined. Men fly from the older political parties —
from orthodox Socialism as well as from Liberalism and
traditional Conservatism — to one extreme or the other.
On the one side Communism, master of the vast Russian
experiment, stretches out its hands to Asia and to Western
Europe ; and on the other, Fascism, taking in each country
a distinctive shape of its own, seeks to rally the nationalist

FOREWORD 15

instincts of the peoples behind a programme which discards
all true internationalism as fruitless.

Such is the Europe which this book sets out to study, in
the hope that better knowledge of the facts and tendencies of
to-day — of the much that is evil and of the something here
or there that gives solid ground for hope in the future — may
help to create in men's minds that international under-
standing without which there is plainly no issue out of our
present troubles and perplexities. For this at least can be
said with confidence where so much is doubtful — that the
disease from which the world is suffering is a disease not of
each separate country but of the whole world, and de-
mands a cure that can be applied only by courageous
action on a world-wide scale. To so much of bias in their
presentation the authors of this book readily plead guilty ;
but they have tried to present the facts and tendencies as
objectively as they have been able, not disguising their own
views, but seeking to give full weight to what makes against
them, as well as to what tells in their favour. They do not
hope to please everybody ; but at least they hope that the
honesty of their purpose and, presentation will be unassailed.

PART I: HISTORICAL OUTLINE

1. What is Europe?

2. Europe in the Time of Charlemagne

3. Medieval Europe

4. From the Fifteenth to the Eighteenth

Century

5. The French Revolution and After

6. The Age of Imperialism

7. The European War

8. The Post- War Map of Europe

§ i. WHAT IS EUROPE?

\V H A T i s Europe ? The Encyclopedia Britannica says that
it is " the smallest of those principal divisions of the land-
surface of the globe which are usually distinguished by the
conventional name of continents " ; and that definition
may serve as a start. But it is important to realise that
" Europe," in the sense of a civilisation-group, has not
always borne quite the same meaning at different periods.
In some ages the northern parts of what we now call
Europe were practically not part of it ; at other times por-
tions of Northern Africa and of Northern or Southern Asia
(or both) were included in the ambit of European civilisa-
tion. Even now, when Europe is commonly accepted as
being bounded by the Urals, the Caucasus, the Black Sea,
and the Mediterranean, we find that political reasons make
it necessary for parts of Northern* Asia to be brought
within the scope of this book.

Europe, also, has had a long history. In point of civilisa-
tion, it is not the oldest of the continents ; there were
civilised states in Asia when the inhabitants of Europe were

l8 HISTORICAL OUTLINE

still primitive. But, though European civilisation has not
had the longest, it has had the most variegated history. The
history of European civilisation is one of continual change
and development — sometimes in a progressive, sometimes
in a retrogressive sense — and the political map of Europe
to-day is the product of a great number of historical factors.
Europe has grown rather than been planned ; and when, at
one time and another, efforts have been made to re-plan
Europe by important treaties, such as the Treaty of Paris in
1816 or the Treaty of Versailles in 1919, the results have
often been more unfortunate and less stable than those of
natural growth.

If, then, we take Europe as defined in our first para-
graph, and look at it as a whole, what do we find ? Physic-
ally, Europe is divided into two main contrasting portions —
the great plain to the north, and the mountain masses to
the south. Reading the map from west to east, we find the
great plain beginning as a narrowish strip in Northern
France, continuing, still narrow, through Holland and
North Belgium into Northern Germany, where it begins
gradually to widen out. East of the Bavarian and Austrian
highlands this widening becomes much greater, taking in
the whole of Poland and spreading northwards up the
Gulf of Riga, until we reach the great plain of European
Russia which stretches from the Arctic Ocean to the shores
of the Black Sea and merges almost imperceptibly, save
for the slow slopes of the southern Urals, into the huge
spaces of central Asia. The traveller who is ignorant of
language and indifferent to the works of man will, as he
looks out of his carriage-window, find nothing in the shape
of the land, and little in the vegetation, to tell him when he
has passed from Germany into Poland, and from Poland
into Russia.

South of this great plain region is the mountain mass of
which the Alps are the central core. Westward this moun-
tain mass spreads via Haute-Savoie and the /Dauphine*
into southern and central France, and vj* the Pyrenees to
the high-ridged plateaux of Spain ; nortnward it flings out

WHAT IS EUROPE? IQ

the Black Forest, the mountains of South Germany, Austria,
and Czechoslovakia, and the great curving ridge of the
Carpathians ; southward project the Apennines and the
other mountains of Italy, as well as submerged ridges which
occasionally rise above sea-level, as in Corsica and other
Mediterranean islands ; while eastward an irregular moun-
tain block covers practically the whole of the Balkan coun-
tries, extends, growing even more irregular, south to
Greece and the -dEgean islands, and reappears, after a very
brief interruption, across the Straits in the highlands of
Asia Minor. This mountain region, naturally, is not homo-
geneous like the plain. Within it, separate mountain chains,
upland regions, and even separate peaks can be distin-
guished. Moreover, there are a number of subsidiary plains,
large and small, enclosed or half-enclosed within the ranges,
of which the plain of Hungary, encircled by the arm of the
Carpathians, is the most obvious example ; and there are
also many instances in which rivers, cutting through the
mountain masses, have in the course of ages turned their
beds into wide valleys or plains of their own. The Po, whose
valley is the plain of Lombardy, and the Rhone in Provence,
are cases in point ; and it often happens that such minor
plains or valleys, sheltered by the mountains, are more
fertile and more productive than the unprotected northern
flats. North again, of the great plain lie more mountains,
the highlands of Wales and Scotland — Eastern England is
really a part of the plain — and the great mountain chains
of Norway and Sweden, which extend via Finland into the
northernmost parts of Russia.

We have said that the great plain stretches from the
coast of Normandy to central Asia without a break. It
should be observed, however, that the only swamp area
of any size in Europe, the Pripet^ marshes which lie
between Poland and Russia, though they do not make a
break, do in effect constitute a considerable natural barrier ;
while there is a somewhat similar barrier in Finland, where
a very hard undersoil has caused to exist a large number of
lakes. (Most of the inland water of Europe is in fact to be

2O HISTORICAL OUTLINE

found in Finland.) Furthermore, though there is no visible
natural barrier to the south between Russia in Europe and
Russia in Asia, there is in fact a perceptible, though not
strictly defined, climatic differentiation. In the summer,
the warm damp winds from the seas and mountains pene-
trate far into central Russia and produce a rainfall that is
more like that of Central Europe than that of Asia, so that
a broad wedge of Russian territory whose apex is some-
where about Kazan may be said to be European in summer
and more or less Asiatic in winter.

Along with the climatic differences go differences in
crops. In the south, round the Mediterranean regions, is the
traditional home of the vine and the olive, the former, which
stands fairly cold winters but requires sun to ripen it,
extending further north than the latter. North of the olive
region comes the region of forest trees, mainly beech at
first, then beech and oak, then oak alone, with ash and
birch extending further north, and north of all pine. North
of the pine area comes the area of frozen sub-soil, where
even the pine will not grow, and the vegetation descends to
Arctic scrub. The forest region extends over the bulk of
Europe except the steppes of South Russia, where trees
only grow along the. banks of rivers. The famous " black
earth belt " of mid-Russia is all oak country. But, of
course, not all the forest region is now covered with forest,
though there is much forest remaining. Two-fifths of the
entire area of Russia and Germany, for example, is still
forest.

Where the forest has been cleared, there follow the cereal
crops — wheat, for the most part, in the warmer and more
sheltered parts, rye north and east of the Rhine, the Austrian
Alps and the Carpathians, with barley and oats as subsi-
diary crops. There is not, of course, a definite boundary
between wheat-growing and rye-growing areas ; but the
distinction between the countries which eat wheaten and
those which eat rye bread is fairly marked. Two foodstuffs
of considerable importance have been introduced from
America, maize in the south and potatoes in the north of

WHAT IS EUROPE? 21

Europe ; and there has also in recent times been a consider-
able development of root crops such as turnips, swedes,
etc. (mainly for feeding cattle), and sugar-beet. Tobacco is
grown in the south and cotton only in the Turkestan and
Transcaucasian provinces of Russia.

Transport and Occupations. Europe's means of com-
munication and transport are on the whole excellent. The
natural means are plentiful : there is the sea, which by
many bays and indentations, and such great arms as the
Gulfs of Bothnia and Riga, brings widely separated districts
within easy " sea-reach " of one another ; and there are
plenty of navigable rivers, of which some, such as the
Dnieper, the Danube, the Rhine and the Rhone, have been
highways of traffic ever since there was any traffic to use
them. The hand of man has added to these natural advant-
ages— there are large and important canal systems in many
areas, of which the French canals are the best ; and there is
also, at least in the western and central parts, a network of
railways which, though suffering in general efficiency from
having been planned overmuch on pre-war national lines,
still far surpasses the railway-systems of any other continent
but North America. Roads vary much more, from the
magnificent French pattern of routes nationdes radiating out
from Paris (and planned and built, in the main, to serve the
military needs of France) to the appalling series of pot-holes
that go by the name of roads in central Russia and some of
the Balkan States. The arrival of the internal combustion
engine seems to be forcing some road improvement in
Central and Eastern Europe as the arrival of the stage-
coach forced it on eighteenth-century England ; but road-
building is so expensive, and the countries which need it so
poor, that any improvement can only be very slow. Of
aerial transport it is too soon to speak with confidence. At
the moment, its part is negligible ; air lines do not pay ;
where they exist, they are subsidised by governments,
mainly from military motives. At first sight, the greatest
future for the development of aerial transport would seem

22 HISTORICAL OUTLINE

to be in Russia, where railway competition is slight and
where the great plain removes the problem of landing. But,
of course, further inventions may mitigate or wipe out
the difficulties of landing in mountainous country. In
the meantime, one can only observe that the develop-
ment of air navigation tends to concentrate traffic more
on the capitals of the several countries, and to remove,
to that extent, the obsolete horrors of the " frontier
station."

To the English reader, who is too often educated to
regard Europe as an over-large, polyglot, ill-tempered
country lying to the east and south of England, it comes
natural to think of Europe as primarily industrial. This is
not so. According to the latest available figures (1933) less
than a hundred millions out of its 250 millions of occupied
inhabitants get their living by ways other than agriculture,
hunting or fishing. Even if Soviet Russia be excluded, less
than 50 per cent are so occupied ; and in only five out of the
28 important States (Great Britain, Belgium, Germany,
Holland and Switzerland), do the industrial workers exceed
the land workers in number. The great majority of the in-
dustrial workers in Europe are concentrated in and about
the coalfields, of which there are four main conglomerations
— the English coal-measures, the coalfields of Belgium,
Northern France and the Ruhr, the Silesian field, and the
inadequately-developed Donetz basin in South Russia.
Of these fields, two, Silesia and the Ruhr, have been the
subject of bitter political contention. Coal being so bulky
and expensive to transport, the tendency, noted by all
economic historians, to concentrate productive industry,
and hence population, in and about the great coalfields,
has generally prevailed. There are, however, smaller coal
areas which have attracted manufactures to them ; there
are also industries, such as the silk industry of the Rhone
valley, which have grown up independently of coal ; and
there is, further, the comparatively recent development of
hydro-electric power in industry, which is most marked in
countries such as Italy, Switzerland, and Scandinavia,

WHAT IS EUROPE? 23

which have little coal but abundance of water-power. This
development, however, is as yet in its infancy, and its
future is a matter of guesswork.

Broadly speaking, industrial production is still the
preserve of Western Europe. The only non-agricultural
product in which Eastern Europe has at present the advant-
age is petroleum, which is hardly found in the west. It
should be remembered, however, that this statement refers
only to present-day statistics. The unused mineral resources
of Russia are enormous ; they are only beginning to be
tapped to-day ; and it may well be that another generation
or two will see a very great transformation in the balance
of European modes of life.

To-day, however, we must still regard Europe as mainly
agricultural ; and Eastern Europe as almost wholly so.
Agricultural, in the sense of living off land crops — wheat,
rye, potatoes, butter, cheese, etc., according to climate and
fertility — and exporting, in the case of the east, a per-
ceptible, though not a very large surplus, to feed the mine
and factory workers of the west. Certain highly developed
areas have specialised in certain products — the dairy pro-
duce of the Danes, and the vineyards of Southern France,
are examples which will occur to everyone. But, in general,
the type of" mixed farming " which aims at supplying as a
first charge the necessities of the producer and only there-
after exchanging for industrial goods prevails. (The English
reader, however, must beware of assuming that this implies
a universal system of scattered farms such as he sees in his
own country. The village community — a phenomenon lost
in England since the industrial revolution — clustering
round its own centre, with frequently miles of unoccupied
territory separating it from the next community, is a far
more common mode of organisation in the peasant
countries.) *

Much of Europe, then, is peasant. Much of Europe, then,
by English or American standards, is poor. How poor,
relative to the standard of an " advanced industrial
country," the economic chapters of this book will show. It is

24 HISTORICAL OUTLINE

important to realise, at the outset, that the standard of life
of a Hungarian, Polish or Yugoslavian peasant, even before
the world slump, was one at which the industrial worker
of the west would have scorned to live, would, in fact, have
died — probably of scurvy. The rulers of Soviet Russia,
whose people consist largely of peasants bred to the lowest
of European standards, and whose quotient of political
realism is perhaps the highest in present-day Europe, have
recognised this fact by putting the foreign (i.e. imported
Western) industrial worker in a preferential position
as regards essential food supplies, because the Western
worker, called upon to live at the Russian peasant standard,
dies out of hand. Nevertheless, the European worker,
industrialist or peasant, lives better than the worker of
other continents, save Australia and North America. This
book is not dealing with the lot of the Chinese coolie, the
Indian ryot, or the native of Kenya Colony ; but the
existence, in Asia and Africa, of millions far outnumbering
the entire population of Europe in an economic condition
below that of the poorest European is a fact which must not
be forgotten.

For the last point which must be emphasised in this
opening survey is that Europe does not live of itself alone.
In spite of this preponderance of agricultural over industrial
workers, Europe does not feed or clothe itself. About 10
per cent of the food of Europe, and a smaller percentage
of the clothing of its population, are annually imported,
to say nothing of the raw materials which the industrial
areas draw from tropical or semi-tropical regions. Ever
since the seventeenth century, the import of primary
products from other continents, and the export to them of
manufactured goods, has been an integral part of European
economy. Nor can we quite ignore the steady export of
human beings to the tvest which, until a very few years ago,
formed an important factor in keeping up the European
standard of life. The practical closing of the United States
to Europe's unwanted mouths has undoubtedly had some
effect on the post-war standard of life in countries, such as

WHAT IS EUROPE? 25

Italy or Roumania, which before the war annually exported
a considerable human surplus across the Atlantic.

More important, however, for European history and
present-day politics is the business of material import and
export, including the export of capital, by which European
groups which have a surplus to invest lend it overseas for
the purpose of development and manufacture in " un-
developed " or " uncivilised " countries, and receive there-
for an annual tribute of interest whose preservation leads to
complicated political relationships with extra-European
lands. The Near East, the Far East, the South American
States, and the tropical African territories, have all played
an increasing part in the life of Europe. As it were a great
shadow, the shadow of imperialism, has loomed for at least
the last two hundred years over all European events. In
studying either the history or the present condition of
modern Europe, the reader will find, again and again, that
some quite minor incident or dispute appears to have
attached to itself national passions out of all proportion to
the issues immediately involved ; and a further examination
will often show that the clue lies, not in Europe, but far
outside, on the route to India or the upper reaches of the
Nile. Neither European history nor European politics can
be understood if the rest of the world is forgotten.

§ 2. EUROPE IN THE TIME OF
CHARLEMAGNE

As WELL as being a physical and economic entity, Europe
is a congeries of national States, having among them many
varieties of race, religion, occupation and political in-
stitutions. To describe these States,* their likenesses and
differences, will be the concern of Part Two of this book.
Here we have now to consider how Europe " came about "
— how the political map which we shall draw grew to its
present appearance.

26 HISTORICAL OUTLINE

In one sense, all history is continuous ; and it would be
reasonable to begin a survey of European history in the
Stone Age. But it would not be very useful for our purpose ;
it would take up a great deal of space, and the bearing of
much of it upon the life of modern Europe would be very
slight. It will therefore be more sensible to begin at the
earliest point at which we can think of Europe as a whole
without having to concern ourselves also with Northern
Africa and the Levant, at a point, that is to say, when the
earlier civilisation-grouping which centred around both
shores of the Mediterranean — which in its last phase we call
the Roman Empire — had definitely ceased to exist. Such an
historical point seems to lie somewhere between A.D. 732,
when the Frank leader Charles Martel stopped, finally, the
rapid conquests of the Mohammedan armies at the battle
of Tours in Southern France, and 800, when the Pope
crowned his grandson Charlemagne as Emperor of Catholic
Christendom. Let us therefore begin by looking at Europe
in the latter half of the eighth century.

The first essential is that we should not look at it too much
from the standpoint of the modern Westerner. The rapid
economic advance of Western Europe since the discovery of
America, coal, and steam power, tends to make modern
readers think only in terms of the West, and ask of any age
first, what was happening in Britain, France, Germany, as
though these were the areas of outstanding importance.
But in the eighth century this was not in the least true. A
dispassionate observer from another continent (or another
planet), looking at eighth-century Europe, would have
certainly selected the Eastern Roman or Byzantine Empire,
centred upon the splendid city of Constantinople, as the
most important political unit. This Byzantine Empire, it is
true, had been very much reduced in territory during the
preceding hundred years by the conquests of the Arabs
under Mohammed and his successors. It had lost Egypt,
Northern Africa, Syria, and Mesopotamia, and its hold
upon Asia Minor was precarious. Nevertheless, in Asia
Minor, Greece, the ^Egean islands, and much of what now

EUROPE IN THE TIME OF CHARLEMAGNE 27

forms the Balkan States its territory was extensive, and it
was, moreover, still vital and able to expand and deliver
the culture it had learned from Greece and the form of
Christianity known as Orthodox among the half-civilised
tribes to the north and east of its own dominions. Bulgaria,
for example, and the communities which sprang up along
the Dnieper River and whose centre was Kiev, were Chris-
tianised from Constantinople, and the extent of its medieval
influence can partly be calculated by seeing in what modern
countries the majority of the population belong to the Greek
Orthodox Church.

Further, the civilisation of the Byzantine Empire was a
great civilisation. It had a long tradition of culture, going
back more than a thousand years to the early Greek cities ;
it had a highly developed city life, with magnificent
buildings, spectacles, art, decoration, etc., etc. Constantin-
ople is estimated to have contained, at its height, two
million people — as many as modern Paris, more than
Imperial Rome and far more than any medieval European
city. Its reputation spread far beyond the confines of the
Empire ; by the firesides of Norway and Sweden tales were
told of Micklegarth — the word means Great City, and the
city is Constantinople. Nor was the civilisation, though
stiff and to our modern eyes overridden with formalism,
in any sense effete. The finance of Constantinople was
sound ; its gold besant circulated unquestioned in all
markets of Europe and the Near East — no small achieve-
ment in an age where debased and unacceptable currencies
were the rule ; and in a military sense the Empire had
proved itself again and again able to withstand the attacks
of the full Moslem force and to hold the Straits against
Moslem invasion.

The Byzantine Empire, then, was solid, rich and splendid.
Western and Central Europe, however, had fallen into a
chaos which the efforts of Charlemagne did little but throw
into relief. As the Roman Empire in the West declined, so
did the system of government which it had taught to its
barbarian subjects decline also. It became more and more

28 HISTORICAL OUTLINE

difficult to find persons who would undertake the task of
civil administration and perform it with reasonable justice
and honesty ; more and more the Government, instead of
itself governing or defending its territories, tended to " farm
out " this function, to give to a great chief or lord the task
of himself policing or defending his estates, thereby relin-
quishing in effect any right of control over his actions ;
towns began to decay and roads to be unsafe ; and the class
of small freemen who had come into the Empire with the
barbarian tribes, like the remaining middle-class of the old
regime, began to be driven by insecurity more and more to
come, willingly or by force, under the protection, and even
under the absolute power, of some great man. Serfdom was
beginning.

These tendencies were rapidly strengthened when the
Arab conquests (which included all Northern Africa, Spain,
South Italy and Sicily and the Mediterranean islands)
practically cut off Roman Christendom from the rich lands
of the Near East. As the war was a religious war, the
Christians in effect ceased to trade with the Moslems ; and of
all that we now call Europe only Spain, Constantinople, some
of the islands, and Venice (which was exceptional in many
ways) continued to participate in that Mediterranean trade
which had been the life-blood of the Roman Empire. The
result of this was quickly seen in the rapid impoverishment
of" Christendom." Gold coins disappeared ; silver coinage,
and that of every sort and standard of refinement, alone
was to be found ; but there was everywhere a return to
primitive standards of living eked out by barter. The
Roman cities dwindled, and many of them, like Verula-
mium and Silchester in England, simply disappeared. Even
so important a city as the great port of Marseilles dwindled
to a fraction of its former self. City life had nearly come to an
end, and the rising of the " burgs " of the Dark Ages, which
many have regarded as a revival of city life, is so in very
small degree. For the majority of the burgs were not cities in
any real sense, but small clusters of cottages around castles
built by barons or princes of the Church, housing the

EUROPE IN THE TIME OF CHARLEMAGNE 29

craftsmen — smiths, armourers, carpenters, masons, and the
like — who were necessary to the upkeep of the castle.

With the decay of the towns and the impoverishment of
country life went a decline in the arts of civilisation. It is
hardly necessary to remind readers that in this beginning
of the Middle Ages practically all that was preserved of
science, art, and literature was preserved by the monas-
teries ; it should be noticed, however, that preservation is
all that we owe them. The new contributions made to these
subjects during the period are of interest only to anti-
quarians.

Before Charlemagne it is somewhat misleading to speak
of the political government of this part of Europe ; for there
was hardly any. There was a rough language-grouping,
derived from the tribes who had originally invaded the
Roman Empire ; and there were " kings " or " dukes," or
" princes," who were more or less sovereign over territories
of varying extent. But such political power as there was
rested mainly in the hands of local lords, who had carved
out for themselves small or large territorial spheres, in
which they were practically supreme, paying some sort of
service and tax to their nominal overlord, ruling over a
congeries of lesser lords and peasant farmers who might
be slaves, serfs, or free tenants, and living, in their turn, by
services and tribute taken from these classes. Medieval
histories, for want of a better word, speak of the " king-
doms " of Neustria, Lombardy, and the like ; but it is im-
portant to realise that such kingdoms bore practically
no resemblance to the kingdoms of the modern world, or
even of the seventeenth century.

Such, in the eighth century, was the condition of a large
part of Europe, covering roughly the area occupied by
modern France, England, Germany, the Low Countries,
Austria, Switzerland, and Northern* Italy. Charlemagne,
the grandson of Charles Martel, made a great effort to in-
troduce unity and at any rate the rudiments of ordered
government. Beginning with a counter-attack upon the
Moslems in the Spanish Peninsula (later known as Moors),

30 HISTORICAL OUTLINE

which resulted in the formation of a couple of Christian
principalities just south of the Pyrenees, he went on to unite
under himself the two main divisions of the former Prankish
kingdom, which were roughly separated by the Rhine, and
continued by conquering Northern Italy and parts of
Germany which had never been included in the Roman
Empire at all, and were now, by the efforts of Charlemagne
and his monks, brought within the pale of" Christendom."
His coronation, in the year 800, by the Pope as " Holy
Roman Emperor " — of the results of which more later —
proclaimed him ruler, in idea though not in fact, of all the
lands which had formed part of the Roman Empire of the
West, and filled his contemporaries with the idea that a
golden age for Christendom was about to dawn.

They had some justification for this. Charlemagne tried
hard to introduce some sort of order into his wide domin-
ions ; he sent round royal emissaries to check and control
in some degree the behaviour of the local lords ; he extended
the scope of royal justice ; he regularised, as far as possible,
taxation ; and he laid the foundations of the feudal system
under which much of Europe lived and worked for many
generations. Further, he was a friend to culture and learn-
ing, and encouraged education. After his death, men looked
back with longing to his times. So in England they did to
the times of Alfred the Great, who, a hundred years
after Charlemagne, performed, on a smaller scale, much
the same service for his own poorer and smaller country.
But Charlemagne's efforts failed politically, partly because
his empire, like the Roman Empire in its later days, was too
poor to stand the expense of a strong system of political
government on a large scale. At his death, his Empire
split into three sections, France, Germany, and the inter-
vening strip which was called Lotharingia — the name
is preserved in modern Lorraine ; and within these three
sections weakness and confusion were widespread. For a
century and a half after Charlemagne's death, the northern
parts of what had been his empire were helpless to protect
themselves from Scandinavian raiders from the north (the

EUROPE IN THE TIME OF CHARLEMAGNE 31

Vikings), who pillaged and settled practically as they
pleased. Some of Charlemagne's social work remained ;
the schools he founded continued, and the feudal system
grew and developed. But the political legacy of his reign to
later Europe was of very doubtful value ; it consisted in two
things, the Holy Roman Empire, and what we have learned
to call the problem of Alsace-Lorraine.

South of" Christendom " lay the Spanish Peninsula, held
by the Moorish Caliphate. Spain and Portugal at this time,
therefore, were outside " Europe " and linked with the
Near East. This meant that Spain and Portugal were not
cut off from either the trade or the civilisation on which the
Roman Empire had flourished ; and we find that the Dark
Age of which we were writing in previous paragraphs was
not shared by these countries. The fact that so much of our
medieval history is derived from writers of the Christian
Church who were bitterly hostile to Islam has hidden from
the ordinary reader the fact that Moslem rule was neither
oppressive nor unenlightened. The Moslem conqueror
propagated his religion by the sword ; but once he had con-
quered a territory he did not use persecution or torture to
make the inhabitants individually Moslems. It is true that
the unbeliever was in an inferior position and was taxed
more highly than the believer ; but beyond that he was free
to pursue his normal activities and to retain his political in-
stitutions. For the Moslems did not possess a developed
political system of their own, which they enforced upon
conquered peoples. It would be almost true to say that they
had no political system at all ; in any event, anything that
could be called an Arab Empire collapsed almost as soon
as it was made. Practically, the Spanish Caliphate was in-
dependent of any outside control. Further, the Moslems
were friends to learning — it was not Moslems, but monks,
who burnt the great Greek library 'at Alexandria — and
during the period of their rule the Spaniards were in touch
with all the culture of Moslem countries as far east as Persia
and India. The universities of Spain, particularly Cordova,
were famous for their scholars, and when learning began

32 HISTORICAL OUTLINE

to revive in Christian Europe, two centuries and more
before what we call the Renaissance, it was Arab and
Spanish scholars who played the leading role.

North of Christendom lay the Scandinavian countries,
with the brilliant warrior, seafaring civilisation which we
call Norse, and know from the Tales of Edda and the
Northern Sagas. Norway, Sweden, and Denmark were the
homes of the Norsemen, who in the ninth and tenth cen-
turies were pushing outwards in all directions They col-
onised Iceland and Greenland, and visited the shores of
Labrador and possibly places further south ; eastward they
colonised the Baltic, entered Russia, spread to Nijni
Novgorod, Kiev, and many other places, and enlisted them-
selves in the Emperor's bodyguard at Constantinople ; they
overran England, Northern France and the shores of the
North Sea ; and they sailed right round the west coast of
Europe, founded states in Sicily and Southern Italy, and
challenged the Moslem power in the Mediterranean. At
one time a Norse prince, Cnut or Canute by name, was
ruler of a great sea-kingdom reaching from England to the
Baltic ; and when the wave of invasion had ceased and the
Norsemen had settled down in new quarters, such as North-
ern England, Normandy, and Sicily, the amount of re-
vivifying energy which they had brought with them began
to be immediately apparent in the life of Europe.

East were groupings of half-civilised peoples with which
we need not detain ourselves for the moment, except to
observe that the great plain was then, as it had been for
centuries, the home of a great variety of wandering tribes
whom natural cataclysms, such as failure of crop or water
supply, every now and then drove to raid the territories of
their neighbours and to force these, in turn, into the more
settled western lands. Much of the history of Eastern Europe
in its early days is concerned with the struggles of civilis-
ation with these invaders, as Charlemagne struggled with
the Avars, and with their subsequent Christianisation.

There remain two phenomena — the city of Venice, and
the Church of Rome. Venice, founded in A.D. 552 by citizens

EUROPE IN THE TIME OF CHARLEMAGNE 33

of Roman Italy who fled from the invading Lombards into
the lagoons on which they built their city, is unique in that
it of all the cities of the west remained in touch with the
eastern trade without being severed from Christendom, and
that it was a free city, in the sense of having no master (un-
less we count a shadow y and fluctuating allegiance to the
Emperor of Constantinople) at a time when such a thing
was almost unknown in the West. Venice, however, was a
pioneer among cities, a forerunner of the true Middle Ages,
and only as a pioneer does it concern us at this moment.

Last is the Church of Rome, which is not, and was not, of
its nature a political institution, but which, through a series
of circumstances, became one of the most important, if not
the most important, political institution of medieval Europe.
This importance is due in the first place to the fact that
the Church survived when the Empire fell. It was thus the
only institution which kept in men's eyes continuity with a
greater and more prosperous past ; and to the prestige
which this gave it was added the fact, already mentioned,
that in the Church, and particularly in the monasteries, was
preserved what little of culture was preserved during the
Dark Ages.

Further, the Church was never exclusively a spiritual
body. Not only did the Pope hold lands of his own in
Central Italy, which in course of time were increased until
the " States of the Church " formed a respectable-sized
principality ; bishops also became lords and held estates in
their own right, as did monastic foundations.

At first the Church was not so much a single institution
as a federal body composed of a number of autonomous
churches. Gradually, however, reforming Popes reduced
this autonomy and established the fact that the Pope was
the supreme head of Christendom, and that every local or
territorial bishop, no matter how large his lands or how
wide his spiritual jurisdiction, was the subordinate of the
Pope. This, as will be easily seen, at once sowed the seeds
of infinite political dispute. For, if the bishop is a feudal
lord, holding lands of a feudal superior such as a king,

BR

34 HISTORICAL OUTLINE

and at the same time the subordinate of the Pope and
responsible to him, which party — king or Pope — is actually
to select a new bishop, and which is he to obey when they
are in dispute ? It is no real answer to say that the Pope
is the authority in spiritual, and the king in temporal
matters ; for in the first place temporal and spiritual ques-
tions cannot in practice be separated, and in the second
place, the Church had always a tendency, whenever it
felt strong enough, to claim authority over all depart-
ments of life. The weapon of excommunication, for example,
was used on many occasions, both by Popes and bishops,
to punish what nobody could have regarded as wholly
spiritual offences.

This question of final authority was raised quite clearly
when the Pope crowned Charlemagne as Emperor. It is
said that Charlemagne received this honour unwillingly ;
and well he might. For by assuming the right to crown the
Emperor, the Pope openly declared that the imperial
power — the inheritance of Caesar and Augustus — was his
to confer, and inferentially his to take away ; and this led
in the end to a long and bitter conflict which was never
settled, except by temporary practical compromises, as long
as the Holy Roman Empire had any effective existence.
Nor was the dispute confined to Pope and Emperor ;
wherever a king or prince and a bishop existed, the same
trouble might arise. The existence, therefore, of the Roman
Church as an independent political institution is of great
importance in European history up to the Reformation
and even beyond.

It should be observed that this is not true of the Greek
Church. The Greek Church was a State Church, in which
the Emperor appointed the Patriarch or Bishop of Con-
stantinople ; and where other countries were converted to
Orthodox Christianity the same procedure was adopted,
and the Metropolitan — the Greek equivalent of an arch-
bishop— appointed by the king. The problem of " Church
and State " has not existed in Orthodox countries.

MEDIEVAL EUROPE 35

§ 3. MEDIEVAL EUROPE

THE DETAILED history of Europe from the death of
Charlemagne to the beginning of the Crusades (end of the
eleventh century) is of interest to nobody but specialists.
There is an endless and confusing struggle between prince-
lings whose very names are hard and unnecessary to
remember ; there is poverty, famine, and a continual ex-
posure to invasion. Nevertheless, by the end of the period
we can see an improvement, a steadying and shaping
which is bringing to birth what we call the medieval
world.

First and foremost, the raids of the Norsemen have
ceased. The countrymen of Canute have settled down in
their new homes and brought their vigour, their enterprise
and their organising ability to the service of the civilisation
they have entered. They have become Christianised, which
in the Middle Ages indicates not so much a change in
religious belief, as we should understand it, as a social
change, an admission into the community which was called
Christendom. They have challenged the power of the
Moslems in the Mediterranean, so that the life-blood of
trade begins to flow back to Europe, and communities of
trading merchants, humble at first, but soon to grow in
importance, begin to spring up on suitable sites — seaports,
river crossings, road junctions, and so forth. A variety of
luxury goods (most of which we should nowadays term
necessities) becomes available, and among the upper classes
the standard of life begins to rise.

Meanwhile the worst of the social anarchy is being tem-
pered. The Church, now much stronger and better organ-
ised, is using its prestige to endeavour to discourage un-
limited private warfare, and with the removal of some of
the causes of this warfare life has become definitely more
safe. Government is becoming both more efficient and more
responsible ; it is recognised that princes and lords in
general hold their estates and their offices in virtue of some
function which they fulfil, and that if they do not fulfil this

36 HISTORICAL OUTLINE

function their power should be forfeit. The medieval
system, to which we shall return in a moment, is being
slowly worked out.

This growing safety increases the population, sets men
free for missionary and pioneering work. Everyone has
heard of the Crusades, and knows, more or less, that the
immediate cause of the Crusades was the interference of
the Seljuk Turks, who had wrested Asia Minor from the
Byzantine Empire, both with the newly restored Levantine
trade and with the pilgrims making for the holy places in
Palestine ; but everybody does not realise how far those
who went crusading, gentle and simple, were a surplus
population produced by the increased security of life and
the decline in private war. The Crusades, therefore, were
in one sense a remedy for potential unemployment which
incidentally enlarged the knowledge, the initiative, and
finally, in spite of their high cost, the wealth of Europe.
Nor was the crusading spirit entirely confined to those who
set out for Palestine. To this time belongs the formation
by the Church of the fighting monastic orders — the Knights
Templar, the Knights Hospitaller, the Teutonic Order,
and the like — which, designed primarily to defend Chris-
tianity and to spread it by force of arms in pagan lands,
also played a considerable part in developing and civilising
those lands. Non-military bodies also, such as the monas-
teries proper, helped in the work. Monastic communities
sent out offshoots to poor and unreclaimed territories, such
as Eastern Germany, and by draining the marshes and
cutting down the forests, brought a large area of practically
useless territory under cultivation, and so within civilisa-
tion. One may say, in fact, that the age of the Crusades saw
a large tract of land which had been hitherto only on the
fringes of Europe brought well into the European group.
Germany beyond the Elbe, Poland, Courland, Lithuania,
are cases in North-Eastern Europe, while further south the
conversion of the Hungarians, the Bulgars, etc., made a
Christian bloc which extended via Kiev well into Russia.
It should be remembered, however, that the Great Plain

MEDIEVAL EUROPE 37

has no certain boundary upon the east. The eastern side
was, and continued insecure.

What was this Europe which was shaping itself eight or
nine hundred years ago ? Medieval Europe is at the root
of the history of all European countries ; but it is in many
ways so different from the Europe of our own times that it
is often extremely difficult to understand, particularly, as
will be shown later, for an English reader.

It is impossible to understand medieval Europe unless
one grasps, first of all, that it was at once more of a unity
and far more subdivided than modern Europe, and further,
that the subdivisions were not mutually exclusive. In
modern Europe things are comparatively simple. A man
is a citizen of one country ; he cannot be a citizen of two ;
and if, by some chance, he is a citizen of a country of which
he does not wish to be a citizen — as certain Germans on the
morrow of the Peace Treaties found themselves turned
willy-nilly into Poles — this may be annoying and un-
pleasant for him, but he will not be able to help it. He
cannot cease to be a Pole unless by a complicated procedure
he re-nationalises himself as a German. Poland and Ger-
many are mutually exclusive political institutions ; and
this principle is accepted throughout Europe. Of course,
there do exist institutions, or societies, which cut across
political boundaries, whether national or local, from the
Beekeepers' Association of Northern Ireland to the Inter-
national Match Combine. But these are in no sense part
of the political machine ; and it is assumed, by most people
at all events, that the political, mutually exclusive grouping
is the one that matters, and that any other grouping or any
other loyalty is, as it were, a side-line which should be
dropped in cases of political necessity.1

There is no logical need that this should be so ; it is only
the exaggerated nationalism of the* nineteenth century
which has caused it to be accepted without question, and
one of the best ways of understanding that it is not neces-
sary is to look at a Europe which got along without it.
1 For^the special case of the League of Nations, see Part V.

38 HISTORICAL OUTLINE

The unifying force in medieval Europe was mainly, as has
been already said, the Church of Rome. When a com-
munity accepted Christianity it entered an organisation
which was European. Not only did it receive a church of
the same pattern as other European churches, with a
European ritual delivered in the European language of
Latin ; it also received church officers who were at any
rate in part under the control of a European head, paid
taxes (as time went on, heavier and heavier taxes) for the
upkeep of a European court, and might even find within
itself groups of persons, such as the various orders of friars,
who worked directly under the instructions of the Pope.
It is thus clear that, whatever the territorial loyalty of the
medieval man, whether to prince, gild, or city, it might at
any moment conflict with his European loyalty to the
Church ; and in fact, it often did. But the point is that this
was not considered as unnatural or extraordinary, but
merely as inconvenient. (In the Orthodox areas, for the
reasons given above, this conflict of loyalty was less politi-
cally apparent ; and we notice that the Orthodox countries
tended to be considered a doubtful part of Christendom.)
So much for the unity of medieval Europe. Now consider
its particularism. Much of Western Europe, in the Middle
Ages, was organised feudally, on a system whose standardised
development can be most clearly seen in France, though it
spread, as Europe spread, eastward. The essence of feudal-
ism, for our purpose, is the idea that every piece of territory
is in the possession of some person, to whom it has been
granted upon certain conditions by a superior. The small
landowner " holds the land of" the large landowner, who
in turn holds his of the duke (or whatever title he may
bear), who holds his of the prince or king. In theory, to
make the social pyramid perfect, the prince should also
hold his lands of the Emperor ; but when, in 962, the
Empire (henceforward called the Holy Roman Empire)
was revived again under a prince of German race, Otto I,
the jurisdiction, even the nominal jurisdiction, of the
Emperor had become much smaller than that t of

MEDIEVAL EUROPE 39

Charlemagne had been. Large parts of Western Christen-
dom, such as France and Great Britain, never acknowledged
the Imperial authority throughout the Middle Ages.

About feudalism there are three main points to be
noticed. First, it made for,. and clearly envisaged, divided
allegiance. A feudal lord might be granted land, in respect
of service, by more than one overlord ; and as the early
forms of feudal tenure generally included the promise of
military support to the overlord, it is easy to see that a
quarrel between two of his overlords might immediately
involve a vassal in a difficult moral and political problem.
Secondly, the lord or overlord, in any particular case,
might be a spiritual person or body — a bishop, an abbey,
or the chapter of a cathedral — in which case difficulties
were bound to arise between the duties owed to the Church
and the duties owed to the temporal power — difficulties
which sometimes make a spectacular appearance in history
on occasions such as that on which Pope Innocent III put
a ban upon John of England and absolved all his subjects
from allegiance to him, but which in much smaller guise
run through much of medieval life. Nor, curious though it
may sound to those brought up upon a unitary system,
did this conflict of loyalties often result in a deadlock.

Thirdly, the medieval man did not, like the nineteenth
century man, conceive of property right as absolute. In
theory, no land belonged to anybody as of right, but only
in virtue of his fulfilment of certain obligations, which if
he failed to fulfil, the land could be taken away from him.
This again is hard for moderns to grasp. We have slowly
accustomed ourselves to the idea that a man may be
restricted in the use of his property by social considerations,
and that he may be forced to contribute some part of it to
the upkeep of society ; but we nevertheless think of it as
his property, owned absolutely by him* and controlled, as it
were, only at the edges. It is salutary to realise that over a
long period of European history the opposite view was
held, and was working.

This feudal " pyramid " was sustained and fed by the

40 HISTORICAL OUTLINE

labour of the peasants, the great mass belonging to the
" simple " (i.e. non-gentle) class, who cultivated the land.
These might be free cottagers, or tenants on a number of
different systems of tenure, or slaves, or even day-labourers.
But for the most part, in Western Europe, they were in
that half-free condition which we know as serfdom, in
which, broadly speaking, they lived on scraps of land which
they could not leave and from which they could not be
driven, whose produce was their own after certain propor-
tions and dues (often very heavy indeed) had been paid to
their immediate overlord and to the Church. Most of these
dues were paid in kind, that is to say, either in produce or
in labour ; the medieval agricultural system made little
use of money.

Such was feudalism — an agricultural economy affecting
by far the majority of Europeans, since Europe then, as at
any time prior to the coming of the machine age, was almost
wholly occupied in agriculture. But feudalism has gone,
and though it left important legacies in the realm of law
and the idea of kingship, we do not see much relic of it, at
any rate, in England of to-day. What we can still see, and
what most people mean when they talk of " the legacy of
the Middle Ages," comes, in the main, from the medieval
towns.

Towns and Gilds. Medieval towns, like modern
towns, were of very different sizes, from an English townlet
that was no more than a glorified village to great cities like
Paris or Florence. Some, like the cities of Northern Italy,
and, to a less extent, those of Flanders and the Baltic
coast, actually owned or controlled a large slice of sur-
rounding territory ; were, in fact, city-states rather than
cities. But most of them had at least two factors in common ;
they grew mainly bfy trade, and they were governed, as
trade and manufacture throughout medieval Europe were
governed, by groups of people.

We have noticed how trade, after the darkness of the age
of Charlemagne, began to creep back into Western Europe.

MEDIEVAL EUROPE 41

Companies of merchants, such as in the East would be
called " caravans," began to move to and fro, bringing
necessities, such as salt, and luxuries, such as silk and spices
from the Levant, to the agricultural communities. Gradu-
ally, sometimes upon the site of Roman cities such as
Lyons, sometimes at such convenient " natural stops " as a
ford, the mouth of a river, the meeting-place of two high-
ways of traffic, etc., these merchant gilds, as they were called,
established permanent settlements which grew up into
towns ; and, where towns grew up, there also grew up
industry and manufacture of all the goods, from cathedrals
to cloth, which we associate with medieval times.

Because we have mentioned merchant gilds, however, it
should not be assumed that all medieval towns were
founded or governed by merchant gilds, or that the mer-
chant gild was the only type of gild known. The medieval
gild, in essence, is a co-operative association, largely
religious in origin and character, for mutual help and
defence. The merchant gild is, possibly, the most noticeable
form of early gild organisation, as the craft gild is of its later
development ; but the gild type of organisation suited the
medieval mind, and we find gild associations springing up
for workers in every sort and kind of craft, and even for
occupations which we should not nowadays term crafts.
The great medieval universities, for example, such as the
University of Paris, began life as gilds. It was an army
largely made up of the gilds of Flanders which in 1214 at
the battle of Bouvines put the feudal cavalry to flight.
Some medieval towns were governed by gilds or groups of
gilds ; the charters of others provided them with a special
municipal corporation. But in all cases the ideas behind
the gild organisation were so strong and so pervasive that
they tended to colour the spirit of all town government,
whatever might be its actual form. A medieval corporation,
when it was not itself a gild, looked and behaved very much
more like a gild than like a modern City Council.

Two things should be noticed about this gild society :
first, that one of its fundamental ideas was that of equality

42 HISTORICAL OUTLINE

between brothers — not, it should be made clear, between all
members of the gild, but between all members of the same
status. The whole basis of much of the gild statutes and
regulations was that when once a man had secured admis-
sion to his society (not by any means too easy a thing to
achieve) his rights were the same as those of any other
member of his class in the society. He must not have his
trade interfered with by competitors willing to sell below
rate, work overtime, use shoddy materials, or corner sup-
plies ; in fact, most of what the nineteenth century called
" beneficent competition " was forbidden, in both theory
and practice, to a medieval craftsman or merchant.
Secondly, the motive of his society, the motive which was
assumed to underlie all the regulations by which he was
bound, was not purely " economic " in the modern sense.
Medieval political and economic thought is rather diffi-
cult for moderns to grasp, partly because so much of it is
stated in religious terms, with arguments, drawn from the
Scriptures and the writings of the Church Fathers, whose
validity we should not now accept. But its main point is
easy enough to seize, viz. that " economic actions " — pro-
duction, buying, and selling, etc. — cannot be decided by
purely " economic " arguments, but depend upon general
views, which are at least as much moral and political as
they are economic, about what sort of society is desirable.
This attitude of mind colours the whole of medieval life ;
it went into eclipse for a while when industrial capitalism was
at its height, but in this generation it seems to be returning
— with the difference that we tend to judge economic
actions not by the standard of Christianity, but by the
standard, according to our particular views and upbring-
ing, of Nationalism or Socialism.

The main bulk of the regulations and rights produced
by this point of view* applied to all gild members ; the dif-
ference between different classes in the same gild lay rather
in the government of the gild and in the apportionment of
privileges. To these class-distinctions, which become more
important as the gilds grow richer, as well as to the

MEDIEVAL EUROPE 43

class-distinctions between gild and gild, we shall return in a
later section. Here it is important to notice that this town-
and-gild system spread rapidly all over Western Europe, and
to a certain extent eastward, through the Middle Ages ; and
that it formed a part of the system of territorial grouping
which we have mentioned before. A town or gild might be
a vassal, or an overlord, or both at once, or it might be a
free city owing feudal allegiance to nobody — towns often
bought their freedom. It might hold its land of several lords
at once, or of a lord and his overlord, who might be at
loggerheads (which was often advantageous to the town).
The point to grasp, however, is that it was the town which
counted in a man's life. We remember the great medieval
names as citizens of Bruges, Rouen, or Nuremburg, rather
than as subjects of the Count of Flanders or of some German
prince.

The Rise of Nations. All this network of associations,
small and large, political, economic, and religious, make the
history of the Middle Ages difficult to follow and, in detail,
unprofitable except for specialists in history. Nevertheless,
from that life so unlike our own, the modern world was
shaping, and if we look at the broad lines and ignore the
details, we can see the process.

Slowly, the territorial divisions which we now call
countries were beginning to appear. This is first seen in
England, both because England has well-defined natural
boundaries, and because it was conquered as a whole by the
Duke of Normandy in 1066 and ruled by him as his own
estate without higher authority — although he held his
Norman lands as vassal of the King of France. For some
generations the poor and bleak land of England, to which
Wales was added by Edward I, counted less with its rulers
than their possessions in France ; but* this situation gradu-
ally altered until by the end of the Hundred Years' War
(1453) the amount of French territory held by England was
negligible. By this time, also, the feudal system was disap-
pearing from English society. Largely because of the

44 HISTORICAL OUTLINE

political sagacity of William I in granting out his conquered
lands only in small and separate parcels, the feudal lords in
England had never had the wealth or power which they
attained on the Continent ; nor were the towns, which
generally speaking sided with the king against the barons,
of sufficient size or strength to become his rivals. Only
during a period of royal weakness, as in the reigns of
Stephen and John and part of that of Henry III, did the
barons really attain power, and they had not unity enough
to hold it. Edward I, by appearing as the defender of the
towns and the lesser gentry (i.e. the beginnings of a middle
class) against the depredations of a quarrelsome nobility,
was able to lay the foundations of a strong English monarchy
based on middle-class support, and his calling together of
a Parliament composed of these elements as well as of the
barons and bishops, on the understanding that he would be
granted supplies in exchange for redress of grievances, was
the real beginning of English " constitutional monarchy."
His building, however, nearly collapsed owing to Henry V's
foreign adventures and the Wars of the Roses in the
fifteenth century, and it was left to Henry VII and
Henry VIII to build it up again. (Scotland, a monarchy
from early times, resisted efforts to incorporate it with the
English system ; and remained for generations semi-tribal
in character).

France was much slower in breaking down the medieval
system. The House of Capet, who called themselves Kings of
France from the end of the tenth century, were much
weaker and controlled far less territory than many of their
large vassals. Not only were there the great provinces held
by English kings ; there were also feudal lords such as the
Counts of Flanders, Brittany, and Toulouse, and the Duke
of Burgundy, who were practically princes in their own
right. The French tovvns, also, were much richer and more
important than those of England, and could not by any
means always be relied upon to support the kings. Slowly,
however — assisted in part by the advantages of an un-
broken succession — the French kings ate into the territories

MEDIEVAL EUROPE 45

of the feudal lords. The Hundred Years' War disorganised
the country terribly and delayed the process, but after the
defeat and rout of the English at the instigation of Joan of
Arc, it proceeded rapidly, until by the death of Louis XI
(1483) the territories of the French Crown included all
modern France but Brittany, Burgundy, and Calais and
Dunkirk (all of which were added shortly afterwards). At
this time France was the richest country in Europe, and the
French king the richest monarch. This was largely owing
to the introduction, in 1439, of the taille, a special tax levied
in the first instance to provide a standing army to fight the
English. The taille, however, rapidly became permanent,
and being entirely at the disposal of the king, put him in a
position of financial independence which greatly affected
the history of France for the next three hundred years.
There was, indeed, in France a body, called the States-
General, composed of the same elements as the early
English Parliaments ; but as the Crown was not dependent
upon it for supplies it never attained the same importance.
South of the Pyrenees little kingdoms grew up, which
gradually became greater kingdoms under the spur of re-
sistance to the Moors. The Spanish Peninsula being the one
part of Western Europe which during the Middle Ages was
still partly peopled by men of alien faith, the crusading
spirit remained alive there long after it had died out in
Europe as a whole. Consequently the discipline and control
of the Church was far stronger in Spain than in any other
country. The Spanish kings were, and increasingly be-
came, above all other things faithful servants of the
Church ; the Catholic institution which Protestants most
execrate, the Holy Inquisition, was born in Spain, as was
the Jesuit Order which succeeded it as defender of the
Church. Meantime, the kingdoms grew and encroached
upon the Moors. The kingdom of Portugal was set up in
1140; east of it, the kingdoms of Aragon, Leon, and
Castile became of importance. Finally, in 1492, the mar-
riage of Ferdinand and Isabella united the last three
kingdoms into one, which by the conquest of Granada, the

46 HISTORICAL OUTLINE

last Moorish stronghold, brought the whole peninsula under
Christian rule, though a number of persons of Moorish race
continued to live and trade there until their final expulsion
in 1609. The daughter of Ferdinand and Isabella married
the son of the Hapsburg Maximilian, and their son, who
became the Emperor Charles V, thus brought Spain, the
Netherlands, and Austria, as well as other territories, under
a single Hapsburg domination.

The greatest subdivision, in the Middle Ages, was to be
found in the territories which we now call Italy and
Germany — Germany, in this case, covering a varying area,
but including at times Austria, Hungary and Bohemia (the
western part of modern Czechoslovakia) . The central part of
Italy was occupied by the temporal domains of the Pope,
which increased considerably in the unrest which followed
the death of Charlemagne. South were the kingdoms of
Naples, Apulia, and Sicily, which, wrested from the
Saracens in the eleventh century by the Norsemen, re-
mained Norman kingdoms or dukedoms for some time,
though towards the end of the period they were fought over
by the kings of France and Spain, and finally came into
the possession of the House of Bourbon, kings of Navarre in
Northern Spain who succeeded to the crown of France.
But the glory of medieval Italy lay in the cities of the north
and northern central parts. There were the great medieval
city-states — greater by far than any English town, greater
than the growing cities of Flanders and the Baltic coast, and
growing gradually greater than Constantinople in its
decline. Venice, the pioneer, has already been mentioned ;
but Milan, Pisa, Genoa, Florence, Padua, Bologna, to take
only half-a-dozen names, were only less well known.
These cities were states rather than cities ; they had large
territories from whicji they drew their sustenance ; they
stood midway between the reviving Eastern trade and the
hungry northern districts ; their feudal nobles early took to
merchanting and left their castles to build themselves
fortified palaces in the towns, which the tourist in Florence
or Venice can see to this day ; they took to banking and

MEDIEVAL EUROPE 47

manufacture for export in advance of other states and
peoples ; and, as everyone knows, their leading men were
the great patrons of art and the new learning which we call
the Renaissance. As shipping contractors for the Crusaders,
the maritime cities made a handsome profit, and the dis-
covery of America at the end of the period, though financed
by other Powers, was made by Italian sailors.

These were free city-states, sometimes governed by a
monarchical duke or prince, sometimes by an oligarchy of
the richest or most important men, sometimes possessing
a semi-democratic constitution. They had not, however,
attained their freedom without a struggle with the Em-
peror, who claimed to be their overlord. The battle of
Legnano (1176), in which the Lombard League of cities,
led by Milan, decisively defeated the Emperor Frederick
Barbarossa, was one of the earliest blows struck by the
rising merchant class against feudal power. But, having
achieved freedom by uniting, they, like the Greek cities
many centuries before, did not retain unity. Trade and
territorial rivalries divided them ; the Genoese sailors hated
those of Venice, it was said, more than they did the
Saracen corsairs. The strife between city and city was bitter,
and it was intensified by their entanglement in the quarrels
between Empire and Papacy (see next section) and by
social disputes, as increasing wealth created wide class
differences within the gild system. In Florence, for example,
the " lesser gilds " were practically shut out from any share
in the government. A great part of Dante's Inferno is con-
cerned with civil strife in Florence, and the picture which he
gives of the social and political hatreds there is certainly
vivid enough.

Germany alone presents in the Middle Ages the picture
of a country which is disintegrating rather than inte-
grating ; and this is due as much to the existence of the
Holy Roman Empire as to any other single cause. A period
of confusion, during which the feudal system became fairly
firmly established east of the Rhine, followed the break-up
of Charlemagne's empire, and ended in the election of

48 HISTORICAL OUTLINE

Otto the Great of Saxony, one of the half-dozen large
German duchies, as king of Germany. He then crossed the
Alps and in 962 was crowned by the Pope as Emperor.
Henceforward, until its demise at the hands of Napoleon in
18065 the Imperial crown was always held by a prince of
German or Austrian birth ; but after Charlemagne France
was never again included in the imperial territories. The
German king thus became overlord both of the North
Italian cities and the South Italian kingdoms ; but in addi-
tion to the awkward size and shape of his dominions he had
to contend with two great disadvantages — his crown was
elective and not hereditary, and he had to receive the
imperial title at the hands of the Pope. Subsequent em-
perors spent much of their time and treasure in (a) securing
their own crowns, (b) suppressing revolts in either Italy or
Germany or both, and (c) struggling for supremacy with
the Popes.

Church and State. The last-named struggle is only one
aspect of the dispute between Church and State which has
been mentioned earlier ; but it is a struggle which con-
tinued throughout medieval history, and was probably
responsible for more waste of life and substance than any-
thing else. At first the Papacy, the older and better-
organised institution, had the better of it. Gregory VII, the
great reforming Pope of the eleventh century, who claimed
overlordship of all Christendom, including the right to
depose " wicked " rulers, but in fact asserted this preroga-
tive mainly in Germany, forced the Emperor Henry IV to
do penance in the snow of Canossa and to receive his crown
back as a penitent at the Pope's hands. But gradually the
growth of nationalism and the decline in the prestige of the
Church, as the Reformation drew nearer, caused the feeling of
Europe to turn against the more extravagant claims of papal
supremacy ; when Frederick II in 1239 defied excommuni-
cation and declared that " his cause was the cause of every
king in Europe," the kings of France and England both
rallied to him ; and at the beginning of the next century an

MEDIEVAL EUROPE 49

obstinate Pope was carried off captive by French troops.
With his death in 1303 the medieval Papacy, with its claim
to universal overlordship, practically came to an end ;
and when, after a long sojourn at Avignon in France, and a
furious internal dispute, during which two rival Popes and
at one time three were engaged in excommunicating one
another, a united Papacy was again seen in Italy, the Pope
had been practically reduced to the status of an Italian
prince — with, however, the right to levy tribute upon the
kingdoms of Christendom.

Before Frederick II, however, the Popes had interfered
heavily in the elections of German kings, supporting,
naturally, the candidate who was likely to accord most
weight to their claims ; and at times, particularly during the
twelfth century, half Europe was involved in the struggle
between Guelfs (anti-papal) and Ghibellines (supporters of
the Pope). That any kingship remained in Germany at all,
under the circumstances, is due partly to the fact that the
old feudal duchies were rapidly crumbling to pieces.
Germany, during the Middle Ages, was splitting into
smaller and smaller units — a tendency which the emperors,,
on the whole, encouraged as much as they discouraged the
growth of towns.

Nevertheless, towns did arise, particularly along the
Rhine and on the northern coasts, and even formed them-
selves into federations, of which the great Hanseatic League
of the trading towns of the Baltic and the North Sea is the
best known. Meantime, and almost unnoticed by the
emperors, German Christendom was extending itself east
of the Elbe, through the efforts of monks, Orders like the
Teutonic Knights, and of unnamed agricultural colonisers.
German barons " Christianised " and took over lands in
Courland and Livonia, and many of the governing positions
in Lithuania, Poland, and Hungary'began to be held by
persons of German birth. While Western Germany was
collapsing into fragments, new and more stable States were
appearing in the east, of which Brandenburg under the
Hohenzollerns and Austria under the Hapsburgs were the

50 HISTORICAL OUTLINE

chief. In 1273, after a period of unusual disorder, a Haps-
burg was elected Emperor, and a hundred and fifty years
later the imperial title became in effect hereditary in that
family. A less desirable result of the eastward expansion was
the introduction of feudalism and serfdom in an unpleasant
and decaying form to Eastern Europe, and eventually,
through Poland, to Russia.

In the fourteenth century, the first republic of modern
Europe modestly established itself. Two small territories
in the Alps, called the cantons of Uri and Schwyz, were pur-
chased by Frederick 1 1 in order to keep open the Alpine roads
between the two halves of his empire. For defence against
aggression — particularly aggression by the Hapsburgs —
these two, with other cantons, formed themselves into a
confederation, more than once decisively defeated the feudal
armies sent against them, and finally, though not until 1501,
established the practical independence of the Swiss Confed-
eration of any other power in Europe. The Swiss were for the
most part burghers and small cultivators ; the first republic
of modern Europe thus started as a republic of the middle
classes, and quickly began to make a living by hiring out its
citizens as mercenary soldiers to belligerent states. (The
production of waiters and hotel-keepers is a later develop-
ment.)

The cities of Flanders (i.e. modern Holland and Belgium,
with a part of Northern France) were of importance second
only to the cities of Italy. It was the Flemish cloth-weavers
who taught the English to weave their home-grown wool,
made possible the big English sheep farms of the fifteenth
and sixteenth centuries, laid the basis of the fortunes of
great cloth merchants like Dick Whittington, and founded
the trade on which English prosperity rested until the
industrial revolution. Like the Italian cities they were rich
and prosperous and patrons of art and literature ; and like
the Italian cities they developed bitter class-struggles. The
attempts of the van Arteveldes in the fourteenth century to
democratise the government of Ghent form one of the
bloodiest passages of medieval history. But, unlike the

MEDIEVAL EUROPE 5!

Italian cities, they did not gain their freedom. Subjects,
first of the Counts of Flanders, and then of the Dukes of
Burgundy, they passed, upon the death of the last Duke,
into the possession of the Hapsburg Emperor Maximilian ;
and their real struggle for freedom belongs outside the
medieval period.

We have dealt with that part of medieval Europe which
has received the most attention from medieval historians ;
we must now briefly consider its " outlying " areas. The
Scandinavian countries — Denmark, Norway, and Sweden —
continued as semi-feudal kingdoms differing little, except
in being more pacific, from their Viking days. Sometimes
they were separate, sometimes two or all united under a
single king ; their importance in European history lies
mainly in their quarrels with each other and with the Hansa
towns over the Baltic and North Sea trade.

The history of Eastern and South-Eastern Europe is
difficult to grasp ; but the two words, Turk and Tartar,
are the key. Kingdoms, half feudal and half barbaric, are
to be found in Lithuania, Poland, Hungary, Serbia, and
elsewhere ; but their relations are confusing ; intermarriage
often unites one to another ; and the interest lies really in
the pressure from the East.

The early advance of the Seljuk Turks, which all but
destroyed the Byzantine Empire at the battle of Manzikert
(1076) has already been mentioned. The Christian counter-
offensive, the first Crusades, drove the Turks back, and
founded a small and shortlived European settlement in
Palestine and Syria. Thereafter a series of to-and-fro
fluctuations achieved a kind of equilibrium ; and though
the Turkish Sultan was regarded as outside the European
pale, he became less and less of a dangerous foe. But in the
middle of the thirteenth century a great movement in the
inner plains of Asia sent an invading Mongol people, the
Tartars under Jenghiz Khan, pouring into Europe. They
overran Russia, destroyed the kingdoms of Poland and
Hungary, and seemed at one time likely to reach the Rhine.

52 HISTORICAL OUTLINE

But with the death of Jenghiz Khan his enormous Tartar
Empire began to collapse, and in Europe the Tartars
retreated to Russia, which they held until, late in the
fifteenth century, a non-Tartar line of princes, of whom
Ivan III was the most important, began to build up a new
Russian kingdom centred upon Moscow. The Tartars were
not savages like the Huns of Attila ; the court of Jenghiz
Khan was intelligent and interested in the things of the
mind more than many of the courts of Christendom ; and
they introduced novelties into Europe, of which gun-
powder, mainly owing to its uses in destroying the castles
of medieval barons, is perhaps the best known. As their
stay in Europe was so short, however, their influence is
rather that of a fertiliser than of a permanent element.
A second invasion, made a hundred years later under
Tamurlane, became involved with the Ottoman Turks.

It was these Ottoman Turks who finally destroyed the
Byzantine Empire, and brought Turkey really into Europe.
In 1329 an Ottoman Empire was founded at Brusa in Asia
Minor, just across the Straits from Constantinople, and the
older Turkish power collapsed before it. Shortly afterwards
the Turks entered Europe and set about encircling Con-
stantinople. They conquered Roumania and Serbia, and
began the practice of training captured Christian children
as Moslem cavalry — these were called the Janissaries. For
a time they were checked by the Tartars under Tamurlane ;
but after his death in 1405 they resumed the attack, took
Salonica, and hemmed in the Byzantine Empire. It ap-
pealed for help to the West ; but in the fifteenth century
there was no crusading spirit left anywhere but in Spain,
and the Spaniards were busy with their own Moslems.
Constantinople fell in 1453 > anc^ shortly afterwards Greece,
Bosnia, and Albania were added to the Turkish Empire.
From this time we have to add a new State, Turkey, to the
States of Europe, though its dominions were of course never
confined to Europe, and though, owing to the religious
difference, it was for a long time scarcely accepted as a
member of the European system. Practically, however, we

MEDIEVAL EUROPE

53

54 HISTORICAL OUTLINE

may say that after the treaty of Francis I of France with
the Sultan in 1536, and still more after the failure in 1532
to stir up a Crusade for the defence of Vienna against
Turkish attack, the Turk had ceased to be an outsider,
though he was never regarded as quite a gentleman.

We have seen, as the Middle Ages progressed, national
monarchies arising or increasing in power in many parts of
Europe. The causes of this phenomenon were many, partly
the desire, as trade expanded, for uniform systems of law
extending over a wider area, partly the need for larger
political units and for stronger government. But the
principle of territorial monarchy was not lifted to the
dignity of a universal dogma until the Reformation had
come to signalise the final break-up of the medieval system.

§ 4. FROM THE FIFTEENTH TO THE
EIGHTEENTH CENTURY

Renaissance and Reformation. Many currents went
to make the Reformation. There were, first, the actual
disputes and abuses within the Church itself, which did
much to undermine men's faith in it as either a spiritual or
a temporal authority. Three Popes, mutually excommunicat-
ing one another, could hardly enhance respect for their
holy office ; and well-fed friars, poisoning cardinals, and
unchaste nuns, however few they may have been in pro-
portion to the total, served to create scandal as much then
as they would to-day. Secondly, the tendency towards
nationalism inevitably made the Pope and the Papal Court
seem more like a foreign power, and therefore intensified
the resentment felt at the taxes levied throughout Christen-
dom for the upkeep 'of the Papacy, and at the habit of
transferring legal cases (particularly those which might be
remunerative) for trial to the Papal courts at Rome.
Thirdly, the Humanists, the students of the Renaissance,
were enraged at the hostility of the Church to the new

FIFTEENTH TO THE EIGHTEENTH CENTURY 55

learning, at its disposition to brand them as heretics, and
to punish, even with death, attempts to study subjects or to
think in terms which were not inside its traditional teach-
ing ; and lastly, the economic structure was moving away
from the medieval rules which the Church had drawn up
and sanctioned. The equalitarian and communal system of
the gilds was declining ; the capitalist entrepreneur, the big
banker and trader, or partnership of bankers and traders,
was coming to the fore ; and these were unwilling to be
bound by rules forbidding high interest, forestalling, or
trading in any way they chose. Thus economic, political,
and cultural forces at the beginning of the sixteenth century
were moved by a common discontent — a discontent which
the Church did nothing to meet until it was too late.

When Martin Luther was excommunicated in 1521, few
realised that a revolution had broken out ; it was not until
the new nationalism really entered into the struggle — as
evinced by the conversion of certain princes to Protestant-
ism— that this became clear. For a brief while, also, it
seemed to some that religious reform meant freedom of
thought on religious matters ; but this was by no means
the case, as the German peasants who in 1522 embraced a
form of Protestantism rapidly discovered. They, however,
were unwise enough to include in their religious programme
certain proposals for social change which roused the wrath
of their masters and gave rise to the bloody Peasants' War
in Germany. It was the social aspect of the peasants' claims
that finally decided Luther against them, and caused him
to take the attitude that there was no right of private
judgment against princes — an attitude later summed up in
the famous phrase Cujus regio ejus religio. But, though the
Peasants' War (in which, naturally enough, the peasants
were completely and savagely crushed) was in a sense the
first of the wars of religion, its causes were so much more
social — resistance to feudal oppression, etc. — that it is not
usually so considered. For some time after Luther's excom-
munication, religious disputes continued without reaching
the stage of national or civil war.

56 HISTORICAL OUTLINE

But gradually it became clear that the passions kindled
by religious differences could not be resolved without
fighting. About the middle of the sixteenth century what
are called " the wars of religion " broke out, and raged for
a hundred years. They were ended finally, partly through
exhaustion of the combatants and partly through the
blunting of the sharp edge of religious feeling, by the
Treaty of Westphalia in 1648, which closed the Thirty
Years' War in Germany ; and it is worth noticing that,
unlike some treaties, this treaty did really put a stop to
religious warfare — though not to religious persecution.
The religious map of Europe, which was drawn in 1648,
lasted unchanged for nearly a hundred and fifty years ;
and though since then important countries such as France,
Russia, and Spain have changed their official religion,
this has happened in each case in connection with a
social revolution, the Church being disestablished or
destroyed because of its connection with a discredited
governing class. Nor has the religious change, of itself,
led to war.

The Reformation took different courses in the different
countries. In England it was, comparatively speaking,
bloodless and not much concerned with religion. Henry
VIII desired, not to change his religion, but to be free of
papal domination, and, in effect, bought the support of
his leading subjects in his struggle against the Pope by
granting them the monastery lands. After a short Catholic
reaction under Mary, during which, it is significant to note,
the sequestered property was not restored, the curious
compromise known as the Church of England was reached ;
this gave England a State Church headed by the king
and having its own ritual, which was a Protestant ritual
though with leanings towards the older forms. This com-
promise has lasted almost unchanged to our own day. In
the second quarter of the seventeenth century a belief that
the Stuart dynasty was attempting to bring the country
back to Rome was one of the causes of the Civil War, in
which Scottish Calvinists joined with the lawyers and

FIFTEENTH TO THE EIGHTEENTH CENTURY 57

middle-class men who disliked the arbitrary government
of Charles I and his advisers. But though the Court was
beaten and Charles I executed, domination by a Puritan
government did not prove any more popular ; and the
Church of England was brought back at the Restoration
and confirmed by the Revolution of 1688. Scotland, in the
sixteenth century Catholic and under a Catholic queen,
who had for a time been married to the king of France,
was converted, mainly through the efforts of John Knox,
to an extreme form of Protestantism. After the Union of
England and Scotland in 1603, Scottish influence added
strength to the reaction against Charles I ; but the English
Protestants, though pushed by the Scots, declined to be
guided by them. Nor was Scotland itself homogeneous ;
the Highlands, in the main, remained Catholic and loyal
to the Stuarts.

In France the struggle was long and bitter. The Court
was Catholic ; but the nation was fairly evenly divided
between Catholics and Protestants (called Huguenots),
and civil war raged at intervals from 1562 onwards.
Eventually, and partly owing to the extreme incapacity of
the Court, the Huguenots won the victory, and their leader,
Henry Bourbon of Navarre, became king of France as
Henry IV (1589), but only, Catholicism being still so
strong, at the price of becoming a Catholic. France thus
remained Catholic ; but, as a make-weight, the Edict of
Nantes (1598) granted the Huguenots not merely freedom
of worship, but so much civil and political self-government
as to make their communities semi-independent. After
Henry's death, the French Government became more
Catholic and more resentful of the privileged position of
the Huguenots ; and in 1685 Louis XIV revoked the Edict
of Nantes, with the result of expelling large numbers of the
Huguenots, and making France uniformly Catholic once
more. Nevertheless, it should be remembered that it was in
France, during the civil wars, that the suggestion was made
that differences in religion should be tolerated, in order that
the State might not be torn to pieces in the struggle.

58 HISTORICAL OUTLINE

In Spain, Portugal, and Italy there was no Reformation.
The Pope retained at any rate his power in his home
country ; and Spain was the great stronghold of Catholi-
cism, the source from which came the main forces defending
the Church — the Inquisition and the Jesuit Order founded
in 1534 by Ignatius Loyola. The Scandinavian countries
went over to Protestantism with little difficulty. But in the
Netherlands and Germany there were savage conflicts.
The Netherlands, at the outbreak of the Reformation, were
part of the dominions of the Hapsburg family, whose head
was the Emperor Charles V. The northern provinces, in
particular Holland and Zealand, became converted to
Protestantism ; while the southern ones (modern Belgium)
tended to remain Catholic. On the death of Charles V, his
son Philip (husband of Mary of England), did not succeed
to the Imperial Crown but did succeed to the throne of
Spain and the Hapsburg Netherlands. Philip II was
Spanish by upbringing, and as fanatical a devotee of the
Catholic Church as any of his subjects. He therefore set
about stamping out heresy in the Netherlands, reorganised
the Church there and introduced the Inquisition, thereby
causing to revolt against him even his Catholic subjects,
who were not minded to be disciplined by Spanish clerics.
The story of the fierce resistance of the Netherlanders to
Philip's policy, which his general Alva was sent to enforce
with fire and sword, has often been told ; the core of that
resistance was the maritime provinces, which faced the
drowning of their land by the cutting of the dykes sooner
than give in, and maintained themselves by trade — partly
also by piracy in the Spanish possessions, in which they were
secretly aided by England ; its head, acting under very
difficult circumstances, was William the Silent, Prince of
Orange. He was assassinated in 1584 ; but the war con-
tinued. Eventually the Catholic south divided from the
Protestant north and remained under the Hapsburgs. The
seven United Provinces of the north maintained their
resistance, and were formally freed from Spain by the
Treaty of Bergen in 1609. Holland thus became a nation.

FIFTEENTH TO THE EIGHTEENTH CENTURY 59

The application of the principle Cujus regio ejus religio to
the German-speaking lands resulted, since they were
divided among so many petty rulers, in a host of Catholic
and Protestant principalities, animated by mutual hatred ;
and the final battles of the religious wars were fought on
German soil. The original cause of the Thirty Years' War,
as this final phase is called, was a dispute over the succession
to the Bohemian throne, i.e., whether Bohemia was to be
Catholic or Protestant ; it rapidly developed into a struggle
between leagues of Catholic and Protestant States, and was
prolonged by the intervention of Gustavus Adolphus of
Sweden, leading what practically amounted to a Protestant
Crusade. Eventually it terminated in a kind of exhaustion.
The Treaty of Westphalia, as we have seen, settled the
religious map of Europe on a territorial basis, and settled it
for a very long time. But the devastation caused by the
Thirty Years' War had meanwhile put back the social
and economic development of large parts of Germany for
generations.

Cujus regio ejus religio did not mean religious toleration.
It did mean, however, that some possibility of religious
difference was recognised, since it was at any rate theoretic-
ally possible for a man to change his religion by changing his
country ; and gradually, in the Lutheran countries and in
England, the positive use of persecution began to decline.
Men suffered punishment and disability more because
their nonconformity with the State religion, whatever it
was, appeared to endanger the State, and less because it was
absolutely wicked and must be stamped out at all costs.
But one of the Reformed Churches held the contrary view
as strongly as any Inquisitor. The city of Geneva in 1541
committed itself to the administration of John Calvin, the
greatest and most ruthless of all the leading Reformers.
Calvin initiated the " Rule of the Saints," or the elect,
which demanded and fiercely enforced a strict conformity
in matters social and ethical as well as religious. Calvinism
wherever it went — and the power and logic of Calvin's
mind spread it far beyond the borders of Switzerland — was

6O HISTORICAL OUTLINE

always a persecuting creed, with the actual amount of
persecution only limited by the strength of the particular
Calvinistic Church. The civil government, in the view of the
Calvinists, should be ruled by the elect, and should enforce
the ideas and decrees of the Church.

Even to the Calvinists, however, religious toleration came
in time and by force of events. Towards the end of the
sixteenth century such people as the Politiques in France,
Robert Browne in England, and Arminius in Holland were
beginning to say that religious beliefs, if their holders were
law-abiding, ought not to be the concern of the civil
government ; the advent of the Quakers, who resisted
persecution quietly but would not persecute, added to the
general tendency, which was further reinforced as it became
slowly clear that no persecution could really stamp out,
for example, Catholicism in the Protestant States. Tolera-
tion, therefore, began to grow, more quickly in the Protest-
ant than in the Catholic countries ; but in all its growth
was slow, and the admission of tolerated persons to citizen-
ship was slower still. In England, richest and safest of all
the chief Powers, full Catholic emancipation was not
secured until 1829, and events to-day remind us how far
parts of " civilised " Europe are from even tolerating the
Jews.

The New World. Simultaneously with the Reforma-
tion and the wars of religion was taking place the political
change from the medieval system to the system of national
monarchies, to which we have already alluded, and the
economic change to what is usually called Capitalism.
Before we consider either of these changes, however, we
must briefly explain the great change in the size of the known
world which took place at the end of the fifteenth and the
beginning of the sixteenth centuries.

One of the chief causes, no doubt, which led to the dis-
covery of America was the closing, by the fall of Constan-
tinople and the growth of the Ottoman Empire, of the trade
routes to Asia. This gave a renewed impulse to adventurous

FIFTEENTH TO THE EIGHTEENTH CENTURY 6l

sailors to test practically both the old legends — probably
coming in their origin from Phoenician traders — of a lost
continent lying far to the west of Europe, and the redis-
covered knowledge that the world was round ; and the
improvement of shipbuilding, such inventions as the
mariner's compass, and the increased prosperity of Europe
during the fifteenth century, made it possible to finance
and provision such expeditions with reasonable hope of
success. But the actual motive for the earliest " voyages of
discovery " was religious. Dom Henriques of Portugal, often
called Prince Henry the Navigator, sent his first expeditions
out to West Africa as a semi-crusade, to convert the Moors
and the native Africans to Christianity. Little of conversion
was achieved ; but the expeditions and the settlements
proved profitable, both in African products such as gold
and ivory, and in African natives brought over to increase
the labour force of Portugal. The African slave-trade,
which was to prove so tremendous a social factor in the
New World, began with the Portuguese expeditions in the
latter half of the fifteenth century.

The Portuguese sailors continued their explorations
southward from the mouth of the Senegal ; they rounded
the Cape of Good Hope, and in 1598 Vasco da Gama
landed in Calicut and thus established the " Cape route "
to India and China. Meanwhile the Spanish State, under
Ferdinand and Isabella, had taken the same course as
regards the West. Columbus reached Hispaniola (Cuba) in
1492 ; the continent of America was discovered in 1498 ;
Spanish expeditions conquered Mexico in 1517, and Peru
in 1531 ; in 1519 to 1522 Magellan's voyage completed the
circuit of the globe. The immediate result of the voyage of
Columbus was the famous Papal Bull of 1493 dividing the
New World between Spain and Portugal — a bull which the
Reformation soon made inoperative. *

The Italian cities, hitherto the leaders of sea-trading
expeditions, played no part as such in the Discoveries,
though Columbus and other navigators were of Italian
birth. They were not so happily placed, geographically, as

62 HISTORICAL OUTLINE

the countries with an Atlantic seaboard ; and they were
further occupied in disputes with one another, with France
and the Empire, and in defending themselves against
Turkish aggression. But where Spain and Portugal had led,
other countries, particularly England and Holland, fol-
lowed. The Cabots discovered Newfoundland for England
in 1497 ; the Dutch sailed to Trinidad and Guiana, planted
colonists at the Cape of Good Hope, and attacked the
Portuguese in the East Indies ; and during the sixteenth
century many attempts were made to turn the flank of the
Portuguese in the East Indies by discovering a North- West
or a North-East Passage to India. The first of these goals
proved hopeless and was finally abandoned after much
loss ; the second led to the partial opening up of Russia to
western trade via Archangel. But owing to the mineral
wealth of South and Central America and to the Reforma-
tion, the main interest of the Protestant countries, in those
years, lay, not in Canada or Moscow, but in plundering
the Spanish and Portuguese monopolies. The defeat of the
Armada in 1588 was only the largest single event in a
campaign of anti-Spanish aggression.

The most noticeable immediate effects of the Discoveries
were the great improvement in seamanship and ship-
building which the long voyages necessitated, and the great
influx of precious metals from the New World, which raised
prices, and made possible a rapid expansion of trade and
manufacture. But of course the long-term effects were very
much greater. In the first place, the effect on men's minds
of the sudden doubling of the size of the known world can
hardly be exaggerated. Two new continents, to say nothing
of India and the Spice Islands, now lay open to exploitation,
and though their possibilities for the reception of settlers,
as markets, and as sources for raw materials, were only
slowly realised or exploited, they were at once sufficiently
seen to fire the imaginations and to alter the assumptions
of men, particularly those who lived on the western sea-
board. The great change in the tone and spirit of English
literature in Elizabethan days is sufficient proof of this.

FIFTEENTH TO THE EIGHTEENTH CENTURY 63

Men did not know exactly what was happening or what
was going to happen. But they knew that something was,
and that it was enormous and fundamental.

The Rise of Capitalism. Secondly, the New World
gave additional impetus to the demand for new forms of
economic organisation. This brings us to the subject of
economic change to which we referred above. It is not
possible to give any date for the introduction of" Capital-
ism " into Europe. All the features which we know as
characteristic of Capitalism (except, of course, power-
driven machinery) can be found in Europe before the
Reformation, and changes from medieval economy were
taking place before Columbus had been heard of. Never-
theless, the sixteenth century did see a rapid acceleration
towards new forms. The gild system was breaking down,
both from internal decay and from unsuitability to chang-
ing conditions. Internally, particularly in districts such as
Northern Italy and Flanders, where the gilds had been
wealthiest and strongest, bitter class-divisions had devel-
oped. The gilds had become, in effect, small oligarchies of
rich men, keeping under their control both the lesser
members of the gilds — and, in some cases, whole gilds which
were, or were thought to be, of lesser importance — and
also a quantity of hired labour which had no chance of
rising to an independent position. This had already begun
to give rise to class-struggles in gild cities, particularly
in the districts mentioned above. Nevertheless, the grow-
ing narrowness of the gild oligarchy did not make it
more flexible for undertaking the large-scale and long-
distance operations which the new conditions required.
For, though oligarchic, it was still in many respects bound
by unsuitable traditions ; it had rules as to equality of oppor-
tunity among its members which prevented a would-be
captain of industry from getting full play ; its control of the
economy of the older towns largely hindered the develop-
ment of new industries therein ; and it was still, in part at
any rate, bound by Church theories about profit, price, and

64 HISTORICAL OUTLINE

the payment of interest which seriously interfered with
a rapid expansion of its operations elsewhere.

To sum up briefly a complicated subject, what the
rising entrepreneur of the sixteenth century wanted was
(a) command of ready money for investment without
restriction in any enterprise in any place, and (b) a mobile
labour force which could similarly be employed at any
time and place without gild or feudal restrictions. The first
he secured partly through the great expansion of the cur-
rency which was mentioned above, and partly by means of
the regulated company, joint-stock company or partnership
which operated, like the English East India Company,
under charter but without gild restrictions. The second
came to him through the break-up of feudalism in Western
Europe, through the desire of the landowner to have
money rather than hinds, to run his estate at a profit rather
than to live off it in the old traditional way while supporting
a large army of labour which might defend or aid him in
private war. This tendency was most marked in England,
where a large part of the land was deliberately turned over
to the profitable business of sheep-farming, thus setting
" free " a large mass of labour for employment either in
new manufacturing enterprise or in the navy and merchant
service of Elizabeth.

Neither gilds nor feudalism, naturally, died at once.
Feudalism had received a blow from the ravages of the
Black Death in 1348-51. It had practically disappeared in
England and Holland ; but it survived, though with de-
creasing energy, in France, and was actually being intro-
duced, in the form of degraded serfdom, into Eastern
Europe (Poland in 1496, Russia in 1597, Austria in 1627).
It may be noted, however, that even Western Capitalism
had no objection to serfdom as such, as can be seen from
its deliberate introduction into Scotland in the sixteenth
century to provide labour for the Scottish mines.

The gild system in England, where it had never been very
strong, and where the power of the new capitalists was
greatest as compared with that of the Crown, was moribund

FIFTEENTH TO THE EIGHTEENTH CENTURY 65

by the end of the sixteenth century. On the Continent it
remained, varying in strength and importance in differ-
ent places, until after the French Revolution and Napo-
leon's conquests. But the future was not with it.

The new Capitalism, in objecting to gild regulation,
tended also to object to the old system of town government
and customary law, which was so bound up with it. This
did not mean, however, that it desired no law at all, but
that it desired law more simple, more uniform, more
suited to its requirements, and operating over a wider area.
Greater uniformity might be secured by the reversion to
legal systems derived in part from the old Roman law —
which did, in fact, take place to a considerable extent ; but
the widening of the area of operation involves the creation of
an effective authority which can enforce the law. This fact
placed the new Capitalism in general upon the side of the
national State as against the small, traditional, and cum-
bersome medieval unit. Put concretely, the capitalist
wanted the king's writ and the king's arms to protect his
operations, and he did not, fundamentally, care whether
the king was acting in accord with Christian principles or
not, so long as he gave security.

The Growth of States. We have already given an
account of the rise of the national monarchies in most
European countries, and there is little to add to it for the
century of the religious wars. Three things are of sufficient
importance to merit separate mention : first, the disap-
pearance, as free States, of all but a few of the cities of the
Hansa League in the Baltic and the North Sea, partly
because of economic decline after the Discoveries and the
fall of Constantinople had lessened the importance of trade
between the Baltic and the Levant, and partly through
conflict with the national monarchies of Sweden and
Denmark ; secondly, the rise of Prussia, united with Bran-
denburg in 1618, to a position among the German States
only second to that of Austria ; and thirdly, the expansion
of Russia to the East. Russia, not being a member of the
CR

66 HISTORICAL OUTLINE

Roman communion, was unaffected by the Reformation ;
but during that period she became appreciably more like
the Russia we know to-day. The Tsars of Moscow, par-
ticularly Ivan IV, drove the Tartars steadily back, and
incorporated the Tartar principalities of South Russia, as
well as the older city-states, such as Pskov and Nijni-
Novgorod and the district of Livonia, in their empire.
Later in the century a great colonisation of Siberia took
place, and showed, as has been shown both before and
since, that the Urals do not in effect form any barrier
between Europe and Asia. The successors of Ivan had to
face a certain amount of semi-feudal revolt, which is
generally connected with the name of Boris Godunov ;
but early in the next century the empire was secure, and
the first Romanov succeeded in 1613.

More important than these, however, was the appear-
ance and working out of a theoretical basis and justifi-
cation of the modern State (which has profoundly influenced
thought and action ever since), and the defence of civil
government upon lines which omitted the religious argu-
ment altogether. Curiously enough, this justification first
appeared in a country which did not achieve a national
State for hundreds of years. Machiavelli the Florentine in
1513 completed The Prince, which is a defence of the civil
State — and of the employment by it, in order to secure
social order, of methods which would be condemned by
ordinary standards of personal morality — by arguments
which are wholly secular. The State must exist, and must
govern, by any and every means, for the sake of law and
security ; and that is all that matters. This is the essence of
Machiavellianism, and its simplicity has largely obscured
both its fundamental nature and the completeness of its
break with the past. Except for a brief period during which
a childish doctrine" called " the divine right of kings "
attempted vainly to find a new religious sanction for
national monarchies, no defender of absolutism from
Hobbes to Mussolini has ever gone back to the arguments
of religion. Though they may have added mystical and

FIFTEENTH TO THE EIGHTEENTH CENTURY 67

philosophic frills of varying value, they are all in essentials
Machiavellians.

Some historians date the birth of modern Europe from the
Treaty of Westphalia, some postpone it to the outbreak of
the French Revolution or the battle of Waterloo. In 1648
there is, at any rate, much of modern Europe to be seen.
The States which made the Treaty were all, except the
Emperor, independent self-governing States in the modern
sense — and the Emperor, though he survived, survived with
sovereignty much curtailed. Their representatives met, for
the first time, in a representative congress upon political
questions. Its acts were drawn up in Latin as being the
international language — this was subsequently replaced
by French — and such diplomatic questions as the order
of precedence among States were settled for the first time.
Modern diplomacy, in fact, was really born at the signing
of that treaty, a fact which may have some bearing on the
extreme obsolescence of modern diplomacy.

The main difference between 1648 and 1815, considered
as birth-dates for the modern world, lies in the idea of
democratic nationalism, the creature of the French Revolu-
tion. National States, as we have seen, appeared in full
strength during the Reformation period ; but they were,
with but few exceptions, dynastic, autocratic States, among
which territories, with their accompanying populations,
were distributed according to strength, the limits to the
acquisition&of any particular potentate being set by his own
weakness or the willingness of his neighbours to combine
against him. The principle of Luther with regard to religion
was transferred to politics as religion waned, and it was not
conceived that the common people had any right to choose
in what national State they were incorporated, though it
was observed, of course, that in certain cases the rule of an
alien State might as a fact be so unpopular as to lead to
rebellion — as, under any form or theory of government, a
particular ruler may prove himself so obnoxious that he
gets deposed or assassinated. No political system of any kind

68 HISTORICAL OUTLINE

can deny the possibility, though it may deny the right, of
insurrection. The revolt of the United Provinces, described
in a previous section, is a clear case in point. Philip of
Spain was an alien to the Dutch ; but it was not as an alien
primarily, but as an oppressive and unpopular alien, that he
succeeded in uniting against him all classes of his Dutch
subjects in a resistance which had in the end to be recog-
nised as a fact. There was also a recognition of nationalist
feeling in certain of the territories of Eastern Europe
which had been conquered by the Ottoman Empire
(notably Serbia) ; but this was a recognition of religious
rather than national oppression. It was as Christians held
down by infidels rather than as Serbs held down by Turks
that their inhabitants claimed sympathy. Nationalism, in
the modern sense, together with political democracy, was
taught to Europe by the French Revolution ; and, except
within the Soviet Union, the years since Napoleon seem
only to have increased its strength.

The outstanding features of the hundred and fifty years
which followed the Treaty of Westphalia are, first, the
development and crystallisation of the English social
system to something very nearly resembling its present
form ; second, the great changes in the overseas affilia-
tions of the different countries ; third, the quarrels of the
autocratic States in Europe, and the various attempts at
hegemony, of which the French is the most important ;
fourth, the beginnings of those ideals of democracy and
equality which shaped, though they did not make, the
French Revolution ; and fifth, the economic changes which
were taking place above all in England, and which,
speeded up to a sudden and epoch-making extent, turned
rapidly into the machine age.

England was by far the most important exception to the
statement that the national States of the seventeenth cen-
tury were autocratic. Not that the Tudors and Stuarts
would not gladly have been autocrats, but they could not
for lack of cash. Henry VIII having in effect created a rich
bourgeoisie as a price for assistance in breaking free from the

FIFTEENTH TO THE EIGHTEENTH CENTURY 69

Pope and becoming a power in Europe, in which he received
the hearty co-operation of Wolsey with results unfortunate
both for Wolsey and the Crown, his successors had to put
up with the situation, and either rule in accord with the
views of a Parliament of squires and merchants or lose
their own crowns or heads. Charles I, appealing to tradi-
tional loyalties, kept up a fight for some time ; but he was
beaten as much by the power of the City of London as by
anything else ; and in 1688 it was actually the City which
called William III to the throne. Thus was the consti-
tutional monarchy in England firmly established, safe-
guarded by the king's coronation oath, the financial control
of Parliament, and the refusal to sanction a standing
army ; and the merchants and landowners who had made
the Revolution agreed not so much to share the spoils of
government as jointly to receive and distribute them. The
new system was fastened firmly on the country by the in-
stitution in 1694 of the Bank of England and the National
Debt, which gave to the leading Whigs a direct interest in
the financial and political stability of the country. It is
significant that, after the death of Queen Anne, few of the
English Jacobites raised a finger or put their hands in their
purses to help either of the Pretenders ; and after 1 745 the
Government, by encouraging road-building and by a
savage clearance of the economically backward Highlands,
insured against a second repetition of the invasions.

More interesting, perhaps, is the stereotyping of the Eng-
lish class system somewhere about the reign of Anne. A
modern reader, studying either Locke, the father of modern
English political thought, or Defoe, the first modern
novelist, must surely feel that here is the modern English-
man at last, a very different fellow from passionate con-
troversialists like Milton or Bunyan, or the florid, word-
loving romancier of the seventeenth ceritury. Mind and tem-
per and language, all seem to be changed. How has this
happened ?

The clue to the English class system is that, owing to the
comparative weakness and the early break-up of feudalism,

7O HISTdRICAL OUTLINE

the various sections of the bourgeoisie — landowners, mer-
chants, and the higher ranks of the army and the profes-
sions— were all fused together, often, indeed, all represented
in the same family ; that the landowners, as a class, many
of them being merchants by origin, treated their land as a
property to be improved and made to pay, not purely as an
endowment to be lived off, while the merchants (who fre-
quently married into the families of the landowners),
tended to put their money into the land, either by contri-
bution or by purchase. Sheep, further, provided a direct
economic link between the merchant and the landowners ;
the landowner bred the sheep, whose wool was the mer-
chant's stock-in-trade. England, therefore, never developed
a functionless aristocracy, as did eighteenth-century France
or nineteenth-century Russia, and there was no real an-
tagonism between the landowning and merchant classes.
A merchant risen from humble origins was readily accepted
into the governing class, and there was no general bar to
the acceptance of a manufacturer, though in the days of
the industrial revolution the manufacture of manufacturers
took place with such rapidity that they could not be ab-
sorbed with ease, and a situation of momentary difficulty
was created.

In Defoe's time, however, there was this wealthy and
homogeneous governing class, sharing the government out
among its members, with the Crown as a useful asset, dif-
fering at times over the spoils of government and details of
administration, but not at all in fundamentals. Below them
was a steady middle class, consisting on the one hand of
small yeomen and tenant farmers, and on the other of
small tradesmen and manufacturers, of whom Defoe was
one, disposed, like the English middle class at all times, to
grumble against its rulers, but on the whole quite con-
tented. Below, again, was a populace of cottagers, hired
labourers, mine-workers, cloth-weavers, artisans and un-
skilled labourers in the towns, of whom no one cared, save
for the fear of strikes or bread riots, whether they were con-
tented or not. In fact, their standard of living was, during

FIFTEENTH TO THE EIGHTEENTH CENTURY *Jl

the major part of the eighteenth century at all events, rising
sufficiently to keep them in acquiescent subjection.

This society was governed locally by Justices of the Peace,
and in some of the old towns, also by closed and generally
unrepresentative corporations deriving from ancient char-
ters ; and nationally by a Parliament whose unrepresenta-
tive character had been obvious even by Cromwell's day. A
surprising fact, to foreign observers, is that this Parliament
was suffered to continue to exist in that form right until
1832. The explanation is quite simply that as a governing
body it worked, and worked reasonably to satisfaction,
until nearly the end of the century. After the accession of
George III, it became for a time clear that a Parliament of
unrepresentative, corruptible objects might be an incon-
venience if the king decided to use it against the general
will of the governing class, and proposals for reform there-
fore assumed some importance. But the outbreak of the
French Revolution frightened the reformers into realising
that an unrepresentative Parliament was far preferable to
no Parliament at all, in the sense in which they had known
it ; and reform was therefore postponed until fear of revolu-
tion had died away, and the inconvenience of a Parliament
in which the manufacturing areas were almost entirely un-
represented, and too high a proportion of the voting
machines were, or could be, at the command of too few
persons, drove the manufacturing classes to join with the
radicals and their own employees in a demand for reform.
Which reform, though drastic enough to scandalise its op-
ponents nearly out of their wits, proved, when applied to
the British class-system, to involve quite small immediate
alterations, and has been able to survive, with alterations
in electorate and minor adjustments of procedure, right to
the present time. Students, and admirers, of British " Par-
liamentary democracy " too often foi^et that the phrase
should be pronounced with the stress on the word Parlia-
mentary, not on the word democracy.

72 HISTORICAL OUTLINE

Colonies and Empire. This book is not intended to trace
the history of Europe overseas, nor should we have space to
treat it adequately. But the possession, by European Powers,
of various territories and interests outside Europe so much
affects their policy and therefore the course of modern
European history, that the facts of the case must be briefly
taken into account. The main feature of our present period
is the rapid decline of Spain, the pioneer in New World ex-
pansion, and, to a less degree, of Portugal (from 1580 to
1640 Portugal was under the Spanish Grown) ; and the rise
oi England, Holland and France as colonial Powers, the
first of these becoming, after vicissitudes, by far the most
important.

The question of Spain can be very shortly dealt with. As a
State, Spain declined and declined from Philip IPs time
onwards. The defeat of the Armada was not an accident,
though luck played a part in it, as the winning of the toss
may assist a cricket team, but essentially the defeat of an in-
efficient by an efficient Power. This was due in part to
foolish economic policy, which rendered the bullion of the
New World a loss instead of a gain to the country which
brought it in, prevented the growth of manufacture, and
impoverished the agriculture of Spain ; and partly to the
bigotry of the Church in Spain and its close control over
government policy. These two factors combined disastrously
at times, as when in 1609 seventy thousand persons of
Moorish descent, including many of the most productive
elements of the Spanish population, were driven out of
Spain by order of the Church and salved by the Turks. But
the signs of this decline were far more visible in European
politics than in America, partly because the very economic
stagnation and poverty drove masses of Spaniards (50,000,
it was said, in one year) to emigrate, and so to assist in de-
veloping and retaining the New World possessions. Spanish
America was still open to plunder, but Spain retained all
her colonies until the nineteenth century, and even her ex-
clusive right to trade with them until the Treaty of Utrecht
in 1713, when it was invaded by England. Portugal in the

FIFTEENTH TO THE EIGHTEENTH CENTURY 73

seventeenth century lost the bulk of her East Indian pos-
sessions to the Dutch, but retained those on the African
coast, and (except for a brief interval from 1624 to 1642)
the vast territory of Brazil.

As is well-known, the colonial possessions of England,
until after the Seven Years' War (1756-1763) consisted
mainly of the North American colonies, founded at various
dates from 1621 onwards, Newfoundland, the sugar islands
of the West Indies, of which Jamaica was the most import-
ant, and certain trading stations in other parts of the world,
notably on the Indian and African coasts. The French pos-
sessions were somewhat similarly distributed ; French
Canada and Louisiana in North America, sugar islands
such as Guadeloupe and Martinique, and African and
Indian trading stations. The Dutch, on the other hand,
were all over the place — in New Amsterdam on the North
American continent, in Brazil in South America, at the
Cape of Good Hope, in Van Diemen's Land at the Antip-
odes, and in various places in the East Indies, from which,
in the middle of the seventeenth century, they were grad-
ually ousting the Portuguese. None of these possessions,
however, was nearly as important as the Dutch carrying
trade, which, in the early stages, was far greater than that
of the English. The Dutch were the international carriers ;
they were all but born on the water, and their ships, par-
ticularly after they were finally freed from Spain, went
everywhere. Only gradually did England catch up to a
point at which she could become a rival. In the early days of
the English Protectorate, it is interesting to note, Cromwell
made a proposal to the Dutch for the federation of the two
Protestant, maritime, and now republican Powers — a pro-
posal which was favourably received at first, but broke
down, not altogether surprisingly, upon the question of the
headship of the new federation. The 'English reprisal was
the Navigation Act of 1651, which forbade English or
colonial merchandise to be carried in any but English
bottoms. This indicates at any rate some strength in English
shipping ; yet sixteen years later the Dutch fleet was in the

74 HISTORICAL OUTLINE

Medway, coolly burning English ships at their moorings.
By the end of the century, however, England, in spite of
having accepted a Dutch king, had definitely gained the
upper hand ; but this was due less to any inherent or ac-
quired superiority than to increasing material wealth, and
still more to her island position freeing her from constant
fear of invasion and from the necessity of Continental en-
tanglements. England could afford to keep out of Con-
tinental wars until it suited her interest to take part ;
Holland could not, and the economic strain eventually
wore her out.

In the eighteenth century, then, the colonial struggle
transfers itself to England versus France. In that struggle
France might be held to have many advantages ; she was
still the richest country ; her colonies enjoyed (though in-
termittently, it is true) more support from the home Govern-
ment than did the English possessions in America and
India ; and her colonists seemed in many cases better able
to secure native goodwill. The English American States, for
example, whose record in treatment of Indians (with ex-
ceptions such as that of the Quakers who ruled Pennsyl-
vania) is somewhat unsavoury, found that the French were
far better trusted, and lived for long in terror of a French
encirclement from the St. Lawrence to the Missouri letting
loose raging tribes of Indians on their rear.

Nevertheless, the French Government, slipping down into
the financial morass which preceded the Revolution, was
unable both to hold an Empire and to carry out its European
designs. Dupleix in India, and Montcalm in Canada, were
both left without adequate support. In the one annus
mirabilis of 1 759 both India and Canada were lost, and the
French colonial empire reduced to very small dimensions.
(The present empire is nearly all post-Napoleonic.) Eng-
land became pre-eminently the colonial Power ; the end of
the eighteenth century saw Australia and the early nine-
teenth New Zealand painlessly becoming possessions of the
British Crown ; and from 1815 onwards Great Britain
takes part in European peace conferences with her eye on

FIFTEENTH TO THE EIGHTEENTH CENTURY 75

territorial acquisitions not in Europe but at the ends of
the earth.

The political history of the Continent after 1648, for at
any rate half our period, centres round the name of Louis
XIV. The government of Henry IV and his minister Sully
had successfully united France and repaired the economic
losses of the wars of religion. Following upon them a succes-
sion of able Ministers reduced the nobles and the towns to
complete dependence upon the king — the States-General,
the only body in France resembling the English Parliament,
met in 1614 for the last time before the Revolution ; and
Louis XIV, at his accession in 1643, found himself the
absolute ruler of the most populous kingdom in Europe,
with the highest and most stable tax revenue, the largest
army, the most experienced generals and diplomatists, and
the highest reputation for art and culture. Armed with all
these assets, the Roi Soleil set out, not long after the conclu-
sion of the Treaty of Westphalia, to dominate Europe. The
principal plank in his programme was to be the uniting
of France with Spain, which was already in a state of
decline, and whose king was a sickly imbecile unlikely to
have children. This main object, however, though his
generals made minor conquests upon his eastern borders,
Louis was unable to achieve, mainly through the resistance
of Holland. The Dutch intervened first in 1668, when he
was invading the Spanish Netherlands, and the ensuing
forty years were occupied in a series of coalitions organised
against him by the Dutch, much as Pitt and his successors
subsequently organised coalitions against Napoleon. The
accession of William III, by bringing England into the
war, finally settled it ; the victories of Marlborough at
Blenheim and elsewhere (whose importance Southey's
poem seems rather to under-estimale) depleted Louis'
resources and forced him in the Treaty of Utrecht to give
up], both his conquests and his pretensions to Spain. Two
years later he died, not without having drained the French
exchequer to exhaustion. Meanwhile Austria, which had

76 HISTORICAL OUTLINE

acquired Bohemia in 1526, after a war with the Turks
conquered from them in 1699 the great area of Hungary,
and thus was formed the Austro-Hungarian Empire which
lasted until 1918, and gained, in 1713, Belgium, part of
North Italy, and Naples. Of the German Powers only the
united State of Brandenburg-Prussia (which owed a good
deal to the wise economic policy of its rulers) was at all
comparable to it ; and Prussia was still much poorer and
weaker than its neighbour.

Late in the century, an attempt somewhat similar to the
French attempt was made in Eastern Europe by the free-
booter Charles XII of Sweden, who endeavoured to make
the Baltic into a Swedish lake, to overrun Poland, and
even invaded Russia. Here, however, he met with the
obstacle of Peter the Great, who in 1685 had begun his
colossal task of westernising Russia. In that encounter
Charles was completely worsted, and by his death Sweden
had lost nearly all her possessions on the Baltic except
parts of Finland. Following up his advantage, Peter the
Great made an agreement with the king of Poland which
gave him some control over that country. In his reign, and
still more in that of Catherine II (1762-1796), another
westerniser, Russia definitely becomes part of what is sub-
sequently called the Concert of Europe. One may also
note that a small kingdom, the kingdom of Sardinia, con-
siderably increased in importance through the Treaty of
Utrecht. This is of significance for later European and
Italian history.

The Treaty of Utrecht left France beaten, but with
French territory unimpaired ; and the remainder of the
eighteenth century, until the Revolution, is occupied with
dreary diplomatic marchings and counter-marchings which
sometimes issue in war. Three things only are of importance
during the whole pfcriod — the survival of the kingdom of
Prussia under Frederick the Great from attack by Austria,
Russia, and France, and its acquisition of Silesia (a territory
nearly as much disputed as Alsace-Lorraine) from Austria ;
the alliance between France and Austria which may be

FIFTEENTH TO THE

remembered by the marriage of JWafley-^ntoinette T
Louis XVI ; and the first partition! of {Poland ,
Prussia, Russia, and Austria, made in ry/2t

§ 5. THE FRENCH

AND AFTEW

THE FRENCH Revolution did not fall ou
as regards its circumstances or the theories whicngaed it.
As regards the circumstances, the most important are the
financial bankruptcy caused by the long wars (and, to a
much less extent, the extravagance of the Court and the
governmental machine), the effects of an absolutist policy
as regards trade and industry, and the persistence of an
outworn feudalism and a functionless aristocracy. The
natural resources of France were such that there was no
real reason why industry and trade should not have
developed there fast during the seventeenth and eighteenth
centuries, and so created a solid basis on which the Con-
tinental wars could have been fought, as England fought the
wars with Napoleon. And so, from time to time, they were
developed. But trade and industry in France, as every-
where except in England and Holland, were under despotic
control, and were therefore liable to sudden changes of
policy either from political reasons or from pure caprice.
The classic example is the revocation of the Edict of Nantes
in 1685, which upset the entire silk industry by banishing
thousands of Protestant textile workers from France. As a
result, French industry, like French colonial expansion,
was subjected to alternative over-stimulation and neglect,
and magnificent opportunities were lost. Further, the
remains of the medieval system were Admirably calculated
to hamper, discourage, and infuriate that class of would-
be merchants and manufacturers whose support was of
such importance to the government of eighteenth-century
England ; while at the same time the continuance of feudal
dues and exactions for the support of the Church and a

78 HISTORICAL OUTLINE

landed aristocracy which, whether it resided at the Court
or on its estates, did on the whole nothing to earn its keep,
was felt to be more and more oppressive. The business of
government, as in the Roman Empire, became more ex-
pensive as the taxes grew harder to collect ; by the reign
of Louis XVI the State finances were in hopeless confusion,
and as the privileged classes refused to be taxed to meet the
deficit, the only remaining expedient was to call together
the States-General. When the Third Estate of this body
(the Commons) refused to cast their votes as a separate
estate and so be outvoted by the remaining two estates of
nobles and clergy, the Revolution had begun.

To a considerable extent, at any rate, these small bour-
geois (many of them lawyers and lesser clergy) who made
up the Third Estate knew what they intended to do as
well as what they were doing. The Revolution did not
happen without a great deal of discussion and propaganda,
some of it native, some of it derived from English and
American sources. The idea of the Rights of Man was not
new in the eighteenth century ; in some sort, the idea of a
limit beyond which no Government has a right to interfere
with its subjects goes back beyond the Absolute State to
medieval times, and it turns up with great vigour in the
English Civil War. But after 1688, when the government
in England ceased to be generally obnoxious, this idea
became more and more negative, a mere statement that
there were certain points beyond which government
became tyranny. Discussion did not altogether cease ; but
it became quiet and inconspicuous until the revolt of the
American colonies gave a new and positive content to the
idea of natural rights.

The North American States, separated from Great
Britain by three thousand miles of sea and united to it only by
a vague loyalty to the King and a Crown governor whose
hopes of a quiet life and a prosperous return depended
largely upon his conciliating the residents during his term of
office, had been practically free to evolve their own forms
of political machinery, and many of them were composed,

THE FRENCH REVOLUTION AND AFTER 79

like the Puritan settlements, of individuals who had fled
from England actually to escape from interference with
what they conceived to be their natural rights. Feudalism,
chartered towns, and other varieties of privilege had never
been found in America ; on the contrary, political democ-
racy and complete religious toleration appeared there long
before they were seen in Europe.

Under these circumstances, as soon as the conquest of
Canada had removed the need for British protection
against French aggression, the control of the British Parlia-
ment began to be felt by the colonists as an interference
with their natural rights. The British Government would
not make concessions, and a dispute which began over an
unimportant tax resulted, in a few years, in open and
successful war, and the resounding phrases of the Declar-
ation of Independence. " We hold these truths to be self-
evident ; that all men are created equal ; that they are en-
dowed by their Creator with certain inalienable rights ; that
among these are life, liberty, and the pursuit of happiness.
That, to secure these rights, governments are instituted
among men, deriving their just powers from the consent
of the governed ; and that, whenever any form of govern-
ment becomes destructive of these ends, it is the right of
the people to alter or abolish it, and to institute new
government, laying its foundation on such principles, and
organising its powers in such form, as to them shall seem
most likely to effect their safety and happiness."

In England, these words struck chords in the minds of
Whigs like Burke and Fox and Radicals like Paine and
Priestley, and revived on all sides a demand for the reform
of Parliament so as to make it more in accordance with
natural rights ; but in France the effect was far greater.
In France, the government had long been obnoxious to
" enlightened persons " as well as to those who were
directly oppressed and inconvenienced ; and the discussion
of natural rights and the prevention of arbitrary oppression
had consequently never died down. Many of the ideas of
Jefferson and others of the American revolutionists were

8O HISTORICAL OUTLINE

actually derived from discussions in French circles.
Now, in 1776, the doctrine of the Rights of Man was
actually proclaimed by a nation under arms as its primary
objective. The French Government, in revenge for its defeat
in the Seven Years' War, sent help to the rebels ; many
future revolutionaries, such as Lafayette, went out with
the French reinforcements, and saw with their own eyes
this nation not merely victorious but preparing to translate
the Rights of Man into constitutional terms. (Incidentally,
they mostly returned to France before some of the difficul-
ties of this translation were realised.) American independ-
ence was not the only factor in the situation. In 1764
Rousseau, the most inspiring and influential of French
thinkers, had published his Social Contract, and all over
Europe a new consciousness of the existence of the masses
was arising. John Wesley discovered that even colliers had
souls to be saved ; movements towards educating the
ragged poor, towards improving the lot of felons and sus-
pected persons, even towards recognising the humanity of
slaves, were being born ; even such autocrats as Joseph of
Austria and Catherine of Russia were fain to call them-
selves " enlightened despots," and, while abating no whit
of their despotism, did at any rate do something to mitigate
brutalities in its employment. At the same time, Jeremy
Bentham, hardly out of Oxford, found in a book of phil-
osophy the phrase " the greatest happiness of the greatest
number," and set about applying that devastating criterion
to the existing institutions of the world. Bentham, it is true,
cared nothing for the Rights of Man ; he thought natural
rights " nonsense," and natural and imprescriptible rights
" nonsense upon stilts " ; but his insistence on the value of
the individual and his happiness gave additional arguments
for the destruction of systems which cared for neither. In
1 789 it was possible,*as it would not have been possible a
century earlier, to conceive of the Rights of Man as some-
thing at once universal and positive, to imagine a state of
society in which the whole people should really partake in
the government — and to set about bringing it into being.

THE FRENCH REVOLUTION AND AFTER 8l

Not that the delegates to the assembly of the Third
Estate intended all this when they met. They aimed first
at the redress of their most glaring grievances, and
secondly at the abolition of privilege and the establishment,
probably, of something like English constitutional govern-
ment. Even at this early stage, though, the people of Paris,
by destroying the Bastille and forming a National Guard,
had proved themselves a somewhat alarming ally ; and
shortly afterwards the peasants throughout the country set
about liquidating privilege in their own way, by burning
the chdteaux and expelling their owners. The new constitu-
tion and the disestablishment of the Church (the greatest
owner of privilege) were pushed rapidly on ; and when
the Court, in fear, appealed to other dynastic Courts to help
it in restraining the excesses of its subjects, and the Courts
of Austria and Prussia, albeit slowly, responded, the Revolu-
tion was in full swing. Republican armies appeared in
answer to the foreign invasion, and as the usual economic
and financial difficulties of revolution showed themselves,
and the inevitable counter-revolution began in such places
as Lyons and the Vendee, so the right wing and moderate
revolutionaries found themselves pushed out by the
Jacobin left, who were determined at all costs to save the
Revolution by strong measures, while pushing it as far as
it would go. It would not, however, go beyond political
equality ; its heads were men of the middle class, who
wanted the abolition of privilege and the introduction of
equal political rights. So, though the constitution of the
First Republic gave political equality to more persons than
did the English Reform Act of 1832, any attempt to follow
this with economic equality was promptly crushed, as in
the case of Babeuf's Conspiration des Egaux (1795).

The French revolutionary wars began in 1792. At first
beaten, the armies of the Revolution then had a brief
period of success ; but, as the wars, particularly after the
execution of the king and queen, were more fiercely
prosecuted, and as other Powers, such as England, took a
hand, the revolutionary forces began to crumble. Military

82 HISTORICAL OUTLINE

considerations came to override others, and the Jacobin
Government was superseded, first by the Directory, then
by Napoleon as First Consul, and finally by Napoleon as
Emperor. Even after his first rise, Napoleon had to spend
some time in pulling his forces together and reorganising
them, in fighting rearguard actions and indecisive actions ;
it was not until after the battles of Marengo and Hohen-
linden (1800) that the French Revolutionary army was
really recognised as a new and formidable force. The
immediate result of these battles was the conclusion of
peaces, or rather truces, between Napoleon and his chief
opponents.

Napoleon. From this point dates the real drive of the
French Revolution into Europe, which, however, soon
becomes indistinguishable from the military and dynastic
ambitions of Napoleon himself. As has so often been the
case in the course of history, Napoleon's foreign policy
was disastrously out of date, and in his later years at all
events was simply an insane revival of the projects of Louis
XIV. The idea of proselytising the Revolution by arms,
however, did not begin with Napoleon ; it began early, as
a counter to the invasions, and in 1 793 the French drove the
Austrians out of Brussels, never effectively to return. Nor
should it be forgotten that where the French armies went,
fch/e principles of the Revolution did in fact go with them.
Feudalism, in the conquered countries, particularly in West-
«ern Germany, was brought to an end ; republics were set up
an such places as Holland and the Lombard plain ; the Code
Napolion was introduced. The legal uniformity which is to
be found to-day over large parts of the Continent is due to
the French invasions.

At first, except fof the defeat at Trafalgar, which con-
clusively showed that French command of the sea was not
to be achieved, Napoleon carried all before him, defeating
Prussia and Austria, seizing the latter's Italian possessions,
setting up vassal kingdoms in Holland, Naples, and all over
Western Germany, destroying the Holy Roman Empire,

THE FRENCH REVOLUTION AND AFTER 83

84 HISTORICAL OUTLINE

capturing the Pope, and overrunning Spain. But 1809, the
year of Murat's entry into Spain, proved the highest point
of Napoleon's power. In Spain the new French nationalism
raised up a nationalism equally persistent, and the Penin-
sular War drained him of money and men. Unable to beat
England at sea or to do more than make empty threats of
invasion, he was equally unable to conquer her economic-
ally, for the boycott of English goods introduced by his
Continental System was countered by the Orders in Council
cutting off supplies, which so injured his allies that he was
obliged to connive at extensive smuggling in his own
interests. Further, his Continental conquests at length
brought him into conflict with the Tsar, and led to the
disastrous march on Moscow (1812). From Moscow check
after check caused him to fall back until his abdication and
the return of Louis XVIII, under the protection of the
Allies, in 1814. Even then, after all the strain of war, his
personal popularity was such that he was able to return and
fight the campaign of Waterloo ; but the immediate effect
of the Hundred Days, for France, was a severe stiffening of
the terms of peace, and the fastening upon her of a Bourbon
regime which was responsible for much of the troubles of
the next thirty years.

Napoleon's wars have done much to obscure in the minds
of historians and students his civil changes ; yet these were
in fact no less great and more lasting. Mention has already
been made of the Civil Code of 1802-3, which was in fact
a reaffirmatior in clear and definite terms of the social
changes of the Revolution, though to a certain extent its
political institutions, such as a greatly restricted franchise,
were borrowed from the old regime. But, at the same time,
Napoleon found opportunity enormously to improve the
road and canal system of France, to institute an effective
system of taxation, and to encourage industry as it had not
been encouraged for a long time past. The prosperity and
brilliance of France, particularly of Paris, just after the
1802 Peace of Amiens, were sights which the world came
to see. All this, however, was achieved before the great

THE FRENCH REVOLUTION AND AFTER 85

invasions began ; if Napoleon had not been " the slave of
history," Germany would have remained longer in the
bonds of feudalism ; but France would have been erorm-
ously the gainer.

England and the Industrial Revolution. Three causes of
Napoleon's failure have already been mentioned — the failure
to control the sea, the provocation of Spanish nationalism,
and the attempt to make a French hegemony in Europe. To
these a fourth should be added — the economic and financial
strength of Great Britain, which enabled her, not only to
maintain her sea power intact both in open conflict, as at
Trafalgar, and by such measures as the repeated destruction
of the Danish fleet, but also to keep the war going on a
number of fronts (sometimes with singular ill-success) and
to finance, with money and supplies, a perpetual opposition
among other Powers. The European coalition which finally
forced Napoleon's abdication is called by historians the
Seventh Coalition ; had it not been for England's persistent
pressing and England's financial power, the Seventh Co-
alition, and indeed several preceding coalitions, might
easily never have been formed.

This economic power of England was chiefly the result of
the economic development of the preceding century. The
extraordinary growth of the last quarter of that century,
which historians call the beginning of the industrial
revolution, has obscured the progress made during the
earlier years, but Defoe, writing of England about 1725,
has no doubt about it. Again and again, in his Tour through
England, he refers to the amazing growth of such towns as
Liverpool in the previous twenty or thirty years.

Commerce, of course, rather than industry, showed
the greatest increase during the earlicfr part of the period.
Everyone has heard of the mass of trade done with
distant parts by the great companies such as the Hudson
Bay Company, the Turkey Company, the British West
African Company, and above all, the East India Company.

86 HISTORICAL OUTLINE

(In the latter part of the eighteenth century the fortunes
made by servants of the last-named — the ** nabobs " —
actually played no small part in the social and political
history of their native land.) Old ports, such as Bristol,
and newer ports such as Liverpool and Glasgow enormously
increased in size and importance ; and there was an appre-
ciable change in the diet of the people owing to greater
and more varied imports of foreign food, such as tea,
oranges, coffee, and cheap sugar. The English pudding —
now, as some think, unfortunately common — was born
under Queen Anne.

But manufacture was also proceeding rapidly, helped by
greater financial stability and by the improvement of roads
and the building of canals. Coal, mined in increasing
quantities since Elizabeth's day, was becoming an im-
portant industry, and was steadily replacing the depleted
timber of Sussex and Kent in the manufacture of iron ;
metal goods of all sorts were being made in such centres as
Sheffield and Birmingham : and there was a whole host of
minor industries, in addition to the great woollen trade
which, right up to the outbreak of war, was still the back-
bone of England's foreign trade. Shipbuilding was improv-
ing fast. Meanwhile, scientific experimentation (the Royal
Society received its charter from Charles II) was helping
to prepare the way for more rapid changes.

After the first quarter of the century, the agricultural
experiments began that were so shortly to change the face of
agricultural England. " Turnip " Townshend, Bakewell,
and later Coke of Norfolk and other large landowners
introduced methods of crop rotation and systematic stock-
breeding which enormously increased agricultural pro-
ductivity. (The value of Norfolk land was said to have
increased tenfold between 1730 and 1760 alone.) At once
landowning and lai*ge-scale farming became profitable
propositions.

This had two results. In the case of stock-breeding there
was much enclosure, resembling somewhat the enclosures
of the sixteenth century, of commons for pasture. But in

THE FRENCH REVOLUTION AND AFTER 87

arable the change Was more far-reaching. The " engros-
sing " of arable land into large farms under a single direc-
tion involved the abandonment of the old strip system of
cultivation, where it still existed, of the common meadow
and pasture of the village, and in fact, of the communal
village life as it had existed since the Norman Conquest
and before ; and the provisions of the various Enclosure
Acts usually resulted in the small man getting no part in the
enclosed land. This enclosure movement was in full swing
when the war broke out ; it secured, generally speaking, a
considerably increased level of production ; and the high
war prices, coming on top of the increased production,
sent up enormously the monetary yield of agricultural
land. For a while, farming and land-owning became highly
profitable pursuits ; and as for the dispossessed cottagers
and small yeomen, few cared what happened to them as
long as parish doles were available out of the farmer's
surplus profits to prevent them actually reaching the point
of riot. If their services were not required as agricultural
labourers or for stone-breaking on the roads, perhaps they
could go into the army, or into the new factories.

For by the outbreak of war the manufacturing age was
beginning to transform Northern England, and beginning
to replace the old predominance of the woollen industry by
a predominance of cotton and iron. Factories employing
hired labour had long been known, particularly in the
cloth-weaving of Western England ; machines worked by
water-power had also been known to some extent. (Lombe's
silk-throwing factory employed 300 workers in 1718.) But
now a great crop of mechanical inventions enormously
( increased the output of factory production, and prepared
the way for the age of steam.

Kay's flying shuttle, first used in 1727, is generally taken
as the starting-point of these new inventions, though it was
not itself used for machine production, but to increase the
output of the domestic weaver ; but in point of fact cotton
and iron progressed side by side. An invention which speed-
ed up weaving needed to be followed by an invention to

88 HISTORICAL OUTLINE

speed up spinning ; coal, wanted for the ironworks, could
not be mined in sufficient quantities unless some engine
could be contrived to pump the water out of the deeper
levels ; Watt's steam-engine, patented in 1763, could not
be exploited unless it were possible to cast iron tubes hard
and tine ; and so on.

The cotton trade, even before the war, grew with enorm-
ous rapidity. In 1781 only 5^ million pounds of raw cotton
were imported ; by 1789 the amount had grown to 32 \
million. And this was before the application of steam to
cotton manufacture ; for, though the steam-engine had been
used there by 1 789, it was not in full use until the nineteenth
century, while the woollen trade was much slower to adopt
it. Simultaneously there grew up an entirely new industry,
that of engineering ; and the ironworks, violently stimulated,
of course, by the demand for war material, increased their
production many times over. Experiments with iron ships
and the like prepared the way for the steam-engine, in the
nineteenth century, to be adapted to the haulage of goods
by land and sea.

These developments, with the bubble of war prices added
to them, produced enormous fortunes for men from the
northern counties, such as Richard Arkwright. Of the
humblest origins, these found it difficult, owing both to class
and place of birth, to get into the close corporation of the
governing group. When, as not infrequently happened, they
found themselves at odds with the policy of this governing
group, they began to reflect on how its power was exercised
and obtained, and to demand representation of the new
industrial centres in Parliament. They listened to Ben-
thamite Radicals who asked what was the utility of this
ancient and venerable institution, this ancient and corrupt
Church, these ancient and privileged municipal corpor-
ations, and came to the conclusion that they had no utility.
The fact that many of them were Dissenters, and so suffer-
ing under civil disabilities and social contempt, pointed the
argument. Further, the policy of the war blockade, with the
resulting interference with trade, and above all, the

THE FRENCH REVOLUTION AND AFTER 89

American War of 1812, angered them and turned them into
opponents of the Government ; though too many of them
held large blocks of the immense war debt, or profited by
large war contracts, for them to risk upsetting the constitu-
tion before the war was over.

The reform movement, large before the end of the war,
became larger still when it was over. The new factories in
the north were collecting to work in them large supplies of
labour, composed partly of women and children, partly of
paupers, partly of low-grade Irish workers, and for the rest,
of unskilled labour of various sorts, including some country-
men evicted from the enclosed villages. Herded together in
towns hastily run up without plan, air, or sanitation, and
brutally disciplined within the factory, these workers
formed the first aggregations of industrial proletariat in
England (except for the northern miners and the west-
country weavers) ; and, as prices rose and fluctuated, they
were a source of perpetual anxiety to the Government. The
small radical movements of the intelligent artisans who
sympathised with the American and French revolution-
aries and were working for the reform of Parliament and
of the system of society which William Cobbett called the
Thing, were unimportant and easily crushed by means of
repressive laws such as those which suppressed the Corres-
ponding Societies and the Trade Unions ; it was when the
Radicals (above all, Cobbett) began to go round the new
manufacturing districts, preaching to the new proletariat
that the existing system was responsible for their dear food,
their ragged clothes, and their wretched conditions, that a
great and explosive Radical movement began to grow up.
The Government first countered by the institution of the
yeomanry, mounted regiments to keep the crowds in check ;
then, as after the war the movement did not die down but
rather increased with post-war unemployment, it took to
more violent methods of oppression. It is then that we find
the host of Acts of Parliament (some still unrepealed)
against conspiracy and unlawful assembly, the repeated
prosecutions of editors and pamphleteers, the extensive

9O HISTORICAL OUTLINE

government system of spies and agents-provocateurs, and
massacres like that of Peterloo. It was some years before it
was realised that the only answer to Reformers was Reform.

Europe after Waterloo. However undemocratic the per-
sonal government of Napoleon, and however dangerous
and obsolete his European ambitions, Waterloo meant the
triumph of pure reaction in Europe. The House of Bourbon
returned to Paris, it is truly said, " having learned nothing
and forgotten nothing " ; but it is not always emphasised
that they returned under express instructions to do neither.
The end of the war gave the control of Europe to three
absolute princes, the rulers of Russia, Prussia and Austria.
Great Britain, whose main interest in the peace settlement
lay in being able to retain her non-Continental conquests
important for a naval power, such as Malta, Ceylon,
Mauritius, and the South African possessions taken from
the Dutch, was content to act in the very congenial role of
policeman, Wellington being put in command of the Allied
military occupation of Paris.

Meanwhile, the victorious despots proceeded to divide up
the European spoil among themselves and such of their
allies as seemed worthy of reward. The Tsar Alexander
desired to give a mystical colouring to his political affilia-
tions ; and consequently there arose the Holy Alliance of
the three sovereigns (to which Louis XVIII was soon
admitted), by which they undertook to regard themselves
as appointed by Providence to preserve the post-war
political system in Europe. This curious revival of the
theory of Divine Right struck men's imaginations at the
time ; but it was a spiritual and not a practical alliance.
The practical architect of the peace settlement and political
controller of Europe was not the Tsar but the Austrian
foreign minister, Metternich.

By the terms of the Treaty of Paris, Poland, which
Napoleon had partly restored in the Grand Duchy of
Warsaw, was again divided between the three despotic
Powers. The last remaining piece, the district around

THE FRENCH REVOLUTION AND AFTER

92 HISTORICAL OUTLINE

Cracow, was finally absorbed by Austria in 1846. Russia re-
tained Finland, conquered from the Swedes, and Bessarabia,
which she had seized the opportunity to remove from the
Turks. Austria received the northern part of Italy, i.e.
Venetia and the Lombard plain, but not Genoa, which was
given to the King of Sardinia. Prussia was enlarged by the
addition of part of Saxony, Westphalia, the Rhine Province,
and the last surviving piece of Swedish Pomerania ; the
King of Bavaria received the Rhenish Palatinate ; and a
Diet was formed representing all sovereign States in
Germany. The minor German principalities destroyed by
Napoleon were not restored. Finally, Belgium was put under
the Dutch, whose ruler was raised to the status of King of
the Netherlands, and the Danes lost Norway, which was
given to the King of Sweden.

More important, perhaps, than the actual territorial
changes was the creation, through the Peace Treaty, of a
permanent instrument of reaction throughout Europe.
Louis XVIII was promised by his fellow sovereigns sup-
port against all revolt, whether popular or Bonapartist ;
and in logical sequence to this, the Quadruple Alliance
bound itself to uphold " peace and quiet " — i.e. despotic
government and the status quo — throughout Europe. For
this purpose, regular meetings of the ambassadors of the
four Powers were held, as well as periodic congresses at
which the necessary action for suppressing Liberal and
nationalist revolts was decided. Cases in point were the
Congress of Troppau (1820) which authorised Austrian
intervention to suppress a revolt in Naples, and the Congress
of Verona (1822) which sent French armies to uphold
despotic monarchy in Spain. The foreign invasions of
Russia in the years immediately following the establishment
of Communist rule were only a revival of the " interven-
tionist " principles of 1816.

Two qualifications to this system should be noticed — the
non-adhesion of Great Britain and the doubtful position of
Turkey. Great Britain, having, as she believed, solved her
own nationalist problems by the clearance of the Highlands

THE FRENCH REVOLUTION AND AFTER 93

and the purchase, in 1801, of the weak-kneed Irish
Parliament, was a constitutional monarchy and proud of it,
and very disinclined to force absolutist regimes on any
European peoples. From the Treaty she wanted nothing
but her naval conquests and the elimination of Napoleon
and the danger of French attack. Both of these were early
secured ; and, having got what she wanted, Great Britain,
in effect, withdrew from the Continental bloc, and became,
indeed, a potential source of support for Liberal and nation-
alist revolutions. The Sultan of Turkey, partly owing to
remaining religious prejudices and partly owing to par-
ticular disputes at the time of the signing of the Treaty of
Paris, was not a party to the Quadruple Alliance ; it was not
until 1856 that Turkey formally became part of the Concert
of Europe.

We thus have Europe nailed into an absolutist system
in which territories were distributed with a fantastic dis-
regard for the nationalist sentiments to which the French
Revolution had given so large an impetus. The Treaty of
Paris created seething storm-centres of national feeling, of
which the most important were to be found in Belgium,
Poland, Northern Italy, parts of the Austrian Empire such
as Hungary and Bohemia, and certain of the Balkan pro-
vinces of the Turkish Empire. Side by side with these, how-
ever, there existed the strong Liberal movements in coun-
tries such as Spain, Portugal, France, and Western Ger-
many, where there was no foreign oppression, but where the
inhabitants had seen and even tasted the pleasures of con-
stitutional government ; and — small now, but soon to grow
— the protests of the new industrial proletariats against
absolutism in the economic sphere. For the next thirty
years the revolutionary movement in Europe was made up
of nationalists, Liberals, and Socialists united in a harmon-
ious hatred of all forms of oppression ; it was not until
much later that the differences between these forces
appeared, and it became clear that nationalism triumphant
could be as illiberal as any autocracy, and that neither
nationalism nor liberalism was necessarily in the least

94 HISTORICAL OUTLINE

favourable either to Socialism or to the working class. Until
1848, and indeed for some time afterwards, Marx and
Mazzini and a solid English Liberal Trade Unionist of the
type of William Allen could often work together.

It will be our task to trace the breaking up of the system
of 1815 until by 1870 it had disappeared for all practical
purposes ; but first we must turn aside to deal briefly with
the unique internal history of Great Britain.

When the immediate war reaction was over, and some
years before the Reform Act set the seal on change, the
British system had moved steadily in the direction of
liberalism. The worst of the repression was lightened after
1820 ; Trade Unions, suppressed in 1800, were restored,
almost casually, in 1824-25 ; the Catholics were emanci-
pated, and the political (though not the economic or nation-
alist) grievances of the Irish thus redressed, in 1829 ; and
throughout the decade before the Reform Act Huskisson
and his colleagues, at the bidding of the northern manu-
facturers, were gradually removing governmental control
over trading operations. This last, of course, was an im-
perialist as much as a Liberal move ; it was a recognition,
signalled by the removal of the embargo upon the export of
machinery and of skilled artisans, that it would for some
generations pay Great Britain to stimulate the economic
development of other nations as far as possible in order that
they might be in a position to buy her increasing surplus of
industrial goods. To this end the promotion of international
trade, the removal of tariff barriers, and the elimination of
war clearly contributed ; and until the 'eighties, at any rate,
it was perfectly possible for Liberals of the Cobden type to
regard the British system as the height of progressive
liberalism, and the British navy as only a police force neces-
sary to ensure that this liberalism was not interfered with by
persons or groups o:f illiberal or unprogressive tendencies.

The 1832 Reform Act was carried by the manufacturing
classes with the aid of a discontented and hungry pro-
letariat— of which the rural wing, attempting a protest by
itself in 1830, had been savagely crushed, thereby clearly

THE FRENCH REVOLUTION AND AFTER 95

indicating that it was absolutism and foreign domination,
not home repression, to which British Liberals objected.
William Cobbett, who himself was accused of complicity in
the 1830 risings, was one of the few Radicals to see in this
the indication of the probable attitude of the middle-class
reformers to their working-class allies when they should
have gained their ends. The Reform Act, as a belated
change, was drastic enough to surprise many. That is to
say, it decisively removed the property rights of great land-
owners in Parliamentary seats ; it brought the new indus-
trial cities into the Parliamentary machine ; and it gave,
impartially, votes to all the new bourgeoisie above a certain
standard of living. The fact that it produced so little imme-
diate change in either the method or the personnel of govern-
ment, as, indeed, the fact that it succeeded in passing with
the minimum of disorder, is a tribute to the adaptability of
the British governing class. The political life of Wellington,
that Iron Duke who in practice was such very malleable
iron, is well worth studying from this point of view.

The Rise of the Working Class. But the working
classes, as a whole and immediately, got nothing out of the
Reform Act. They did not get the vote ; in fact they actu-
ally lost it in the few constituencies, such as Westminster,
where they had possessed it before. In local affairs the
Municipal Corporations Act of 1835 initiated a system of
government in which they were no more represented than
they were in Parliament. Wages and the cost of living were
naturally unaffected by the political change ; and though
the Reformed Parliament did make a small gesture in the
direction of public education, and did, in the Factory Act
of 1833, pass a useful measure which was more useful after
its amendment in later years, the effects of these were
small, and the Parliament was too much influenced by
manufacturers and Liberals of the real laissez-faire school
to interfere either with the horrible social conditions of such
areas as Lancashire and South Wales or with the industrial
despotism of the self-made factory owner. By far the most

96 HISTORICAL OUTLINE

obvious result of the Reform Act to the working classes was
the New Poor Law of 1834, which carried out an inevitable
economic change, the removal of surplus and stagnant
labour from the villages, by extremely harsh methods. The
triumph of liberalism, in England, came to mean to the
working classes the triumph of the workhouse — the English
Bastille.

Under these circumstances, the working-class organisa-
tions, Trade Unions, Co-operatives, and political societies,
which had been springing up rapidly for the previous ten
years, broke into open revolt, first in the great strikes of
1833-34, and then in the Chartist movement of 1836 on-
wards. Under the influence, largely, of Robert Owen, the
pioneer of factory legislation, the father of English Socialism
and Co-operation, as well as the initiator of many ideas upon
education, etc., whose fruit has yet to be fully gathered, most
of these movements had at any rate tendencies towards
Socialism in a pre-Marxian sense, i.e. towards equalitarian
communities of self-governing producers. Owen's direct
connection with the movement ceased with its industrial
defeat ; but many of the Chartist leaders were influenced by
him. Both protests failed, the industrial one immediately,
Chartism after a period of years. The constitution was never
really in the slightest danger from either. Apart from the
special economic circumstances (to which we shall return)
and the strength of the just-cemented alliance between
the old governing class and the new bourgeoisie, the move-
ment failed from insufficient resources and divided counsels.
Particularly in the case of the Chartists, the division between
those who wished to educate by propaganda and those who
wished to prepare a revolution, was paralysing to both groups.
By the time of its final (and somewhat ludicrous) demon-
stration in 1848, Chartism was practically dead, though
Chartists, and members of the now reviving Trade
Unions, provided links with the revolutionists on the
Continent.

Apart from its inherent weaknesses, Chartism failed
partly because of changes in economic conditions, and

THE FRENCH DEVOLUTION AND AFTER 97

partly because some of its appeal was stolen by an organisa-
tion which was middle-class in aims and leadership. The
Anti-Corn Law League, with its cry for cheap bread, seemed
to promise what the working class had hoped to achieve
from Reform, with more likelihood of success than through
the Chartists ; and accordingly, membership fell away to
take part in the great propaganda campaign of Bright and
Cobden. Actually, the repeal of the Corn Laws, which was
put through, under the immediate stimulus of the Iiish
famine, in 1846, did not bring cheap bread, for foreign
wheat could not come in in sufficient quantities seriously to
lower the home price until transport had been very much
improved. All that free trade in corn did for some time after
its introduction was to steady the level of prices so that a
had British harvest did not result in an immediate rise in
the price of bread1 ; and, in fact, as far as economic con-
ditions were concerned, there was little reason why the
Corn Laws should not have been repealed some years before.
But the continuing support of a landowning class is not
bought without a price.

Cheap food did not come in 1846. But better conditions
were coming, partly owing to railway development. The
middle of the 'forties was the great age of railway-building
in Great Britain. In 1842 there were only 1,857 miles of
railway ; by 1849 there were 6,031, and by 1854, 8,954 ;
and the quantity of unskilled labour required for the build-
ing of all this mileage sensibly improved the state of em-
ployment. Further, the opening up of the New World,
largely with the help of British capital, increased the oppor-
tunities for emigration. Money wages were not sensibly in-
creased until after 1850, and then not very fast for some
time ; but they were more regular, and they had fewer
mouths to support. The British working class was moving
towards the comparative prosperity of the mid-century ;
and its ardour for revolt was waning. It did not receive the
franchise until 1867, or> *n t^ie country districts, until 1884 ;

1 With the exception of the year 1854-55 (t^e Vear °f t^ie Crimean
War), in which there was a sharp rise.

DR

98 HISTORICAL OUTLINE

but it was being well prepared to enter the bourgeois Par-
liamentary game of alternate Liberal and Conservative
Governments which followed the Reform Act.

Nationalism in the Nineteenth Century. The system of
1815 did not last long intact, though the two breaches first
made in it might be strictly argued to be outside the system
proper. In 1822-23 the Spanish and Portuguese colonies in
South America declared their independence. The Powers,
which had recently aided in stamping out a Liberal in-
surrection in Spain, desired to intervene ; but the United
States unexpectedly took a hand, proclaiming in the Mon-
roe Doctrine (1823) t^iat intervention by European Powers
on the American continent would no longer be tolerated ;
and Canning, who desired to secure entry for British goods
into the South American market, in the following year re-
cognised the revolted States. The Spanish colonial empire
was thus reduced to Cuba and the Philippines (which were
lost in 1897 to the United States) and a few possessions on
the coast of Africa.

In Europe, the Greeks in 1821 revolted against their
Turkish masters. Little notice was taken at first until
Mehemet Ali, pasha of Egypt and vassal of the Sultan, came
to the rescue of his overlord and through his son Ibrahim
began brutally putting down the revolt. Then a wave of
anti-Mohammedan feeling appeared, and was reinforced,
in England and France at any rate, by a sentimental re-
publicanism which remembered the great days of classical
Greece. (From 1802 to 1816, Lord Elgin had signalised Eng-
lish admiration for Greece by removing the best Parthenon
sculptures from Athens to England.) Sympathy became
widespread ; a Greek Loan, most of which never reached
the Greeks at all, was raised ; the poet Byron went to their
assistance and died at Missolonghi ; and finally England,
France, and Russia joined in " mediating " with the Sultan
to secure Greek independence. A small kingdom of Greece,
presided over by a son of the King of Bavaria and guaran-
teed by all the Powers, was set up in 1832 ; but a concurrent

THE FRENCH REVOLUTION AND AFTER 99

revolt of Mehemet All against the Sultan had the un-
expected result of rallying Russia to the protection of the
latter and placing her, for the moment, in effective control
of the Black Sea. One of the most difficult aspects of the
" Near Eastern Question," the control of the Dardanelles,
thus carne to the front.

Turkey was not part of the Concert of Europe, and the
Spanish colonies were far away. The events of 1830 to 1834,
however, were more unmistakeable. In France the reac-
tionary rule of Charles X, stupidest of all the Bourbons,
had become intolerable to all but the extreme Right, and
in July 1830 a brief revolution, accompanied by the mini-
mum of street-fighting, turned him out and replaced him by
Louis Philippe, son of a Revolutionist, who was intended to
be a constitutional monarch of the English type. In the same
year the Belgians revolted against Dutch domination.
Great Britain and the new French monarchy supported
them, and the Kingdom of the Belgians, with Leopold of
Saxe-Coburg, uncle of Queen Victoria, at its head, was
established in 1831. It was finally recognised by Holland in
1839 in the Treaty of London — the treaty by which all the
leading Powers guaranteed to Belgium " perpetual neutral-
ity." Further, in 1833-1834, there were liberal revolts in
Spain and Portugal. These were successful, again with the
support of England and France against the autocratic
Powers, who backed the reactionaries — Carlists in Spain
and Miguelists in Portugal. This, however, proved the end
of liberal successes for the time being ; revolts in Italy and
some of the small German States failed, and the Tsar seized
the moment to take away most of the autonomy which had
been granted to his Polish provinces. Nevertheless, the
revolutionary movements, mostly under the inspiration of
Mazzini, continued to develop underground.

It might have been expected that after 1830, and still
more after 1832, England and France would stand in close
alliance against a reactionary Europe. But Louis Philippe
had too much of the French royal tradition in his blood to
be an effective " head of a crowned republic." After a few

100 HISTORICAL OUTLINE

years of indecision his government in effect became a veiled
autocracy, which persistently embroiled itself with England
over foreign policy, particularly in the Near East, where
both countries had designs upon Egypt. A foolish attempt
on his part to emulate the policy of Louis XIV by getting
control of the Spanish throne completed the division. Nor
did his ^oveinment remain popular in France itself; one
party disliked his liberalism, another his autocracy, while
the industrial proletariat, rapidly increasing in numbers,
was furiously dissatisfied with the power given to the rich
middle class and eagerly drinking in Socialist doctrines from
the successors of Saint-Simon and Fourier, the French
counterparts of Robert Owen. The people of Paris had
made one revolution to free themselves from exploitation ;
they were quite ready to make another.

The events of 1848 took all Europe by suq)rise. 1847
was a year of great distress and commercial panic ; it
was also the year when the first international Socialist
appeal, the Communist Manifesto of Marx and Engels, was
drafted. (It was issued in 1848.) But in the main there was
no particular cause for the " Year of Revolutions," except
desperate discontent with the age of repression. It began
with a rising in Sicily, which was quickly followed by in-
surrections in Paris, Vienna, Prague, Copenhagen, Berlin
and many smaller German cities, a nationalist rising in
Italy, led by the King of Sardinia, and another in Hungary,
led by Louis Kossuth. In Belgium, Holland and Denmark,
minor constitutional changes were demanded and received,
in England, as related above, there was only a Chartist de-
monstration which was a failure, some Irish disturbances,
which corresponded more to the continental upheavals,
being suppressed easily and without publicity.

Taken by surprise and very much alarmed, the absolutist
system at first yielded. The Hungarians gained their aut-
onomy ; an Italian Republic was proclaimed in Rome and
Tuscany ; several German princes hastened to grant
constitutions ; and a republic, with avowed Socialists
participating in the government, was set up in Paris. But

THE FRENCH REVOLUTION AND AFTER IO1

reaction came swiftly and in arms. Everywhere, except in
France, the risings were suppressed by the military, such
concessions as a popular franchise, freedom of speech and
freedom of assembly taken away, and monarchic and
clerical despotism restored. In France, the liberal bourgeoisie
resisted the attempt of the workmen and their leaders to
give the revolution a Socialist aspect, and the workers
under Louis Blanc and his colleagues were shot down by
the Liberals under Cavaignac. The republic remained ; but
the reaction went so far as to enable Louis Napoleon,
elected President in 1849, to make himself Emperor by the
coup d'etat of 1851. The German revolution collapsed ; and
the new Hungarian State was crushed in 1849 by Austrian
arms. Nevertheless, though reaction triumphed it did not
triumph completely. A few democratic gains remained ;
Napoleon III, elected bv popular vote, could not occupy
the position of a Continental despot, and England, though
it had played so little part in the struggle, remained, under
Palmerston, a tranquil home for exiled and active revolution-
aries from all countries. (It may be noted that in 1847 tnc
Protestant cantons of Switzerland, by defeating a Catholic
League supported by the chief clerical powers and by France,
had definitely put a stop to reaction in that country.)

Reaction emerged triumphant from the year of revolu-
tions ; but as has been said, it was not perfectly complete
or very violent reaction. Only in Russia was the govern-
ment entirely unaffected by liberalising ideas, and in
Europe, partly owing to the economic conditions to be
mentioned in the next section, there was, for a time, a
definite tendency to pacific co-operation. The main interest
of the next few years lies in the Near Eastern question, and
the rise of Germany and Italy.

The story of Italian unity is quickly told. After the
destruction of Garibaldi's Roman Republic in 1849, the
Italian patriots had not in any way ceased their efforts,
and within a few years, thanks largely to the diplomacy of
Cavour, they had gained the partial support of Napoleon
III, who until 1870 was prone to regard himself as

IO2 HISTORICAL OUTLINE

commissioned to redraft the map of Europe on democratic
lines. The struggle with Austria, which began in 1859, was
short and decisive ; the Austrians were beaten, and a
kingdom of Italy set up, after a plebiscite, with Victor
Emmanuel of Sardinia as its king. Partly owing to the
failure of Napoleon's support at the last moment, the
unification of Italy was incomplete ; the Austrians were left
in the possession of Venetia and the Pope of the Papal
States, but during the distraction of the Franco-Prussian
War the Italians redressed most, if not all, of these griev-
ances. Italy thus became a national State on the parlia-
mentary model ; but parliamentarism, as can be seen by
events since the war, never obtained a strong hold on the
minds of the Italians.

The history of German unity, until 1863 at all events,
is the history of the growth of the German Zollverein or
Customs Union, and its gradual control by Prussia. First
formed in 1834, out of various smaller Customs Unions,
the Zollverein gradually grew by the adhesion of more
and more States, and developed a system of government
and a policy of its own. At first hesitating, this policy was
firmly taken in hand by Bismarck, who became Prussian
Chancellor in 1862, and directed towards the establish-
ment of Prussian supremacy and immediately at the definite
removal of Austria from her path. In 1866, a dispute over
Schleswig-Holstein (the German-speaking provinces of Den-
mark) was allowed to develop into a war in which Austria
was immediately and decisively beaten, the neutrality of
the Tsar having been secured three years before by
giving him Prussian assistance to crush a Polish rising.
Bismarck, however, did not wish for permanent enmity
with Austria, and so demanded no territorial gains at the
peace, contenting himself with uniting practically all the
German States into the North German Confederation. The
German Empire was now all but formed.

Its final consummation needed only a war, which
Napoleon III kindly provided. Napoleon, in common with
others, had been startled and alarmed by the revelation of

THE FRENCH REVOLUTION AND AFTER JO3

the military strength of Prussia. When, in 1870, it was
announced that a Hohenzollern was candidate for the
throne of Spain, Napoleon visualised a new Holy Roman
Empire under the Hohenzollerns instead of the Hapsburgs,
and rushed to protest. Bismarck, who wanted war and had
eyes, also, on the iron mines of Lorraine, situated so pleas-
ingly near to the German coalfields, let him trip over his
own feet. The Franco-Prussian War destroyed the belief
in French military power which had existed since the seven-
teenth century, gave Alsace-Lorraine to Germany, and
created the German Empire. Bismarck was then free, with
the spectacular, if at times embarrassing assistance of
William II, who became Kaiser in 1887, to develop a new
orientation of European politics.

The Near Eastern question, from 1840 onwards, has
always centred round the disposal of one or other part of
the Ottoman Empire. In 1853 the Tsar Nicholas I, having
failed to secure a general agreement to dismember Turkey,
acted alone, seized the Roumanian provinces, and seemed
about to get control of the Black Sea. This brought on the
Crimean War, in which the Russians, in spite of the fright-
ful inefficiency of the British war preparations, were finally
defeated. The result was the neutralisation of the Black
Sea and its closing to ships of war, the loss by Russia of a
portion of Bessarabia including the mouth of the Danube,
the admission of Turkey to the Concert of Europe (which
meant, in effect, that the Great Powers announced that no
one of them was to have a free hand in the Turkish domin-
ions) and the erection of Roumania into a separate State
(made independent in 1861). Meantime, the Sultan of
Turkey promised better treatment for his Christian sub-
jects, in which he disappointed them.

Russia was indignant at the Black Sea clauses of this
treaty, which she denounced in 1870, when the attention
of Europe was distracted by the Franco-Prussian War ;
and she was also engaged in promoting Pan-Slavic move-
ments in the Balkans, of which the centre was Serbia, and
which were aimed, in the main, against Austria. In 1875

104 HISTORICAL OUTLINE

a Slav revolt in Herzegovina set the fire alight ; it was
followed in the next year by a revolt in Bulgaria which the
Turks endeavoured to stamp out by means of the " Bul-
garian atrocities." Russia intervened, declared war on
Turkey, and gained so thorough a victory that the Powers
immediately took action to prevent her reaping the fruits.
The Treaty of Berlin (1878), which Disraeli described as
" Peace with Honour," settled the Near Eastern question
in such a manner as to set the stage for the outbreak of 1914.
The main interest of the Treaty lay in its treatment of
the Balkan States, which were left in great discontent.
Roumania, though independent, was forced to cede the
strip of Bessarabia gained in 1856 to Russia ; Bulgaria was
practically cut in half, the northern part, Bulgaria proper,
being made autonomous but tributary to Turkey, while
Eastern Rumelia was left under direct Turkish govern-
ment ; Serbia and Montenegro fnow both parts of Yugo-
slavia) were made independent Turkish vassal States, but
Serbia was in effect cut off from both Montenegro and the
sea by an Austrian protectorate over Bosnia and Herze-
govina and an Austrian garrison in the Sanjak of Novi-
bazar. Great Britain, by a secret Treat}, laid hold of
Cyprus, and with that and her shares in the newly made
Suez Canal, was full set to dominate Egypt and control
the new route to India

Economic Changes. The first half of the nineteenth cen-
tury was marked by the spreading of the industrial revolu-
tion from England to the Continent, the gradual removal of
serfdom with its tying of men to the land, and the simplifica-
tion and lightening of tariff barriers. In France, it is true,
industrialisation had begun to a certain extent before the
Revolution ; the Creusot ironworks, oldest of armament
firms in Europe, was founded in 1 780. But the Revolution
had caused a great set-back, and all Napoleon Fs passionate
care for industry could not make France anything like the
equal of England. Belgian industrial development also
started early, especially (owing to her rich iron and coal

THE FRENCH REVOLUTION AND AFTER 105

resources) the iron industry. During the Napoleonic wars
Belgium, then under French control, was largely used as
an arsenal for the French armies. But Belgium was a small
country ; during the early part of the nineteenth century
Great Britain had no effective rival. After the war, however,
and still more after 1830, French machine-production went
ahead rapidly. Germany did not effectively " commence
industrialist " till the 'fifties, and Russia not until the
'nineties.

To make any sort of factory production possible, however,
it is necessary that there should be " free labour," not tied
to the soil, but capable of being transferred to factory em-
ployment wherever the factory is set up. This meant that
the remains of feudalism and serfdom had to be destroyed,
and the peasant worker given complete freedom oi move-
ment. In those parts of Europe where Napoleon I had held
effective control this had been done, and serfdom was
not restored after his fail ; in other parts, however, emanci-
pation was more slow. It gradually spread in Eastern Ger-
many mainly through the efforts of Stein and Hardenburg
in the first half of the century ; the Austrian serfs were freed
in 1848, and the Russian in 1867. But this did not neces-
sarily solve the peasant's problems, for the annual charge
which his land (in countries other than France) had to
bear in order to redeem the feudal dues — more simply, the
tribute he had to pay to the landlords — was apt to be so
heavy that, where there was no factory immediately ready
for him to work in, he was often worse off immediately
after emancipation than before. So, in all the great countries
but Russia, considerable efforts were made to improve the
land and to encourage the peasant to greater productivity.
And there, at any rate, the labourer was, freed and ready
to work ; and industrialisation began to advance.

Alongside of industrialisation went the reduction
and simplification of tariffs. This can be regarded in
three aspects, the first of which is the gradual aboli-
tion of the numerous and vexatious local tolls and tariffs

IO6 HISTORICAL OUTLINE

which, like serfdom, were relics of medieval Europe,
and no more than a tiresome hindrance to economic de-
velopment. Second comes the abolition of tariffs be-
tween independent economic units, of which the German
States are the great example. The German Customs Union
played a larger part than any other single factor in bringing
about German unity. Last was the lowering of tariffs
between the great nations. Of this the Anglo-French com-
mercial treaty of 1860 is the principal instance. Strong in the
knowledge of the rapid progress of French industry, largely
upon lines with which British products did not compete,
and anxious to maintain the role of world architect of
peace, Napoleon III carried through this treaty, largely
against the opinion of his subjects, who regarded the
economic ruin of France as the only possible result.

This result did not, as a matter of fact, occur. French
prosperity continued to increase ; and for the next few years
commercial treaties, with lowered tariffs, became the
fashion among both politicians and economists. Of all econ-
omists, only the German, List, was opposed to free trade ;
and List's influence at the time was slight. Bismarck,
indeed, was not as whole-hearted as many, fearing the
flooding in, over the eastern borders of Germany, of
Russian grain exported at low prices to pay for the building
of the railways which the Crimean War had shown to be
so urgently needed. But in the late 'seventies there came
a change which caused nearly all European countries
rapidly to reverse their policy.

This change was immediately due to the improvement
of railways and ocean transport, and at one remove to the
inventions which made possible the production of steel on
a large scale (such as the Bessemer process, patented in
1865, and the Gilchrist-Thomas process of 1876). The
building of steel hulls, with far more effective engines,
thus became practicable, and cargoes became bigger and
voyages shorter and more profitable for perishable goods.
Concurrently, the building of railways in the United
States, largely with European capital, opened up the great

THE FRENCH REVOLUTION AND AFTER 107

corn-growing areas of the Middle West. The first American
transcontinental line was opened in 1869, and steel rails,
with a life many times that of iron rails, were effectively
used in the 'seventies.

Immediately mass-produced corn, garnered at amaz-
ingly small cost, began to pour into Europe. In 1846 the
cost of bringing corn from Odessa into London had been
estimated as equal to a IO.T. per quarter preference. Now
this was swept away, and a study of the price of corn on
the English market, year by year from 1875 to 1900, even
when allowance is made for the fall in the general price-
level, will give some indication of the meaning of American
grain to Europe.

At once the countries with peasant populations dyked
up against the flood, not merely for reasons of pure econ-
omics, but also because no country which intends, as both
Germany and France after 1870 intended, to keep up a large
land army with a great reserve of possible conscripts, can
afford to let its peasantry be ruined. England alone, with
no land frontiers to defend and a large city population
delighting in cheap food, raised no tariffs. Besides, England
had in effect no peasantry, and her landowners, being to
start with comparatively well off and with access, in many
cases, to alternative sources of income in commerce or
manufacture, were in a better position to cope with rapidly
falling prices. They were hard hit, it is true, both by the
wheat imports, and in the next decade, after the invention
of cold storage, by the competition of frozen meat from
South America and the Antipodes ; but they were not ruined.
As to the agricultural labourer, his wages could not be
lowered, for they were so low already ; but he could be
reduced in numbers. He could go into the cities, or he
could emigrate ; and he did. Only in one part of the British
Isles — Ireland — was there a peasant population ; and there
the British Government had in the end to come to the rescue
of the peasant by providing him with money both to buy
his landlord out and to enable him to produce for himself.

The German tariff, the first example of this change of

108 HISTORICAL OUTLINE

policy, was passed in 1879, after an appallingly bad harvest.
French opinion was moving in the same direction, and the
French tariff of 1881 was also protective. Neither tariff was
high ; but they increased gradually after 1900, when the
age of really high tariffs begins. But these tariffs were not
intended by any means solely for the protection of agri-
culture. Both France and Germany were developing iron
and steel manufactures of their own (which, like the land
armies, the Franco- Prussian War seemed to make more and
more desirable), and were afraid of British competition.
Other industries, such as French silk, threatened since the
opening of the Suez Canal by competition from Japan,
joined in the demand ; and the tariffs of these countries,
reinforced by such additions as preferential railway rates,
were in fact general tariffs. Thus, by the early 'nineties, in
one of the quickest changes known to history, practically
the whole of Europe, except Great Britain, had gone
Protectionist. The United States, Protectionist from the
start, after a brief experiment in the lowering of tariffs,
returned to high protection after the Civil War of 1861.

§6. THE AGE OF IMPERIALISM

THE NEW tariff policy, however, was only one indication
of the arrival of the age of economic nationalism and
imperialism, whose beginning — in so far as the beginning of
an epoch can be dated — is commonly set by historians at
about 1880. Another sign is the great increase, in the older
industrial countries, of the production of iron and steel
and of what are called " constructional " goods. This is not
to imply that consumption goods are not produced in ever
increasing quantities ; but the prosperity of British industry
as a whole, for example, comes to depend more upon the
condition of the coal, iron and steel and engineering trades
than, as fifty years back, upon that of cotton and woollen
textiles. As the former both require more fixed capital,
proportionately, and also have to face a more fluctuating

THE AGE OF IMPERIALISM I(X)

demand, the result is a growing instability of industry,
reflected, for a large part of the working class, in consider-
ably increased ups-and-downs of employment. Further-
more, the rapid increase and improvement of European
production as a whole demands wider markets outside
Europe, secure access to sources of raw materials not found
within the European continent, and governmental protec-
tion for the nationals of any country which engages in
overseas trade, whether of their persons or their invested
funds. For one of the largest items of European export,
particularly in the case of Britain in the latter part of the
century, was the export of capital, and its export not, as
previously, to developing countries like the United States,
but to countries practically undeveloped. This had
unlooked-for results. Capital goods, and, to a less extent,
goods of immediate consumption, cannot be sold outright
to a totally undeveloped country, which will not be able to
use, or, still more, to pay cash for them. Docks, harbours
and railways are essential to a country which is to be
brought within the ambit of commerce ; but docks, har-
bours, and railways are expensive. It is therefore necessary
for the country which desires, say, to sell locomotives and
railway equipment to the Argentine, first to lend the Ar-
gentine the money to pay for them — money which will only
be repayable in instalments over a long period, as the rail-
way begins to earn a profit. In point of fact, the industrial
and transport development of Russia, the South American
States, China, and many other areas was largely financed
by European capitalists, who lent money in order to help
provide a market for the goods which they or their fellows
had to sell. This was more true of Great Britain than any
other country, for the profits made by British industry in
the mid-Victorian period were so great that there was more
capital available than was required to finance home de-
velopment, and as the surplus was not used to raise the
standard of life of British workers, much of it had to seek
investment overseas. It followed that those European
countries whose nationals had lent money were continually

IIO HISTORICAL OUTLINE

interested in the financial and political stability of the
countries to which it had been lent, in order that the
capital might be safe and the interest punctually paid ;
and a great deal of imperialist interference, both by diplo-
matic pressure and by direct threat of war, is attributable
to the export of capital.

Along with political interference for the sake of preserving
interest rights went political interference in order to safe-
guard supplies of essential raw materials, to secure exclusive
rights of selling in a particular area, or simply to hold
points that would be " strategic " in the event of war or
any other interference with trading operations. We deal
with this more fully in a later section ; here we need only
observe that it is all part of a growing view, which is in
direct contrast to the views of Cobden and the Free Traders,
that it is the right and duty of Governments to act, both
positively and negatively, so as to promote the economic
interests of their subjects. The shift of opinion with regard
to colonial possessions, which in the mid-century were
regarded in the main as nuisances which would "drop
away when ripe" without causing the mother country any
inconvenience or diminution of trade, is a striking illustra-
tion. By the 'eighties, the desire to possess colonies was
stronger among all Powers than it had been since the
sixteenth century.

Lastly, we may note the tendency towards paternalism
as well as to predatoriness on the part of Governments — an
inclination to foster infant industries by means of subsidies,
rebates, etc., as well as by tariffs, to regulate trades and
associations within trades, and even, led by Bismarck, to
secure the consent of the workers by such devices as social
insurance. But present-day Communist and Fascist Govern-
ments have gone so much farther in the direction of univer-
sal State activity that this development may well be left
to a later chapter.

Within the several countries, the growth of large-scale
industrialism led immediately to combinations, both of
capital and of labour ; but in Great Britain at any rate

THE AGE OF IMPERIALISM III

the working class fared rather differently from its continental
neighbours. In Great Britain the workers had long been
emancipated, and they participated to a certain extent in
the general liberalising of institutions. Trade Unions were
legal, and, though frowned upon when they sought to
constrain men to act in concert in defiance of their em-
ployers, in so far as they could be looked upon as friendly
societies — and in mid-Victorian days, after the collapse of
Chartism, the friendly society aspect was very strong among
them — they were encouraged as examples of the great Vic-
torian virtue of mutual thrift. Money wages, and still more
real wages, improved steadily after the middle of the century,
and the Trade Unions became more and more " pillars
of society. " Even after the great depression of the late
'seventies, which opened their eyes again to the possibilities
of unemployment and starvation, and even after the rise,
from 1889 onwards, of " new " Unions of unskilled and
semi-skilled workers led by men who were definitely hostile
to Capitalism, the element of stolidity remained very large.
Though they took part in Labour politics the Unions, as
a whole, were not Socialist even at the outbreak of the
European war. Nevertheless, partly as a result of the ten-
dencies which were making for State paternalism on the
Continent, and partly as a development of the theories of
liberal thinkers such as John Stuart Mill, a peculiarly
insular form of Socialism, mainly represented by the Fabian
Society, did arise in England, and resulted, at the close of the
century, in the formation of the Labour Party, Trade Union
in its composition and support, Fabian in its main ideas.
The Continental workers — except, to a certain extent, the
French — had never had this freedom ; in some countries
they had been serfs, released from serfdom only to serve in
the factories. In Germany and France, during the latter
part of the nineteenth century, restrictions on combinations
were to a certain extent removed ; but in the main it is
still true that the continental worker was flung into an
industry run on despotic lines. Of the continental, far more
than of the British worker — and of the Russian worker

112 HISTORICAL OUTLINE

most of all — Marx's words were true : " You have nothing
to lose but your chains."

Under these circumstances, and particularly after 1850,
Continental Trade Unionism and Socialism grew up in an
atmosphere of bitter conflict, where working-class activity
might at any moment end in imprisonment, death or exile.
Its prophet and adviser was Karl Marx, who explained
steadily the existence of the class-war, based on robbery by
the owning class of the fruits of the labourer's efforts, and
its inevitable termination in the conquest of power by the
proletariat ; most of the Continental Socialist Parties are
Marxian in their origin and terminology. In the realm of
ideas, they had nothing in common with the British Labour
movement ; they started with a different conception, and
the attempt, in the 'eighties, to introduce Marxism into
Great Britain barely gained a hearing. But the British
worker knew a fellow-worker when he saw one, even though
he did not understand what he said ; and, besides, he was
by all training a liberal and an opponent of oppression,
especially by foreigners. British Trade Unionists, then,
willingly co-operated with Marx in the foundation of the
First International in 1864, and indignantly sympathised
with the victims of the 1871 Commune of Paris, the first
attempt to set up a purely Socialist government — though
they did not support the attempt itself. The attempt, made
in the desperate circumstances of the end of the Franco-
Prussian War, \\ as hopeless from the start, and was speedily
crushed ; but, such as it was, it has provided inspiration
ever since for Communists all over the world.

The years between the Treaty of Berlin and the outbreak
of the European War make more and more ironical reading.
It is impossible not to contrast the armed camp of European
diplomacy, with its growing fears and suspicions and its
armaments increasing to the point at which alarmists
even began to make feeble attempts to curtail war prep-
arations and national sovereignty, and the steady par-
celling out of the whole available world into colonial

THE AGE OF IMPERIALISM 1 13

possessions, " spheres of influence," and areas of plain
grabbing, with the enormous increase of productive power
and material well-being producing on the one hand a much
greater variety of life and freedom of choice and movement
within a restricted area, and on the other a conviction born
of prosperity that this freedom was bound to increase and
that trifling difficulties such as imperialist rivalries would
very soon be smoothed away. A small but very competent
book published in 1912 ends with the words, " we can now
look forward with something like confidence to the time
when war between civilised nations will be considered as
antiquated as the duel, and when the peace-makers shall
be called the children of God." Within two years Europe
was at war.

The salient features of these years are three : the pushing-
on of imperialist expansion until there is no part of the
world which is not the scene of imperialist rivalry in one
form or other, the " armed peace " in Europe which drew
by one " incident " after another closer to war, and, during
the latter part, the increasing unrest, visible in all countries^
of the working classes.

British imperialism, by an accident, began rather early,
when in 1857 the Indian Mutiny forced the British Govern-
ment to remove the East India Company, and to bring
its Indian possessions directly under the British Grown. But
it was not until after 1876, when Disraeli gave Queen
Victoria the title of Empress of India, that the rapid expan-
sion of British rule in that country really began. The French,
in the next decade, followed suit by acquiring vast territories
in Indo-China. But the i^reat field of imperialism in the
'eighties was the African continent. The explorations of
Stanley on the Congo, published in 1878, discovered enor-
mous new possibilities of exploitation ; the International
Congo Association, under Belgian influence, was formed in
1882, and within ten years the continent was practically
divided up between the principal European Powers, the
only serious set-back to imperialism being the defeat of
Italy by the Abyssinians in 1896. For the most part, the

114 HISTORICAL OUTLINE

partition of Africa, except north of the Sahara, was achieved
without difficulty and without spectacular fighting ; but
in 1899 Great Britain, becoming involved with the Cape
Dutch in a quarrel which really derived from the discovery
thirteen years earlier of the huge gold deposits on the Rand,
entered upon the Boer War — the first important case in
which imperialism had involved war between whites. Small
in itself, the Boer War was important because of the interest
it aroused and because of its plain disclosure of what
imperialist policies were bound to lead to sooner or later.
On the north coast, imperalism had begun with the French
conquest of Algiers in 1830. Gradually, and not without
many crises, the former possessions of Turkey along the
coast were divided between Spain, France, Italy, and Great
Britain. The share of the last-named was the protectorate
over Egypt, which she established in 1882 jointly with
France ; but France became in effect only a sleeping
partner.

The new German Empire, coming late into the field and
finding the best parts of Africa already in the hands of other
Powers, but needing, none the less, raw materials, markets,
and outlets for capital investment, turned its eyes eastward,
through the Balkans to the Asiatic possessions of Turkey.
The two most spectacular incidents were the speech of the
Kaiser at Damascus in 1898, proclaiming himself " the
friend of three hundred million Moslems," and the pro-
jection in 1902 of the Bagdad Railway, which was in-
tended to provide a German-controlled route to Persia and
the East. It was firmly believed, both before and during the
European War, that Germany intended, through control of
the Sultan, to put herself at the head of a world-wide
Moslem movement.

In the case of the Far East, where effective imperialism
began in the 'nineties, Germany was not left behind. India
being closed, the most obvious field of exploitation was the
helpless Chinese Empire, into which European Powers
had been slowly pushing their way since the 'forties. But
in the Far East there was Japan to be reckoned with. Japan,

THE AGE OF IMPERIALISM 115

after the visit of Commodore Perry of the United States
navy in 1854 had forced her to open herself to European
traders, had rapidly transformed herself into a Power on the
western model. It is true that Japan, in spite of her indus-
trial growth, remained and still remains overwhelmingly
agricultural as regards the occupations of her population ;
it is true that her standard of living is far below that of the
west, and that paternalism and the State control of eco-
nomic life in Japan has been much greater even than in
Germany. Nevertheless, as far as desire for markets, outlets
for surplus population, opportunities for exploitation, and
a strong naval and military force were concerned, Japan,
by the 'nineties, closely resembled a Western Power, and the
Sino-Japanese War of 1894-1895, with its result in the
practical seizure of Korea by Japan, made this plain to the
West. Great Britain, which had already recognised Japan,
made an alliance with her in 1902.

The success of Japan in the war roused the European
Powers to make an effort to check Japanese penetration
into China, and a further scramble for concessions began.
Russia, attempting to seize Manchuria in 1903, was badly
beaten in the Russo-Japanese War, which startled the other
Powers, including the United States, into full realisation
of the economic and military strength of Japan. It proved,
however, impossible to partition China as Africa had been
partitioned, partly because of the jealousy of the Powers,
and partly because the possible spheres of influence would
not have been of anything like equal economic value. Nor
could the immense population of China, poor and ill-
governed as it was, be handed about like the almost unin-
habited African territories. In 1912, therefore, mainly
owing to the influence of the United States, a Six-Power
Consortium was formed to exploit China under rules to be
agreed. The opportunity for Japan did not recur until the
European War had distracted the attention of most of her
colleagues. Meantime, in Central Asia, apart from the
German plans, Russia and Great Britain squabbled over
Persia, Afghanistan and neighbouring areas.

Il6 HISTORICAL OUTLINE

Except in so far as the Balkan situation (which is attached
to the Near Eastern problem) is concerned, political events
in Europe were little more than a shadow of imperialist
rivalries. In 1878 there were five Great Powers — Great
Britain, France, Germany, Russia and Austria-Hungary;
and the main question at issue was how, in the event of
war, these Powers would be aligned. (Italy, poor, ill-
equipped for industrialism, and suffering perpetual parlia-
mentary crises, remained, as it were, only upon the fringe
of the Concert of Europe.) The tradition of Great Britain
since 1815, relying upon her sea-frontiers and her much
greater wealth, had been to keep free of continental alliances
except for purely ad hoc purposes, and to pursue her own
policy ; but the coming of imperialism had altered all that.
In Germany — and to a less extent in the United States —
Great Britain saw a Power whose industrial development
might make serious inroads on her foreign trade, par-
ticularly since the development of coal-mining in Germany
had begun to threaten an export of which she had hitherto
had a practical monopoly. Moreover, German naval develop-
ment, as exemplified in the Von Tirpitz programme of 1900,
was taken as a direct menace, aimed at cutting off British
food supply in time of war. It was too late now to reverse the
Free Trade policy so as to make Great Britain self-support-
ing ; Chamberlain's Tariff Reform scheme of 1903, which
was rejected, only sought to secure to the British people at
any rate the reversion of the food surpluses oi the Dominions.
But without command of the sea these would have been
useless.

On the other hand, the traditional hostility between
France and Britain was declining. French industry had de-
veloped on such different lines that it hardly competed at
all with British ; the fear of French invasion or of French
domination of Europe had finally vanished ; and except in
the Nile valley, where the Fashoda "incident" of 1898
nearly led to war, the two States were not seriously at odds
outside Europe. The inevitable rapprochement was delayed
a little owing to the Germanic sympathies of Queen

THE AGE OF IMPERIALISM Iiy

Victoria ; but after her death events moved rapidly to the
Entente Cordiale of 1904. The major points of disagreement
were removed by the British Government's agreeing to sup-
port France in Morocco in exchange for a free hand in
Egypt.

Germany and Austria were fairly firmly united, pursuing,
on the whole, a joint policy as regards the Near East. There
remained the question of Russia. The natural affinities of
the Tsar were with the government of Bismarck and the
Kaiser ; but there were personal difficulties on both sides,
and there was also the strong desire on the part of France,
fearing Germany and as yet unallied with Great Britain, to
obtain an ally in Europe. (French capital, incidentally,
played a great part in the industrialisation of Russia.) For
nearly thirty years Russian policy wavered to and fro,
making alliances and " understandings " (some secret and
some open) now with this side and now with that. Even-
tually, in 1907, the Triple Entente was concluded between
England, France and Russia, and Edward VII visited the
Tsar at Reval. This Entente gave rise to great suspicion
among English Liberals, and it did not remove the causes
of friction between England and Russia in the Middle
East ; nevertheless, the stage was now set for the war.

Lastly, \ve come to the Balkans. The provisions of the
Treaty of Berlin were early infringed by the union of
Bulgaria and Eastern Rumelia in 1885. In 1894 the
Turkish massacres of Christians in Armenia caused British
and French protests, of which, however, nothing came ; in
1897 the Greeks went to war with Turkey in order to in-
corporate Crete in the Greek kingdom. The Greeks were
defeated, but through the intervention of the Powers Crete
was put under a Greek High Commissioner. Disputes be-
tween the Balkan States about the territory of Macedonia
were also becoming acute ; in 1903 the Macedonians re-
volted and for five years a portion of Macedonia was ad-
ministered jointly by Russia and Austria.

The Young Turk revolution of 1908 brought matters to a
crisis. In essence, the revolution made no change in the

Il8 HISTORICAL OUTLINE

constitution or foreign policy of Turkey, but merely sub-
stituted a strong government for a weak one. There were
even massacres of Christians in 1909. Under the circum-
stances, it became doubtful whether the system of semi-
vassalage in the Balkans and other parts of the Turkish
dominions could continue ; and interested parties took im-
mediate action. Austria, supported by Germany, definitely
incorporated Bosnia-Herzegovina in her Empire ; Bul-
garia proclaimed its independence, and Crete its union with
Greece. Three years later, when Germany had nearly pre-
cipitated war by sending a gunboat to Agadir to protest
against the French protectorate of Morocco, Italy, in
return, occupied Tripoli and declared war against the
Sultan. The war, which might have dragged on for some
time, was hastily settled by the yielding of Turkey, which
was now faced with a greater danger. Italy retained Tripoli,
Rhodes, and the Dodecanese.

For some time the Christian States of the Balkans had
been discussing common action in view of their fear of
renewed oppression by the Young Turk Government.
Early in 1912 Greece, Serbia and Bulgaria, with the
cognisance of the Tsar, signed mutual treaties for the parti-
tion of the Turkish possessions in Europe, and in October,
after the outbreak of a rising in Albania, the various mem-
bers of the Balkan League declared war. In the First
Balkan War the Turks were completely defeated, and the
subsequent treaty gave the allies all their demands except
that, owing to the intervention of the Great Powers, in
particular Austria, at the settlement, Albania was made
into an independent guaranteed principality. But the allies
fell out over the spoils ; the Second Balkan War (1913)
found Bulgaria ranged against Greece, Serbia and Rou-
mania. Bulgaria was defeated in her turn, and the Treaty
of Bucharest took away her gains of 1912. Nevertheless, the
other States were not satisfied, particularly Serbia, which
while receiving large accessions of territory in Macedonia
and Novibazar, had to allow Greece to take southern Mace-
donia and Salonica, thus losing access to the JEgean. The

THE AGE OF IMPERIALISM Iig

desire of the Serbs, stimulated by success in war and by
the sympathy of Russia towards Pan-Slavic ambitions, was
for the eastern Adriatic coast, which was in the hands of
Austria-Hungary. The subsequent years were years of
definite economic war between Austria-Hungary and
Serbia, much to the disadvantage of both.

It is in some ways paradoxical that, in the period
while nationalism and imperialism were growing so
fast, there should yet have been a fairly steady trend to-
wards greater personal freedom among the subjects of
those nationalist and imperialist Powers. No liberal revolu-
tions took place during the period except in Portugal,
where, in 1910, King Carlos was assassinated and a re-
public established ; the revolutionary attempt in Russia
which followed the Russo-Japanese War (1905) was
crushed. Yet throughout Europe, even in Russia, there was
a general movement towards democratisation of govern-
ment, towards meeting the grievances of subject nationali-
ties— and of women ! — and towards greater recognition of
Trade Unions and working-class activities. Labour and
Social-Democratic Parties rose into prominence in many
countries, and during the later years strikes, successful and
unsuccessful, became frequent. Imperialist Capitalism, still
rich in spite of the saturation of some markets and the be-
ginning of Eastern competition, as industrialism grew in
India, China and Japan, could yet spare enough to give the
working class a share in prosperity, and neither war nor the
threat of war was strongly enough felt to demand the cur-
tailment of freedom where it had been won. There was
superficial reason for believing that continental countries
were in due course all destined to follow in the path of Great
Britain.

The economic situation was not wholly satisfactory. Up
to the end of the nineteenth century prices continued to
fall, and real wages therefore to rise. In Great Britain the
fall in prices was checked about 1896, and real wages fell
slightly from 1900 to 1910. In practical effect, this fall was
offset by the social gains of the first years of the Liberal

ISO HISTORICAL OUTLINE

Government — old age pensions, an amended scheme of
workmen's compensation, free meals for school-children,
etc. But as the reforming energy of the Government died
down and as its policy became in effect dictated by the
Irish vote, the working classes began to lose patience, and
their resentment at the failure of a radical victory to im-
prove their standard of life found expression in the great
series of strikes which began in 1911.

Nor was this strike wave without a guiding theory of its
own. In part, it expressed simple mistrust of political
action, and was under the influence of Syndicalist theories
from France. The French Syndicalist movement was revolu-
tionary, had no use for politics, and believed in overturning
Capitalism by means of an infinite series of sudden strikes
in different areas and industries. Alongside of Syndicalism
went a set of theories formulated by American left-wing
Trade Unionists, which also looked to strike action as a
means of social change, but contemplated as a method the
organisation of all workers into a single body — the One
Big Union — which would then seize the power. Guild
Socialism, a British Socialist doctrine influenced by
Syndicalism, also appeared in 1912-13. Strikes were
not confined to Great Britain, but took place in varying
degrees all over Europe. In Sweden there was even a
general strike. Where these strikes were serious they were
generally defeated ; in the French railway strike of 1910 the
one-time Socialist Minister Briand called the strikers to the
colours ; but they indicated a general social ferment which
made several of the Governments, in 1914, doubtful of the
attitude of their working classes to the war.

It should be noted that in 1900, the various Social-
Democratic Parties had formed a loose international feder-
ation, the International Socialist Bureau, which was
officially opposed to war. Upon various occasions, notably
at the Stuttgart Congress of 1907, this " Second Inter-
national " made great efforts to frame a policy which in
the event of war between nations could be adopted by the
working classes of the world. The difficulties, however,

THE AGE OF IMPERIALISM 121

were too great ; the resolutions passed were not based on a
sufficiently clear internationalist faith, and proved inoper-
ative in the crisis of 1914.

As has been said, Portugal was the only country to go
through a revolution during the early years of the twentieth
century. Nationalist feeling, however, was growing in all
States where nationalities were oppressed. But for the out-
break of war, a nationalist rising would very probably have
taken place in Ireland.

§ 7. THE EUROPEAN WAR

THE EUROPEAN War broke out on July 28th, 1914. The
immediate cause was the assassination of the Austrian
Archduke Francis Ferdinand at Sarajevo, the capital of
Bosnia, with weapons supplied from Serbian sources. The
Austrian Government seized the opportunity to issue a
violent ultimatum to Serbia, which the Serbian Government
accepted in part, but not in whole. Germany and Russia
both temporised, the former not desiring to interfere
unduly \\ith Austria, the latter wishing to uphold the
Pan-Slav cause. The nttitude of Great Britain was publicly
uncertain, but privately she was committed to assist France,
the ally of Russia, if war broke out, and if France were
drawn in.

Events moved with ^reat speed. On July 28th, Austria
declared war on Serbia ; on the 3Oth the Tsar ordered a
general mobilisation, i.e. a mobilisation against the German
as well as the Austrian frontier. This was interpreted in
Germany as a definite act of aggression, and the German
Socialists voted the war credits. On August ist both Germany
and France mobilised. The British Government hesitated,
being uncertain of public opinion ; but on August 3rd the
German army, in order to attack the French before the
Russians were ready, crossed the frontier of Belgium,
thereby violating the 1 839 Treaty of London and providing
an excellent public war-cry. Great Britain declared war on

122 HISTORICAL OUTLINE

August 4th ; Japan, as Britain's ally, on August 23rd.
During the progress of the war the combatants were
reinforced on both sides ; the Central Powers by Turkey
in November 1914, and by Bulgaria in September 1915 ;
the Allies by Italy in April 1915 (though she did not declare
war on Germany until the following year), Roumania in
August 1916, Greece, after much vacillating, in 1917 and
the United States in January 1917. Most of the South
American States, as also China and Siam, took the same
course, but without having any effect on the military
operations.

Early in the war the Allied Powers held conferences in
which they bound themselves not to make peace separately,
and by the secret clauses of the Treaty of London (April
1915) and other agreements decided how, in the event of
victory, the spoils should be divided. The Central Powers,
on their side, were making equally fantastic plans. Japan,
however, in the meantime seized the German port of
Kiao-Chou, and presented various demands to China.

The military events of the war barely concern us here.
The Allies held, almost from the start, a naval supremacy
which the German use of submarines, though it caused
anxiety about food supplies, did little to break. The navies
of the Central Powers were useless except to keep the Allied
fleet occupied, and it was thus fairly easy to blockade
Germany and Austria from the sea. Similarly the German
air-raids were a demonstration with no practical effect save
to invite Allied reprisals. Essentially, the war was won
through the exhaustion of the Central Powers by the length
and cost of the struggle ; and the entry of the United States,
with immense fresh resources of men and finance, at a
moment when the Allies were near to financial collapse,
made it impossible for the Central Powers to win. There
were other actions fought, some to capture the German
colonies in Africa, some in the attempt to cut off the Central
Powers from communication with the east ; but the import-
ant field of war was always the Western Front.

Attempts at peace were made long before the Armistice,

THE EUROPEAN WAR 123

and President Wilson was always ready to mediate. The
first suggestion came from Germany in December 1916,
and its rejection was followed by the unrestricted use of
submarines against merchant and passenger vessels and
the entry of the United States into the war. During the
following spring the Austrian Government, which feared
a Slav revolt, and believed that the Allied Powers desired
to preserve the Austro-Hungarian Empire, made various
peace overtures ; in July the German Reichstag passed a
resolution in favour of peace by negotiation ; and in August
the Pope endeavoured to mediate. All these efforts came to
nothing. Meanwhile, in March 1917, the Tsarist regime in
Russia had fallen ; a weak Provisional Government came
into office ; and the attempt of the Allies to force Russia
to continue the war resulted, immediately, in the complete
failure of the June offensive, and, a few months later, in
the Communist Revolution of October. Russia then
concluded an armistice with Germany and her allies, and
with Roumania, which had been defeated in the preceding
year — an appeal for a general armistice having been re-
jected. After a certain amount of negotiation, during which
it became clear that the Capitalist Powers would soon be
ready to attack the Socialist State, the Russians were forced,
in February 1918, to sign the treaty of Brest-Litovsk, by
which Courland, Lithuania and Russian Poland were given
up to the Central Empires, and independence promised to
Finland, Estonia, Livonia, the Ukraine and parts of Cau-
casia. Russia was thus removed from the war, but the
relief came too late for the Central Empires. The Slav
propaganda, aided by Italy, was threatening to disrupt
Austria ; the French, English and American governments
recognised as a separate nation the Czechoslovak Council
in Paris, presided over by President Masaryk ; the German
offensive of March 1918, failed ; and Bulgaria, Turkey and
Austria all announced their inability to face another winter
of war. The Bulgarians were granted an armistice in
September and the Turks in October. On November i ith,
after General Ludendorff had tried in vain to organise a

124 HISTORICAL OUTLINE

final resistance, and the Kaiser had fallen, the Provisional
Government of Germany signed an armistice which was in
effect a complete surrender.

§ 8. THE POST-WAR MAP OF EUROPE

No EVENT, in all European history, has brought about
such enormous changes in the political map of Europe, as
regards both its boundaries and its methods of government,
as the war of 1914-18, and the five Peace Treaties1 which
followed it. In the first place, by the end of the war there
were only six neutral States in Europe — Spain, Switzerland,
Holland, Norway, Sweden and Denmark. All the rest had
joined in on one side or the other ; and as the Armistice
constituted a virtual surrender by the Central Powers, in
the hope (but under no guarantee) that the influence of
the United States would mitigate the final terms, the Allies
were practically in a position to dictate the peace. Only
Turkey, of all the ex-German allies, resisted the terms
imposed.

This meant that there were a very large number of
claimants for the spoils, once a victory of spoliation had
been assumed, for the number of Entente Powers was
increased by the presence of certain " oppressed nation-
alities," notably the Poles and the Czechs, to whom freedom
and territory had been promised. It is true that Russia,
having not merely concluded a separate peace but gone over
to Socialism, could now be reckoned as an enemy Power and
available, therefore, for spoliation ; but even so there were
difficulties, not lessened by the fact that certain secret
treaties and agreements made to induce States to enter the
Allied coalition contained terms that subsequent events had
made it exceedingly difficult to fulfil. Notably was this the
case with regard to Italy, where the fulfilment of the lavish

1 Treaty of Versailles, with Germany; of St. Germam-en-Laye, with
Austria; of Trianon, with Hungary; of NeuiJly, with Bulgaria; of Sevres,
with Turkey. The last-named was never ratified, and has since been re-
placed by the Treaty of Lausanne (1923).

THE POST-WAR MAP OF EUROPE 125

i

promises of the Treaty of London would have created great
difficulties with both Serbia and Greece, to say nothing
of France.

The story of the Versailles Conference, with its final
imposing of the harshest possible terms upon the defeated
countries, has been told more than adequately by Mr.
Keynes in his Economic Consequences of the Peace. Here we are
only concerned to note its effect upon the general appear-
ance of Europe.

Five of the six neutral countries remained unchanged.
So did Great Britain, which received its compensation for
war services elsewhere, in the African possessions of Ger-
many handed over under mandate, and in certain Pacific
islands and New Guinea. Other Powers gained by Ger-
many's colonial losses, but their share was insignificant
compared with the British. The sixth neutral, Denmark,
received the German-speaking part of Schleswig, which
had been promised a plebiscite more than fifty years before.
All the Allied States obtained accessions of territory.
Belgium got some Flemish-speaking cantons which had
been left in Prussian hands in 1815 ; France took back
Alsace-Lorraine ; Italy, though disappointed of some of her
claims, got I I alia irredenta (the Trcntino), the German-
speaking South Tyrol, and part of Dalmatia. Still unsatis-
fied, the Italians in 1920 seized Fiume from the Serbs. In
South-Eastern Europe considerable changes were made.
Greece secured part of Macedonia, the Thracian coast
practically up to Constantinople, and the coast of Asia
Minor with Smyrna and its hinterland. But the Turkish
revolution and revival of 1922 made it impossible for the
Greeks to hold their new territories ; they were driven out
of Asia Minor arid in Thrace back as far as the Maritza
River, leaving the Turks in possession of Adrianople.
Roumania gained enormously in territory and consider-
ably in resources by the addition of Bessarabia, seized
from Russia, and the transference under the Treaties of
Transylvania and the Banat from Austria-Hungary. On the
west of the Balkan Peninsula, the small pre-war State of

126 HISTORICAL OUTLINE

Serbia, by uniting to itself the still smaller pre-war State of
Montenegro, with Bosnia-Herzegovina, Croatia, part of
Styria, the rest of Dalmatia, and other Austro-Hungarian
territories, reappeared as the comparatively large State of
Yugoslavia, and thus, much to the annoyance of Italy,
realised the pre-war Serbian aspirations of free access to
the Adriatic. Albania remained as an independent State,
though " independence," in the case of a country situated
in so strategic a position and having so poor and ignorant
a population, may well be independence in little more than
name.

All these territorial accessories, as well as the land
occupied by the new States, came out of the territory of
the defeated Powers. Of these Bulgaria suffered relatively
least, losing some small areas to Yugoslavia on the west, and
the eastern part of Thrace. (The latter loss, however, cut
Bulgaria off from the ^Egean.) Turkey, by the original
settlement, was not merely to be confirmed in the loss of all
her possessions in Europe except Constantinople itself, and
to lose large parts of the Near East, but also to be deprived
of the western part of Asia Minor. The Turkish revolution-
aries under Mustapha Kemal, however, succeeded in
reconquering Asia Minor and the part of Thrace round
Adrianople. Germany, in addition to the territories trans-
ferred to Belgium, France and Denmark, lost West
Prussia, Posen, the part of Upper Silesia which was given
to Poland after a deferred plebiscite, the Polish Corridor
to Danzig, and for a time, the Saar mining area. Danzig
became a " Free City," as did for a time Memel, later
acquired by Lithuania. Russia lost all her border States,
including the Polish provinces, part of White Russia, and
Bessarabia. At one time she had also lost the Ukraine ; but
this, in spite of Polish attacks, was reconquered. As to
Austria-Hungary, that Empire was completely dismem-
bered. All the parts which did not speak German or Magyar
were taken away, and the remaining partners, German
Austria and Hungary, received separate treaties, which
left one of them a small State with one huge city (Vienna)

THE POST-WAR MAP OF EUROPE 127

and practically no hinterland, and reduced the other to less
than one half of its former size and population, many
Magyar-speaking districts being transferred to alien rule.

Besides all these changes, we have to note the appearance
of six new States. Four of these, Finland, Estonia, Latvia
and Lithuania, were created directly out of the old Tsarist
Empire. Poland, made out of the Polish provinces of Russia,
Prussia and Austria, with additional increments sliced by
the Russo- Polish war of 1920—21 off the western borders of
Russia proper, was yet denied the " historic boundaries "
which she demanded at the Peace Conference ; while the
long and land-locked State of Czechoslovakia was formed
almost entirely out of the former possessions of Austria-
Hungary.

A comparison of the pre- and post-war maps of Europe
will make all these changes clear, and may also suggest
certain other reflections. Before the war there were five
Great Powers, of approximately equal weight, in Europe —
Great Britain, France, Russia, Germany and Austria-
Hungary, with Italy as a doubtful sixth. Now Austria-
Hungary has disappeared ; Russia has vanished from the
Concert of Europe ; and Germany, though still a large
State, has remained officially a beaten and partly tribu-
tary foe. There thus remain two Great Powers, with two
of rather lesser importance. Against this, one must notice
the increase among States of moderate size. Poland,
Roumania, Czechoslovakia and Yugoslavia have all joined
the category of Spain ; whereas against eleven small States
there are now sixteen, including four carved off Russia,
the autonomous Irish Free State, and two which were the
brains of the great Austro-Hungarian Empire, and now
find themselves reduced below Yugoslavia in importance.
Iceland was made autonomous in 1918 under the Danish
crown. This process has been sometimes described as the
balkanisation of Europe ; it should not be forgotten that
it is also the expansion of the Balkans. Roumania and
Yugoslavia cannot any longer properly be described as
Balkan States.

128 HISTORICAL OUTLINE

In addition to their retaliatory aspects, the Treaties, as
is indicated by the creation of the new States, were intended
to redraft the map of Europe more in accordance with
ethnic and language boundaries. In some cases, this
principle appears to have been deliberately flouted, as
when the Germans of the South Tyrol were put under
Italy, and large Magyar-speaking districts detached from
Hungary ; but at any rate efforts were made to carry it
out. The task, however, is obviously impossible, having
regard to the way in which persons of different race and
language live mixed up together in the States of Eastern
and Central Europe. The reader who turns to the descrip-
tion of any one of these States in Part Two will find abun-
dant examples. Nor would ethnic tidying always be in
accordance with the wishes of the inhabitants ; in spite of
the great strength of nationalist feeling men are still occa-
sionally influenced by other than nationalist motives. There
are Poles who would rather live in Germany than in
Poland ; there are persons of Turkish race who do not want
to live in Turkey. Something can be done to adjust a few of
the difficulties by plebiscites in particular areas, or by ex-
change of the nationals of one State for the nationals of
another, as in the case of Greece and Bulgaria. But, what-
ever is done, there must remain, in practically every State,
a minority, sometimes several mutually hostile minorities,
which are not homogeneous in language, race, religion, or
all three, with the governing majority, and which, there-
fore, nationalism being what it is, will need special protec-
tion if the purpose of the Treaties is to be carried out. Only
Soviet Russia, of all States in Europe, has had the courage
to grant to her racial minorities full cultural autonomy,
and to allow them freely to teach, write and print in their
own languages. This is because the uniting power of a
common Communist creed and Communist institutions is
believed by the rulers of Russia to be strong enough to
override the disruptive forces of nationality and of religious
difference.

Accordingly, much of the activity of the League of

THE POST-WAR MAP OF EUROPE

129

Nations has been directed to carrying out the provisions of
the Treaties for the protection of minorities, to arranging
conventions, and, equally if not more important, to seeing
that these conventions are carried out. In the case of those
victorious Powers which received little or no accession of
territories, the services of the League of Nations have not
been in request. Great Britain, after a short period of civil

Monarchies

Albania
Belgium

Bulgaria

Denmark

Hungary (Regency)

Iceland

Italy (Fascist Dictatorship)

Liechtenstein

Luxembourg

Monaco

Netherlands

Norway

Roumania (Monarchist Dictatorship)

Sweden

Yugoslavia (Monarchist Dictatorship)

United Kingdom

Republics
Andorra
Austria (Christian Social

Dictatorship)
Czechoslovakia
Danzig (Nazi Government)
Estonia
Finland
France

Germany (Nazi Dictatorship)
Greece
Latvia
Lithuania

Poland (semi-dictatorship)
Portugal
San Marino
Spain

Switzerland

Turkey (semi-dictatorship)
U.S.S.R. (Communist)

war, yielded to the demands of her strong racial minority,
and set up the Irish Free State, an autonomous Dominion
within the Empire, which is at present demanding the
right of secession. The problem of the Alsatians in France,
of the Flemings in Belgium, and of the Catalans and other
minorities in Spain is being handled by these States without
outside interference. But in the new States of the east and
south, there are all sorts of arrangements and suggestions for
the protection of minorities, some of which appear to be
working moderately well, some very badly indeed. Instances
ER

130 HISTORICAL OUTLINE

of peculiar difficulty are the welter of nationalities, claimed
by Greece, Bulgaria and Yugoslavia, which is to be found
in Macedonia, the condition of the Ukrainian and Russian
minorities in Poland, and the almost insoluble problem of
the Polish Corridor, which in order to give Poland an outlet
to the sea divides the Germans in East Prussia from their
neighbours on the west.

Not only has the political map changed ; the political
complexion of the States has also altered enormously.
Before the war there were only three republics in Europe
(Switzerland, Portugal and France), and nineteen mon-
archies. Now, since the Spanish Revolution, there are
fifteen republics and only twelve monarchies,1 even if
Hungary, which has a regent but no king, be included
with the monarchical States. All the new States except
Albania, which acquired a king in 1928, are republics ; and
among the monarchies which have disappeared are the
three ancient dynasties of the Romanovs, the Hohenzol-
lerns, and the Hapsburgs, as well as the House of Castile.

But a mere division of the States of Europe into republics
and monarchies does not adequately represent the situation.
The position of the King of Italy, for example, is very
different since Mussolini's seizure of pov\er in 1922 ; and
we must therefore add a new political category, that of
dictatorship. Dictators are to be found in States nominally
monarchical as well as in States nominally republican ;
Mussolini in Italy, and, till recently, Primo de Rivera
in Spain, found their respective monarchs no obstacle
to their rule ; in certain of the Balkan countries, such
as Roumania, the king himself has assumed dictatorial
powers ; Horthy's regime in Hungary may be described as
dictatorship or monarchy according to choice ; Pilsudski in
Poland dictates through republican forms ; while recently
Hitler in Germany must be added to the list of dictators in
countries nominally republican. Greece has had a trial of
several forms of government, monarchy, dictatorship, and

1 Excluding the Irish Free State and States with under one million
population.

THE POST-WAR MAP OF EUROPE 13!

constitutional republicanism. Of dictators, some, like
Hitler and Mussolini, are heads of a definitely Fascist order
of society ; others are despots unadorned. Mustapha Kemal
in Turkey perhaps stands in a category all by himself ; he is
dictator, but dictator of a country which has undergone
violent social change. Turkish political institutions are not
Communist ; but Kemal has more affinity with the Com-
munist Party in Russia than with any of the above instances.
Nor are all of the republics by any means alike. An old-
established republic, such as France or Switzerland, re-
sembles more in character the republic of the United
States, or, indeed, the British constitutional system if the
King were removed. At the other extreme stands the Union
of Socialist Soviet Republics, which is not merely a federal
republic but a Socialist Federal Republic, under the dicta-
torship of the proletariat exercised through the Communist
Party, with an economic system quite different from the
rest of the world, and representative institutions (the
Soviets) constituted on an entirely different basis. No other
State in Europe has so far followed the Soviet example with
success, though short-lived attempts, as in Hungary and
Bavaria immediately after the Armistice, have been made.
Midway come various Liberal-Democratic republics
founded with the aid of the Social Democrats of the Right,
of which Germany was, until recently, the chief example.
These arose, mainly, out of conditions of defeat and
economic collapse similar to, though less catastrophic than,
those which produced the 1917 Provisional Government in
Russia. That is to say, these Governments were brought to
power by a working class in revolt against its old rulers, and
had therefore to begin by aiming at an economic restor-
ation of the working class. Thus, even when these republics
were governed by coalitions between the right-wing
Socialists and the bourgeois parties, something had to be
done to satisfy, at least in part, the workers' demands.
Hence the great increase of unemployment relief and social
amenities, for example, in post-war Germany, the remark-
able housing schemes of Socialist Vienna, and so on. But

132 HISTORICAL OUTLINE

as the general economic situation proved an obstacle to a real
increase in standards of life while nationalist and capitalist
rivalries continued to exist, Governments of this type have
found their task more and more impossible, and have either
been driven out by violent reaction, as happened in Fin-
land, or been forced to coalesce with other parties and
become less and less socialistic. A clear example, in a non-
republican country, was the 1931 defeat of British Labour.
The Russian Revolution was made by the joint action of
workers and peasants, but there has been no case of a purely
peasant Government (though there have been peasant
risings) since the failure of Stambuliski in Bulgaria in 1923.
Details about the constitutions of the various States, their
parties, and their working, will be found in Part II. It
may, however, be stated as a generalisation that, in the
realm of politics, Europe has been and is being profoundly
influenced by the two new ideas of Fascism and Com-
munism. Of all the political tmeutes which have disturbed
Europe during the past fifteen years, with the exception of
the revolution in Turkey, which is hardly now a European
Power, and the long-delayed Spanish revolution, of which
it is too soon to speak with confidence, there are only three
that are of real interest, the Fascist revolution in Italy, the
Nazist revolution in Germany, and the Communist revolu-
tion in Russia. Nationalism, during and since the war, has
grown out of all recognition, and has even made its appear-
ance outside the European system, to the embarrassment
of certain Powers with colonial empires. (We may yet see
the European system profoundly influenced by the growth
of nationalist imperialism in the East.) But it is important
to observe that it is a nationalism which has been fostered
and increased during a time of great economic insecurity
and economic decline, and that, therefore, the mass of the
people have looked to nationalism to give them bread as
well as freedom. The fear of starvation has reinforced the
fear of oppression. This and the belief in the force of
arms, which the war induced and the Peace Treaties
approved, have produced an age of violence in Europe

THE POST-WAR MAP OF EUROPE 133

unprecedented since the Treaty of Westphalia. The settle-
ment of 1816 resulted in a system of grim and secret oppres-
sion, that of 1918 in open and wholesale murder, both by
individuals and by organised groups. Under the system of
Metternich, persons obnoxious to the ruling powers disap-
peared into the dungeons of King Bomba or the distant
parts of Siberia ; under that of Versailles they are shot by
their political opponents, beaten up in droves by Fascist or
Nazi thugs, or invaded, should the obnoxious group be in
command of a State, by their neighbours. The system of
setting bandits loose upon a State began in the middle of
1918, when such White generals as Denikin, Kolchak,
Wrangel and Yudenich were encouraged to attack the
Russian Communist Government ; but it has not stopped
there, and against this tendency to violence, stimulated in
part, as far as nationalist movements are concerned, by the
international activities of armament firms, the pacifist ele-
ments, whether individual recusants, peace societies, or
disarmament conferences, have so far struggled in vain.
Even in countries which have not suffered revolution or
invasion there is visible an intensification of nationalist
feeling and a distinct tendency, in part a legacy of wartime
regulations, to restrict the individual and group liberties
associated with pre-war days, to control far more strictly the
entry, movements and activities of foreigners, and to take
or retain reserve powers, as exemplified in the British
Emergency Powers Act used in the 1926 General Strike, for
coping rapidly and without formalities with any social up-
heaval. This type of legislation by decree has gone much
further on the continent than in Great Britain. Poincare*, in
1926, secured a considerable extension of the power to
govern by emergency decree even in France. Bruning,
under the stress of world depression and in face of a sharp
conflict of opinion in the Reichstag, practically governed
Germany by the extensive use of emergency powers of
presidential decree between 1930 and 1932 ; and Pilsudski
in Poland largely superseded the Seym by obtaining large
and undefined powers of government by administrative

134 HISTORICAL OUTLINE

edict. All over Europe, the effective authority of Parlia-
ments has been weakened ; and Governments, under stress
of the emergency, have claimed the power to act even
without parliamentary sanction, in what they conceive to
be the national interest.

PART II: THE COUNTRIES OF
EUROPE

1. Populations and Occupations

2. Eastern Europe

3. Finland, Estonia, Latvia, Lithuania

4. Poland

5. Roumania

6. The Balkans

7. Hungary, Austria, Switzerland

8. Czechoslovakia

9. Germany

10. Scandinavia

11. Belgium and Holland

12. France

13. Spain and Portugal

14. Italy

15. Great Britain

16. The U.S.S.R.

§ i. POPULATIONS AND OCCUPATIONS

LET us begin with a few elementary facts.

The Continent of Europe, including its islands, covers an
area of 4,400,000 square miles and had in 1930 about
506,000,000 inhabitants. Of this total area the European
territory of the U.S.S.R. alone occupies more than one
half, and the total territory of the U.S.S.R., including its
territory in Asia, is nearly four times the size of the rest of

136 THE COUNTRIES OF EUROPE

the European countries put together. One quarter of all
the inhabitants of Europe live in the U.S.S.R., and the
total population of the U.S.S.R., including those who live
in Asia, exceeds by about thirteen millions the combined
populations of Germany, France and Italy. In terms of
population the U.S.S.R. is the third largest country in the
world, surpassed only by China and India. It has nearly
forty million more people than the United Stales, and its
territory is nearly three times as large. The U.S.S.R. covers
not far short of one-sixth of the world's land surface and
includes not far short of one-twelfth of the world's in-
habitants.

Apart from the U.S.S.R., the territory of Europe is broken
up among a very large number of separate and independent
States of extraordinarily varying sizes. There are four
" Great Powers," each with a population of more than
forty millions. Of these, Germany, despite her territorial
losses after the war, still comes easily first in number of
inhabitants, with sixty-five million people ; but her area is
now smaller than that of France, with her forty- two
millions, or even Spain, with only twenty-four millions.
Next to Germany in size of population comes Great
Britain, with an area less than half that of either France or
Spain, and not much more than half that of Germany.
The United Kingdom, excluding the Irish Free State, has
about forty-six million people. Then come France and,
rapidly outdistancing France, Italy, with forty- two millions
each.

These are the " Great Powers." Next them in number of
inhabitants stands Poland with thirty-two million people,
and then Spain with her twenty-four millions. The area of
Poland, a State re-created after the war, is larger than that
of Italy or the United Kingdom ; and Spain, as we have
seen, is larger than any European country except the
U.S.S.R. and France. Next in order of population follow
Roumania with eighteen million people, Czechoslovakia
with fifteen millions, and Yugoslavia with fourteen millions.
No other European country has more than ten million

POPULATIONS AND OCCUPATIONS

137

H

138 THE COUNTRIES OF EUROPE

inhabitants, unless account is taken of Turkey's fourteen
millions, of whom only about one million live in Europe.

Excluding Turkey, but including the U.S.S.R., we have
so far five " Great Powers " in Europe, and five secondary
Powers, each with more than ten million inhabitants.
Next comes a substantial group of eight countries with
populations exceeding five millions. These range from
Hungary with its nine millions to Sweden and Bulgaria
with a fraction over six millions each. Three more countries
have between three and five million inhabitants ; four,
including the Irish Free State, between two and three
millions ; and two others about one million. Next follows
a group of miscellaneous territories of varying degrees of
independence, with populations ranging from 800,000 in
the case of the Saar territory to 100,000 in that of Iceland ;
and finally the rear is brought up by those territories with
populations of less than 25,000, from Monaco with about
24,000 to Andorra with 5,000 inhabitants. This makes in
all thirty-nine separate political units in Europe, including
Turkey, or, if no account is taken of countries with under
a million inhabitants, a total of twenty-eight, ranging in
size and population from the U.S.S.R. with its 161 millions
(127 millions in Europe) to Albania and Estonia with one
million each.

Each of these twenty-eight self-governing territories (and
some of the others) possesses its own customs administration
and its carefully guarded frontier, and in each there is a
separate Government claiming and, save in the case of the
Irish Free State, actually exercising, complete and indepen-
dent political sovereignty. Each of these twenty-eight
countries has its own taxes, its own monetary system, its
own railways, its own armed forces, and last but not least its
own native supply of politicians and vested interests. Most
of them have their own languages, often more than one,
and their own separate and often aggressively nationalist
systems of education. Many of them are troubled with
" minority " problems, and a number of the newer States
are devoting a large part of their energies to an attempt to

POPULATIONS AND

create a vigorous national consciou

geneous elements which the Pe

under a common and exclusive

the twenty-eight leading Europ

unitary States, governed with varyinl

tion from a common centre, while othli

at any rate up to 1933, and the U.S.S

include within their territories smaller"1

varying degrees of autonomy and

machines of their own. The only safe generalisation to make

about them all is that they are all intensely suspicious one

of another and sufferine; severely from the evil effects of the

world economic depression, and all busily engaged in

trying to thrust off as much as possible of the common

trouble upon their neighbours in the hope, doomed

inevitably to frustration, of bearing a lighter share of it

themselves.

These various countries are naturally very far from
homogeneous in their social and economic structure.
Indeed, within the borders of Europe are found countries
at almost every stage, from the intensified industrialisation
of Great Britain and Belgium to the overwhelmingly pre-
ponderant dependence on agriculture of certain of the
States of Eastern Europe. In more than half the European
countries for which figures are available — these include all
the most advanced — over 50 per cent of the occupied pop-
ulation is still engaged in agriculture and fishing. Accord-
ing to the latest available figures (which are in some cases
rather old) the proportion so engaged in two countries —
the U.S.S.R. and Bulgaria — is still over four-fifths of the
whole occupied population, and four other countries —
Roumania, Yugoslavia, Lithuania and Poland — have nearly
four-fifths of their occupied population engaged in agricul-
tural pursuits. In Estonia, Latvia and Finland the proportion
is over two-thirds, and in Hungary, Portugal, Spain, Greece
and the Irish Free State over one half. Italy, also, despite
the development of industrialisation in recent years, has
still more than half its occupied population engaged in

140 THE COUNTRIES OF EUROPE

agriculture. At the other extreme, in Great Britain the agri-
cultural and fishing population is only about eight per cent
of the total, whereas industry, commerce and transport
together account for over two-thirds. Belgium again has
two-thirds of her occupied population engaged in industry,
commerce and transport, and Switzerland nearly two-
thirds, while Holland, Germany and France all have over
one half so engaged. In an intermediate group between the
industrialised countries of Western Europe and the pre-
dominantly agricultural countries of Eastern Europe stand
the Scandinavian States, Sweden, Norway and Denmark,
and also Austria and Czechoslovakia, which have inherited
the greater part of the industrial equipment of the pre-war
Austro-Hungarian Empire. All these countries have be-
tween forty and fifty per cent of their occupied populations
engaged in industry, commerce and transport as against
between thirty and forty per cent in agriculture and fishing.
They therefore approach nearly in terms of population to
what is sometimes called a " balanced economy " ; but
as the purchasing power of the urban classes considerably
exceeds that of the rural population, all these countries
have in fact a considerable surplus of industrial products to
export, and need to import foodstuffs as well as raw mater-
ials for their industries. In fact the conception of a balanced
economy is far more nearly realised in such a country as
France, with fifty per cent of the occupied population in
industry, commerce and transport as against thirty-eight
per cent in agriculture. Germany, with fifty-eight per cent
in the former and only thirty-one per cent in the latter
group, comes into a different class and has been hitherto
far more dependent than France on the export of manu-
factures in exchange for foodstuffs as well as raw materials,
though of late high agricultural protection has brought her
much nearer to autarchy.

The social structure of these various countries is further
illustrated by the distribution of the remainder of their
occupied populations. The percentage of the occupied
population engaged in the armed forces ranges from a tiny

POPULATIONS AND OCCUPATIONS 14!

fraction of one per cent in Austria and Switzerland to a
maximum of two and a half per cent in Poland and Hun-
gary ; and the great majority of countries have between one
and two per cent of their occupied populations under arms.
Much wider variations, illustrating the broad differences of
social structure between the more and less developed
countries, are to be found in the percentages of the occupied
population engaged in the professions, in public administra-
tion and in domestic service. The proportion engaged in
professions and public administration is highest in Austria,
where the latest available figure gave it as eleven per cent ;
for Austria inherited the large administrative equipment
and professional personnel of the effective political and
economic capital of the old Austro-Hungarian Empire.
But the proportion is little lower in England and Wales,
where it is ten per cent, though incidentally it is only six
per cent for Scotland. At the other extreme Portugal,
Roumania and the U.S.S.R. have only two per cent of their
occupied populations in this group according to the latest
available figures, and Lithuania only one and a half per
cent. After Austria and Great Britain, the highest percent-
ages, seven and a half and seven, are found in Holland and
Belgium; while France, Germany and Denmark have all
about six per cent.

The figures for domestic service tell much the same tale.
In this case Denmark with thirteen per cent shows the
highest figure, but this may be affected by the inclusion of
farm servants. England and Wales comes next with twelve
per cent,1 and then again Austria with eleven per cent. On
the other hand Poland, Greece, Finland and Estonia have
only two per cent, and Bulgaria only one per cent. Norway,
Holland and Sweden with nine, eight and seven per cent
come next after England and Wales ; and again France and
Germany with four and four and a half per cent respectively
occupy an intermediate position. Apart from the special
case of Austria, the proportion of the occupied population
engaged in these latter groups serves as a fairly accurate
1 Scotland nine per cent.

142

THE COUNTRIES OF EUROPE

PERCENTAGES OF OCCUPIED
POPULATIONS ENGAGED IN

~ and Trade, and
Fishing Transport

and Forces
Jbhc
mistration

Austria (1920)

32

46

II

-(0

Belgium (1920)

19

65

7

2

Bulgaria (1926)

81

13

3

I

Czechoslovakia (1920)

40

47

5

2

Denmark (1921)

35

44

6

I

England and Wales (1921)

7

68

10

I

Estonia (1922)

66

»9

4

2

Finland (1930)

63

22

3

I

France (1926)

38

5°

6

2

Germany (1925)

3i

58

6

i

Greece (1928)

54

26

4

I

Holland (1920)

24

59

7i

i

Hungary (1920)

58

28

4t

2i

Iceland (1920)

56

23

4i

—

Irish Free State (1926) .

52

26

6

I

Italy (1921) .

56

35

4i

2

Latvia (1925)

68

19

4

lj

Lithuania (1923)

79

10

'i

'i

Norway (1930)

35

48

6

— (i)

Poland (1921)

76

15

2i

2}

Portugal (1911)

58

3i

2

1}

Roumania (1913) .

80

13

2

2

Scotland (1921)

10

66

6

I

Spain (1920)

56

29

4

a*

Sweden (1920)

4i

45

5

4

Switzerland (1920)

26

61

7

— (0

U.S.S.R. (1926) .

87

9

2

-(a)

U.S.A (1930)

22

51

8

i

Sessions Armed Domestic Others
Service

II

5

I

4

12
2
2
4
4*

2

8

4
15
10

5i

10
2

7i

3

9

3i

7

6

10

5
a{

(1) Included in previous column.

(2) Not included.

(3) Including clerks.

POPULATIONS AND OCCUPATIONS 143

indicator of the size and wealth of the middle class in
relation to the whole population of the country. The figures
are of course subject to a certain margin of error, as they
have not been compiled on a precisely uniform basis for all
countries, nor do the latest figures relate always to the same
year. But the discrepancies arising from these causes are
not likely to be serious enough to invalidate the broad
conclusions drawn in the preceding paragraphs.

§ 2. EASTERN EUROPE

IN 1930 Aristide Briand, then Foreign Minister of the
French Republic, launched his project of the United States
of Europe, in a memorandum which was sent simultane-
ously to all European Governments. What the French
proposed, in terms kept carefully vague, was a federal
organisation of all the States of Europe, designed both for
the promotion of security and the prevention of war and
for the furtherance of positive political and economic
collaboration. The Briand project was conceived mainly
in political terms ; for the French idea was that, if some sort
of political federation could be established among the
European States, economic co-operation between them
would surely follow the achievement of political solidarity.
Accordingly, the project in its first form contained no
proposals for actual economic unification, but only for the
building up, side by side with the League of Nations, of a
far closer political body among the States of Europe alone.
The relations of this new body to the League were not
clearly defined, but it was to act somehow within the
League framework ; and the Committee for European
Union, which was formed as a result of Briand's initiative
to study the project further, was brought into existence as
a committee of the League of Nations.

When Briand launched his project, he was thinking
primarily, not of the whole area of Europe in a geographical

144 TH£ COUNTRIES OF EUROPE

sense, but rather of all those countries of Continental Europe
which lie between the Union of Socialist Soviet Republics
on the east and the Atlantic Ocean on the west. It is true
that Great Britain as a European member of the League of
Nations was invited to take part in the discussions on Euro*
pean union and her entry into the proposed Union was
contemplated as a possibility. But it had to be recognised
at the outset that Great Britain, in face of her vast interests
in other continents and of her imperial connections, stood
to some extent apart from the nations of Continental
Europe ; for these, even when they had empires of their
own, stood to them in a relation substantially different from
that of Great Britain to Canada or Australia or South
Africa. Great Britain was but a doubtful and hesitant
attendant at the discussions on European union. Perplexed
between her lively interest in the development of political
tranquillity and economic prosperity on the Continent and
her fears of entering into any exclusive European arrange-
ment that might prejudice her connections elsewhere, she
could not be reckoned on as a whole-hearted member of
any European family of States.

At the opposite end of the European continent stood the
U.S.S.R., not a member of the League of Nations and in
some sense the potential rallying point for a rival group of
Continental forces. Briand was accused of endeavouring to
make a bloc of Continental countries against Russia rather
than a pacific federation of European countries for co-
operative action in the political and economic field.
Whether this was true or not, it is certain that Russian
participation in the United States of Europe was neither
expected nor desired. The federation was to have been one
of countries living at one or another stage of economic
development under the forms of government and economic
organisation to which the Russian Communists had thrown
put their fundamental challenge.

For certain purposes it is therefore best to think of Europe
as a whole as divided into three sections — Great Britain, the
U.S.S.R., and the rest ; for, despite their continual bickering

EASTERN EUROPE 145

and the strong tendencies towards economic national-
ism which they have manifested in recent years, the
countries of Continental Europe up to the new Russian
border do display to a considerable degree a real homo-
geneity of outlook. Between the democratic constitutions
of France and many of the new post-war States on the one
hand, and the Fascist or similar dictatorships of Italy,
Germany, Yugoslavia and to some extent Poland the cross
is far less wide in mental outlook than between any of these
systems and the quite different social arrangement which
has come into being in the U.S.S.R. From this standpoint
Great Britain forms of course a part of the European bloc ;
but even in this respect she stands to some extent outside
the concert of Continental anti-Bolshevism. British Social-
ism, for example, reformist as it is, has never shared
in the ferocious anti-Bolshevism of most of the Continental
Social Democratic Parties, and on the other hand, Com-
munism in the Russian sense has found so far very little
foothold among the British workers. Let us therefore begin
our survey by leaving aside for the time being Great Britain
on the one hand and the U.S.S.R. on the other as far as
their internal conditions are concerned, and let us deal first
of all with the narrower Europe that lies between the
Russian frontier on the one hand, and the Atlantic Ocean
and the North Sea on the other.

Down the entire length of Continental Europe in the
east, from the Arctic regions to the Black Sea, stretches the
land frontier of the U.S.S.R. Along this eastern frontier of
Briand's Europe lie five States, four of them newly created
by the treaties of peace after the war, and the fifth so
enlarged in area and population as to be virtually a new
country. These five States are, from north to south, Finland,
Estonia, Latvia, Poland and Roumania. In addition, two
other States — Lithuania and Czechoslovakia — come within
a comparatively narrow distance of the Russian frontiflfc ;
and Lithuania, at least, is only held apart from direct
contact with Russia by a territory placed on very question-
able grounds of nationality under the Polish State. In the

146

THE COUNTRIES OF EUROPE

THE NEW POST-WAR FRONTIER IN
CENTRAL AND EASTERN EUROPE

EASTERN EUROPE 147

case of Czechoslovakia, the territory nearest Russia is
occupied mainly by Ruthenians, closely akin in culture and
nationality to the populations both of the neighbouring
portions of the U.S.S.R. and to those of the Polish territory
which lies between. Both Lithuania and Czechoslovakia,
as well as the five border States, are therefore closely
interested in the problems of the Russian frontier. Nor does
this exhaust the geographical contacts of the U.S.S.R. with
nations which have a foothold on the European Continent.
To the south, Soviet territory marches with that of Turkey
in the Transcaucasian region ; and the Turks, astride both
sides of the exit from the Black Sea, command Russia's
principal maritime outlet. Bulgaria, too, with her territory
reaching the shore of the Black Sea, can fairly be regarded
as another of Russia's geographical neighbours. Again in
the north, where Russia's sea outlet is by way of the Baltic,
Germany and the Scandinavian countries find themselves
closely concerned in the problem of Russia's contacts with
the West.

Let us, however, for the moment leave aside these wider
contacts, and consider only the position of the countries
lying along or near the western frontier of the U.S.S.R. It
is important to realise at the outset that this enormously
long land frontier is for the most part merely a line drawn
on the map, and is not marked by any natural features
which serve as clear physical boundaries between one
geographical region and another. The border between
Russia arid Finland does indeed follow in the north for long
distances the line of hills and mountain ranges, while in
the south great lakes form to some extent a natural boun-
dary. Estonia, too, is partly cut off from Russia by the long
expanse of Lake Peipus, and in Central Poland the Pripet
marshes serve for some distance, as was clearly shown in
the late war, as a powerful geographical obstacle to mili-
tary operations. Roumania, again, is parted from the terri-
tory at present under the jurisdiction of the U.S.S.R. by the
River Dniester. But for long stretches of this eastern frontier
of Briand's Europe there are no natural boundaries at all.

148 THE COUNTRIES OF EUROPE

Nor are there clear cultural or ethnical frontiers. The
line of post-war Russia has been pushed back a long way
east of that of the pre-war Russian Empire ; and, while
this has been done largely in accordance with the principle
of national self-determinatipn, the new frontiers include
within the area of the Boi/der States very many Russians
and Ukrainians and other peoples far more closely akin in
culture and outlook to the peasants of the U.S.S.R. than
to the national majorities under whose political control
they have been left by the Treaties of Peace and by the
turmoils of the years immediately after the Great War.
Finland, indeed, includes only a few Russians ; but in
Estonia they form about eight per cent of the population,
in Latvia fourteen per cent, in Poland probably twenty
per cent, and in Roumania also a considerable though not
easily ascertainable fraction. Czechoslovakia, as we have
seen, also contains a substantial Ruthenian population
closely akin to the Russians, and difficult to assimilate to
the very different culture of the Czechs. Anyone who takes
the trouble to look at one of the ethnographical maps of
Europe and to compare it with the political maps of 1914
and of to-day will speedily realise that the application in
the Peace Treaties of the principle of national self-deter-
mination— as far as it was applied — has by no means
solved the problem of racial and national minorities in
Eastern Europe. Indeed, this was so far recognised in the
Treaties themselves that the new and enlarged States of
post-war Europe have been compelled to include in their
constitutions safeguards for the rights of minorities, and
these rights are supposed to be upheld by international
guarantees under the League of Nations. That they are
by no means completely upheld the discontent in Poland,
Roumania, Yugoslavia and several other States shows all
too plainly.

*We have, then, along the eastern borders of Briand's
Europe a group of new countries whose frontiers are arti-
ficial both from the geographical and from the ethnical
point of view. They were, moreover, when they were

EASTERN EUROPE 149

originally drawn, even more artificial from the economic
standpoint. The border States which we are considering
are all predominantly agricultural and inhabited mainly
by peasants, though there were, at the time when the post-
war settlements were made, large differences between area
and area in the proportion of land cultivated in small
holdings by peasant proprietors and that in the possession
of large landed proprietors. But in the early years after the
war the breaking up of large estates and the division of the
land among the peasants, while it was carried out in differ-
ent countries under widely varying conditions, tended
everywhere to bring about a great increase in the propor-
tion of small peasant holdings. This happened both in
Russia and in the border States ; and until the Russians
began their intensive drive for the socialisation of agri-
culture three years ago the peasants on both sides of the
national frontiers continued to live under economic con-
ditions which were very largely the same. The socialisation
of agriculture in the U.S.S.R. may now be in process of
creating a real economic frontier between it and the border
States, but certainly no such economic frontier existed at
the time when the new frontiers were made.

It follows from what has been said that the process of
frontier-making in Eastern Europe was difficult in practice
as well as in theory ; for the politicians at the Peace Con-
ference, surrounded by rival nationalist experts in ethno-
graphy, could not in fact make frontiers simply in accord-
ance with their interpretation of the principles of national
self-determination as laid down by President Wilson. They
had to consider what was actually happening in each of the
territories which they were attempting to assign ; and
more than once, after they had made their decision, it had
to be altered in haste in face of a successful coup d'etat by
nationalists on the spot. The Poles got Vilna and the
largely Lithuanian territory around it in the first place by
forceful and unauthorised occupation. Lithuania got a bit
of her own back by seizing Memel, and her coup duly
received the recognition of the European Powers. The Pole

I5O THE COUNTRIES OF EUROPE

Korfanty seized a disputed area in Upper Silesia ; and
successful Polish occupation undoubtedly affected the sub-
sequent decision of the Powers. Moreover, before the new
juridical frontiers were drawn/ at the Peace Conference,
military occupation by nationalist forces had in many areas
already determined the issue. For some time after the
collapse of the Central Powers in the autumn of 1918 force
and not diplomacy was successfully shaping the political
structure of the countries of Eastern Europe.

Whenever an old empire or an old country is broken up
as a political unit, and new States are created out of pre-
viously dependent areas, very difficult problems of economic
as well as political reorganisation are bound to arise.
Frontiers, on whatever principle or lack of principle they
are drawn up, are almost bound to cut across economic
areas which have hitherto possessed a high degree of inter-
dependence. Railway systems, even if their construction
has not been guided largely by considerations of military
strategy, are almost always so devised as to bear a close
relation to the political unity of the territories within which
they are built. If national frontiers are altered railway
systems cease to correspond to economic and social condi-
tions ; and this is much more the case if the new States,
animated by ideas of economic nationalism, proceed to
build up high tariff walls around the territories placed
under their control. The creation of a new country means
the establishment of a new capital, not only as a seat of
Government but also as the headquarters of a new Central
Bank, and an elaborate set of financial institutions working
in conjunction with it. The capital city almost inevitably
becomes to some extent an economic and financial as well
as a purely political capital. In the older countries railway
systems and road systems converge upon the capital cities
and upon the leading ports and other commercial centres
falling within the national territory. But when new States
are set up it is commonly found that their railway systems
and their other means of communication are orientated
not to their own capitals, or their own ports and commercial

EASTERN EUROPE 15!

centres, but to the ports, capitals and commercial centres
of the political units of which they previously formed a
part. Thus the railway systems and the ports of Latvia and
Estonia were essentially designed to serve the needs of
Russian industry, commerce and administration. Riga and
Reval were Russian ports engaged in the handling of
imports and exports on behalf of the trading communities
of pre-war Russia. In these countries the change of political
sovereignty has involved and been accompanied by a tre-
mendous change in the currents of trade ; and the equip-
ment for transport lying within the territories of these new
Republics does not correspond at all closely with their own
conception of their new needs. Again, in Poland, built up
as she has been out of territories previously divided between
the three state systems of Russia, Germany and Austria-
Hungary, the inherited system of transport is orientated
not towards Warsaw as a national centre, but in separate
sections towards Moscow, Kiev, Budapest, Vienna and
Berlin, as well as towards Danzig and the Baltic ports of
her northern neighbours. Enlarged Roumania finds her
capital, away in the southern part of the country, quite
inadequately linked up with her new territories on the other
side of the Transylvanian Alps ; while Yugoslavia, the
successor of pre-war Serbia and Montenegro, is in the worst
position of all in her efforts to create a national economic
unity based on a nationally unified system of transport.

Moreover, in face of the uncertainties of the political
future, and of the clash of economic and political systems
all along the frontier between Russia and the border States,
it is impossible for economic development and reorganisa-
tion to proceed without a close regard for military consid-
erations. Kiev is over 150 miles distant from the Polish
frontier, but one reason why Ukrainian industry under the
successive Five-Year Plans of the Soviet Union is being
centred upon Kharkov rather than Kiev is that Kharkov
is well out of reach of the threat of frontier wars. Russia is
aiming at building up her new industrial system as far as
she can out of the reach of her neighbours. Her leaders even

152 THE COUNTRIES OF EUROPE

speak of moving in process of time the economic capital of
the U.S.S.R. from Moscow to the Urals, as they have
moved it already from Leningrad to Moscow. All this
frontier between the U.S.S.R^and Briand's Europe is still
essentially an armed frontie*C and on both sides of it the
economic handling of thei territories which lie along it
continues to be governed, despite the conclusion of more
and more pacts of non-aggression, by the sense of political
instability and the threat of impending military conflict.
This applies not only to the U.S.S.R. but with equal force
to the new States on the opposite side of the frontier. They,
too, want to put industrial development as far as possible
out of the reach of warlike action by their neighbours.
Accordingly, save under the most powerful and imperative
inducements of economic opportunity, lands lying near the
Russian frontier are likely for some time to remain indus-
trially undeveloped, and to be given over to peasant
agriculture, based on small peasant holdings on one side
of the dividing line, and socialised farming on the other.

§ 3. FINLAND, ESTONIA, LATVIA,
LITHUANIA

Finland, The most northerly of Russia's neighbours is
Finland, for more than a century a partly autonomous but
discontented territory of the pre-war Russian Empire.
When Finland was separated from Sweden and united to
Russia in 1809 it was allowed to retain autonomy in the
management of its internal affairs. But as the century
advanced the Russian Empire became more and more
aggressive in its attitude towards Finnish independence and
in attempts to bring about the Russification of the country.
This movement of Russian aggression went so far as to
abrogate in 1899 the legislative power of the Finnish Diet,
and Finland, by means of a " national strike," played an
important part in the Russian revolutionary movement of

FINLAND, ESTONIA, LATVIA, LITHUANIA 153

1905. Thereafter the powers of the Diet were restored and
Finland was able to some extent to reassert its political
liberty ; and the system of Parliamentary government
with a single Chamber set up in 1906 prepared the way for
the creation of an independent Finnish Republic when the
Russian Empire collapsed in 1917. But in the years imme-
diately before the war the Russian Government renewed
its attempts at Russification, and the outbreak of war in
1914 found Finland in a condition of acute national dis-
content. It was impossible to compel the Finns to serve in
the Russian army, and Finland remained in effect outside
the sphere of military operations.

When the Russian army broke down in 1917, the Pro-
visional Government set up after the first Revolution at
once restored Finnish rights and representative govern-
ment, and a temporary body based on equal representation
of the Socialist and middle-class parties assumed power.
Immediately after the Bolshevik Revolution this body pro-
claimed Finland's complete independence, which was at
once recognised by the Bolshevik Government ; but there-
after a fierce struggle for power began. The Brest- Li tovsk
Treaty of March 1918 included a recognition of Finnish
independence ; but whereas the majority of the Finnish
Socialists sympathised with Communism, and desired to
establish a Red Republic, the Finnish upper classes were
on the side of Germany, and called in German help against
the Communist Revolution. Through the spring of 1918
civil war raged in Finland. This ended with the victory of
the White Army led by General Mannerhein and aided by
the Germans ; and in the ensuing White Terror fifteen
thousand Finnish Socialists and Communists were slaugh-
tered, and no less than seventy-four thousand put in prison.
The new Finnish Diet, which met in June 1918, altogether
excluded the Socialists. It was strongly pro-German, and
decided to offer the crown of Finland to a German prince,
brother-in-law of the Kaiser. He accepted, but a few
months later the collapse of the Central Powers altered the
entire situation. The Germans were compelled to withdraw

154 THE COUNTRIES OF EUROPE

from Finland, and General Mannerhein became Regent
and organised a coalition bourgeois Government, which
was maintained in power by a civic guard a hundred
thousand strong.

The elections of 1919, despite the disfranchisement of
many Socialist voters, gave the Social Democrats eighty
out of the two hundred seats in the new Chamber ; and in
face of the changed political complexion of Europe Finland
decided to become a republic and began gradually to
settle down to constitutional government on much the same
lines as the majority of the other new States of post-war
Europe. The White anti-Socialist Government remained
in power up to 192 i, when it was displaced by an Agrarian-
Progressive coalition which at length passed an amnesty
on behalf of those convicted after the Civil War. Thereafter
Finnish Communism revived, and secured a substantial
representation in the Parliament of 1922 and the following
years. The Social Democrats continued, however, as the
strongest party, and were able to form a Socialist Govern-
ment supported by the moderate bourgeois parties from 1925
to 1927. The fall of the Socialist Government in that year
was followed by the return to power of the Agrarians, who
have since governed the country. Communism has again
been suppressed in Finland, but continues as a powerful
force underground. Near neighbourhood to Russia, and the
sharp division of political forces within the country, make
the stability of Finnish politics continuously uncertain.
Since 1920, when the Treaty of Dorpat was concluded,
Finland has maintained diplomatic relations with the
U.S.S.R., but her policy has been one of rejecting com-
mittal alliances with her neighbours. In 1922, Finnish
rejection was responsible for bringing to nothing the pro-
posed neutrality agreement with Estonia, Latvia and
Poland, and the country has since tended to fall into line
in its foreign affairs rather with the Scandinavian countries
than with the border States. For some time close relations
with Scandinavia were made impossible by the quarrel
with Sweden over the Aaland Islands, and the position of

FINLAND, ESTONIA, LATVIA, LITHUANIA 155

the Swedish minority in Finland. But the Aaland Islands
question was settled by the League of Nations, which recog-
nised Finland's claim, but laid down conditions for the
cultural autonomy of the Swedish population. The Swedes
in Finland, who comprise about eleven per cent of the total
population, still maintain a separate party of their own
with over twenty members in the Finnish Chamber.
But in recent years the animosity between the two nationa-
lities has to a great extent died down. The Swedes, who
belong mainly to the more well-to-do sections of the com-
munity and are concentrated in the south of the country,
now work in alliance with the other bourgeois parties, and
constitute a markedly conservative influence in Finnish
politics.

Economically, Finland is a poor country greatly depen-
dent on the prosperity of the timber trade. Of her land area,
not including the great lakes which are dotted about the
whole of her central region, over ninety per cent consists
of woods and forests, and under seven per cent of arable
land. She is therefore largely dependent on agricultural
imports for the feeding of her population, though she
exports butter and cheese as well as timber, wood-pulp and
paper. Timber forms over one half of her total exports,
and paper and wood-pulp together a further third. Despite
her necessity to import foodstuffs, Finland now maintains,
under the dominant influence of the Agrarians, a protective
tariff in favour of agriculture as well as industry. A good
deal of redistribution of land in favour of peasant holdings
has taken place since the war, and there is a powerful
movement of agricultural co-operation.

Whereas Great Britain has been in the past the chief
buyer of Finnish exports, Finland has always drawn a large
proportion of her imports from Germany. Thus in 1930
she sent nearly forty per cent of her exports to Great
Britain, but drew therefrom only fourteen per cent of her
imports, whereas thirty-seven per cent of her imports came
from Germany, which took only twelve and a half per
cent of her exports. These two countries preponderate

156 THE COUNTRIES OP EUROPE

overwhelmingly in Finland's external trade. Her only other
important source of imports is the United States, and her
trading relations both with Scandinavia and the border
States and with Russia are comparatively small. Hence
her policy of refraining/from close political commitments
to her immediate neighbours and her anxiety to maintain
satisfactory relations with both Great Britain and Ger-
many. Her relations with Russia are indeed greatly affected
by the competition of the two countries in the timber
market ; and it is from Finland, allied in this matter with
Sweden, that the most lurid accounts of conditions in the
Russian timber camps, and the bitterest complaints about
Russian dumping, regularly emanate.

The Finnish regular army consists of only twenty-five
thousand men ; but in addition the White Guard formed
at the time of the Civil War maintains its existence as a
Civic Guard a hundred thousand strong. Finland, in short,
while she has settled down politically of late years, has still
too lively a memory of the embittered civil conflict of 1918
and of the ensuing White Terror to be comfortable under
her existing political system. She is, moreover, at present
suffering acutely from the world depression, which reduced
the gold value of her exports by more than one half between
1928 and 1932, while her imports over the same period
have fallen by almost three-quarters, giving her what is
known as a " favourable balance of trade " during the
slump only at the cost of a great contraction of necessary
imports, and a consequent fall in the standard of life of her
people. Despite this improvement in the trade balance,
Finland's dependence on exports to Great Britain forced
her off the gold standard in 1931 in common with the rest
of the Scandinavian countries, and thus decreased her
power to purchase imports from Germany, which remained
tied to gold. These conditions foreshadowed some readjust-
ment in the direction of Finnish trade, but this is now
liable to be influenced in an opposite direction by the
Ottawa agreements concluded by Great Britain in 1932.

FINLAND, ESTONIA, LATVIA, LITHUANIA 157

Estonia. On the opposite side of the Gulf of Finland,
which commands the approach to Leningrad, lies the small
Republic of Estonia, with a total population of little
more than one million persons. The Estonians are a people
of Finnish descent, and their language and culture are of
Finnish type. Native Estonians form about eighty-eight per
cent of the population of this new State, but within its boun-
daries are included minorities of Russians (8 per cent), and
Germans (2 per cent). The country is predominantly agri-
cultural, and about two- thirds of its occupied population live
by agriculture, as against thirteen per cent engaged in in-
dustry. Estonia exports butter, bacon, potatoes, flax and
linseed, but is an importer of cereals. Her chief customers
are Great Britain and Germany, and she draws her imports
chiefly from Germany and the United States.

Estonian nationalism is a product of modern times, and
can hardly be said to have made its appearance before the
Russian Revolution of 1905, when the demand for national
autonomy was put forward by Estonian representatives in
the Russian Duma. But this does not mean that Estonian
political history has been uneventful ; on the contrary the
territory has been handed to and fro for many centuries
from one conqueror to another. In the thirteenth century
it was shared between Denmark and the Knights of the
Sword ; thereafter until the sixteenth century it was under
German control ; it then passed to Sweden, and was finally
ceded by Sweden to Russia in 1721. Thereafter it formed
part of the Russian Empire, and its history in the nine-
teenth century was marked by a series of small peasant
revolts and by a strong attempt at Russification by the
Tsarist Government. The first Revolution of 1 9 1 7 was imme-
diately followed by the growth of a nationalist movement.
In July of that year an Estonian Diet met, and prepared a
scheme for an autonomous Estonia under Russian sover-
eignty, but immediately after the Bolshevik Revolution
the Estonians proclaimed their independence and the
Russian Government retaliated by dissolving the Estonian
Diet. A large part of the country was at this time owned by

158 THE COUNTRIES OF EUROPE

great German landowners — the so-called Baltic Barons —
and this section of the population, in face of the opposition
of the national Diet, called for German help. At this point
the Estonian nationalists were successful in driving the
Bolsheviks out of Reval, and a republic was definitely pro-
claimed. But this success was immediately followed by the
occupation of the country by the Germans in the interests
of the Baltic Barons. Russia was compelled to renounce her
rights in Estonia under the Brest-Litovsk Treaty ; but after
the German collapse of the autumn of 1918 the German
forces had to withdraw, and the Russians promptly invaded
the country. The Finns thereupon came to the help of the
Estonians, and a British fleet arrived at Reval and took the
new Republic under its protection. With the aid of large
forces of Russian " Whites " the Bolsheviks were driven
out, and in 1919 Estonia was used as a base by the
' Whites " for an unsuccessful invasion of Russia. At the
same time an irregular German army from Latvia, under
the command of General von der Goltz, invaded Estonia,
but was successfully flung back with British help. An armis-
tice with Russia was arranged at the end of 1919, and
peace definitely concluded at Dorpat in 1920. Full
Allied recognition of the Estonian Republic followed in
1921.

Before this, Estonia had begun to settle down to dealing
with her own internal problems. A law for the division of
the large estates hitherto held by the Baltic Barons was
passed in 1919, some measure of compensation for dis-
possessed owners being finally afforded in 1926. Under the
new conditions the peasants became definitely the domi-
nant force in the country, but Communism retained con-
siderable strength in the urban centres, and especially in
the large port of Reval (since rechristened Tallinn) which
served as_an important outlet for Russian produce and as a
direct railway connection widi Leningrad and Moscow.
At the end of 1924 there was at Reval a Communist
rising, and its defeat was followed by the suppression of the
Communist Party and the creation of a permanent Civic

FINLAND, ESTONIA, LATVIA, LITHUANIA 159

Guard of thirty thousand men on the Finnish model.
Politically, Estonia maintains very close relations with her
neighbour Latvia, including, since the Treaty of 1923, a
defensive alliance and a unified tariff system. She is also
in treaty relations with the U.S.S.R. and closely dependent
politically on Great Britain. Estonia received a League of
Nations loan in 1926 for the purpose of stabilising her cur-
rency, and unlike her northern neighbour she maintained
the gold standard after the crisis of 1931. She has been
governed of late by a coalition between the Agrarians and
a bourgeois Centre Party, with a fairly strong Socialist con-
tingent forming the opposition.

Latvia. To the south of Estonia lies the Latvian Re-
public, including the great ice-free port of Riga, also known
to all newspaper readers as the chief centre from which
news about the impending collapse of the Soviet system
has been assiduously circulated in recent years. Latvia,
like Estonia, is a predominantly agricultural country, and
more than two-thirds of her total population depend
directly on agriculture for a living. Three-quarters of her
people are Letts by nationality, but she also includes a
strong Russian minority of about 14 per cent and sub-
stantial fractions of Jews and Germans. The majority of
the people are Protestants, but there is a Roman Catholic
minority of nearly 25 per cent, and the Orthodox Church
has also a considerable number of adherents. Latvia lost
nearly 40 per cent of her population during the war and
the period of acute disturbance which followed it ; for com-
paratively few of those who fled during this period ever
returned, and a great number of them actually perished.
Her population is now rather less than two millions in all.
Economically she has much in common with Estonia. Her
leading exports are timber, flax and butter, and she needs
to import cereals. Her chief source of imports is Germany,
and Germany also takes the leading place among her
markets, followed by Great Britain and Russia. Latvian
industries were severely damaged because all the available
plant, including most of the rolling stock of her railways,

l6o THE COUNTRIES OF EUROPE

was removed to Russian territory during the war or destroyed
in the course of the civil troubles.

Latvia, like Estonia, was under German control during
the greater part of the Middle Ages. In the sixteenth cen-
tury her territory was parted between Poland and Den-
mark, and in the seventeenth century one of her provinces,
Livonia, was annexed by Sweden. Livonia passed to Russia
in 1710, and by the end of the century Latgalia and Cour-
land had also been added to the Russian Empire. The
usual discontents marked Latvia's connection with Russia
during the nineteenth century. At the time of the Revolu-
tion of 1905, there was a vigorous national insurrectionary
movement, which was savagely put down. In the Great
War Lettish units served under a separate command in the
Russian army, and after the Bolshevik Revolution of 1917
this Lettish army became a revolutionary force. The
nationalist elements opposed to Bolshevism thereupon
formed a Landwehr under British leadership to fight the
" Reds," and this body gradually got control of the northern
part of the country. Meanwhile the Latvian representatives
at the Russian Constituent Assembly put forward a demand
for independence ; but the Germans, under the Treaty of
Brest-Li to vsk, annexed and occupied Courland, the south-
western province of Latvia, and proceeded to make an
attempt at intensive German colonisation. The collapse of
Germany was followed by a Bolshevik invasion of the
country at the end of 1918, and thereafter by a devastating
and tangled civil war between von der Goltz's German
irregulars, the Russians, and the Lettish national forces.
Courland, the great stronghold of the Baltic Barons, was
von der Goltz's chief base of operations ; and not until his
forces and the Bolsheviks had both been driven out with
Allied help was Latvia in a position to settle down to
dealing with her domestic problems.

The Republic had been definitely proclaimed at the end
of 1918 ; but the first Latvian regular Parliament was not
able to meet until 1922. In this Parliament and in its suc-
cessors the characteristic feature of Latvian politics,

FINLAND, ESTONIA, LATVIA, LITHUANIA l6l

aggravated by the system of proportional representation
which all the new States of Europe have incorporated into
their constitutions, has been the division of political forces
into a large number of separate parties. In the first Latvian
Parliament the Social Democrats formed the largest homo-
geneous group, with a membership of more than one-
third of the Chamber. Since then Socialism has lost ground,
and a system of consolidation among other parties has made
more stable Governments possible. In the Chamber of 1933
the Agrarians are the leading party and exercise the chief
control in the Government. But there are in addition to
the Social Democrats a number of smaller conservative and
bourgeois parties, and also a number of separate parties
representing the various national minorities. Latvia, as we
have seen, is in close treaty relations with Estonia, includ-
ing the conclusion of a unified customs tariff. The large
estates which covered a great part of the country before
the war have been divided up among the peasants, and the
domination of the Baltic Barons brought finally to an end.
The social and economic structure of the country is thus
closely akin to that of her immediate neighbours. Latvia,
like Estonia, is a Republic of small peasant proprietors
attempting to apply in her government the orthodox sys-
tem of democratic Parliamentary institutions. These
institutions, however, with no tradition behind them, and
no strong hold upon the great mass of the people, possess
little vitality ; and in Latvia as well as Estonia and Fin-
land, the politics of government continue to be dominated
by fear of Russia.

Lithuania. Lithuania, to the south of the Latvian
Republic, is not strictly a border State of Russia, being cut
off from direct contact with the Russians by the northern
extremity of Poland. According to the original settlement of
Lithuanian territory after the war, this separation between
Lithuania and Russia was accomplished by assigning to
Poland a long narrow stretch of territory running the
entire length of the Lithuanian eastern border and obviously
FR

l62 THE COUNTRIES OF EUROPE

designed with the deliberate object of pushing a wedge
between the small Lithuanian Republic and her great
eastern neighbour. Since the forcible seizure of the city and
province of Vilna by the Poles in 1920 the distance between
Lithuania and Russia has become much greater, save at
the extreme north. But the territorial settlement between
the three countries has in it no element of finality, and
Lithuanian politics and external relations continue to be
dominated by the question of Vilna and of the border
territories which shut the country off from direct contact
with the U.S.S.R. On the west Lithuania adjoins East
Prussia, and her chief trade both as importer and as ex-
porter is with Germany. She is predominantly an agri-
cultural country, and nearly 80 per cent of her population
are directly dependent on agriculture for a living. Her
chief exports are flax, linseed, timber, butter and pigs, and
by far her largest imports are coal, other mineral products,
and agricultural fertilisers and manures. Nearly half the
whole area of the country consists of arable land and
another quarter of grass land, the forest area being rela-
tively small. By religion over four-fifths of the people are
Roman Catholics, Protestants predominating only in the
German city of Memel, which the Lithuanians seized in
1923 partly by way of retaliation for the act of the Con-
ference of Ambassadors in recognising the Polish claim to
Vilna.

Lithuania, unlike Latvia and Estonia, possesses a national
history which lends strength to the nationalism of modern
Lithuanian politics. She was a Grand Duchy in the thir-
teenth century, and from the fourteenth to the fifteenth
century extended the great period of Lithuanian po^er,
when her dominions spread from the Baltic to the Black
Sea. In the sixteenth century Lithuania was united with
Poland, and fell gradually under Polish domination,
passing finally under Russian rule towards the end of the
eighteenth century in connection with the partition of the
old Polish kingdom.

The history of modern Lithuania, as of her neighbours,

FINLAND, ESTONIA, LATVIA, LITHUANIA 163

begins with her part in the Russian Revolution of 1905. At
that time the Lithuanians rose in revolt ; and they shared
in the repression of the following years. During the war the
Germans invaded Lithuania from East Prussia, and created
a dependent Lithuanian State under promise of inde-
pendence. In 1917 Russia was compelled to renounce all
claim to Lithuania under the Treaty of Brest-Litovsk, and
the Lithuanian State Council put forward a demand for
independence, and actually proclaimed a republic in
February 1918. The German withdrawal later in the year
was followed by war with the Russians, who occupied
Vilna and caused the removal of the Lithuanian national
Government to Kovno. In the course of the subsequent
war between Russia and Poland the Poles captured Vilna,
only to be driven out again by the Russians, who in turn
handed over the province to the Lithuanians in 1920 in
order to save it from the Poles in the course of their retreat
after their unsuccessful attack on Warsaw. But the Lithuan-
ians were not long left in possession ; for despite the provi-
sional assigning of the area to Lithuania, it was occupied
later in the year by General Zeligowski's irregulars on
behalf of Poland, and in 1923 this act of aggression was
legalised by the Conference of Ambassadors, which gave
recognition to the Polish occupation. The Lithuanian
Government, however, refused to accept this decision ; and
right up to 1927 Lithuania maintained a formal state of war
with the Polish Government, only agreeing in that year to
bring this condition to an end under strong pressure from
the League of Nations.

In the meantime, as we have seen, the Lithuanians found
partial compensation for their loss of Vilna by the forcible
seizure of the town and territory of Memel, which had been
constituted a free city at the end of the war ; and this act of
aggression, which gave the Lithuanians an outlet to the
Baltic, was also legally recognised in 1924 by the formal
cession of Memel to the Lithuanian Republic. Hostility to
Poland was largely responsible for the early conclusion of
peace between Lithuania and Russia in July 1920, on

164 THE COUNTRIES OF EUROPE

terms which included Russian recognition of Lithuania's
claim to Vilna. Largely on account of her attitude on this
question Russia's relations with Lithuania have been
throughout much better than with the other border
States ; but Lithuania has also entered into close relations
with her northern neighbours, and from 1924 has formed
part of one customs system with Latvia and Estonia.
Hostility to Poland and the desire to regain Vilna, which is
regarded as the historical capital of the Lithuanian Re-
public, dominate Lithuanian politics. Before 1926 Lithu-
ania was governed for a time by a coalition of parties of the
Left, which in that year concluded a pact of non-aggression
with Soviet Russia, but was immediately afterwards over-
thrown by a military coup d'ttat. This was followed by the
formation of a strongly nationalist Government with a
predominantly clerical complexion, under the leadership
of Professor Valdcmaras. But this Government was essen-
tially dependent on military support, and the rule of
Professor Valdemaras became in effect a dictatorship.
Since his overthrow power has been held by a coalition of
nationalist parties with a predominantly Agrarian com-
position, the Social Democrats and the various national
minorities forming the principal elements in the opposition.

§ 4. POLAND

THE FRONTIER between Russia and Poland stretches
in a long curving line from a point almost level with the
northern part of Lithuania at one extreme to the confines of
Bessarabia in the south. Save where the Pripet marshes
form near the middle of this long line a great natural
barrier, the frontier is from the geographical point of view
almost everywhere purely artificial, neither rivers, nor
mountains, nor even hills running along it for any con-
siderable distances. In the south it cuts through the middle
of the uplands of the Ukraine and Eastern Galicia ; and in

POLAND 165

the north it is an arbitrary line drawn across the plain which
stretches right from the Urals to the North Sea. Nor does
the Russo- Polish border correspond to any real division of
races or peoples. In the north, White Russia extends racially
right across Polish territory to the neighbourhood of Vilna,
and further south, around the Pripet marshes, there is an
inextricable mixture of races, in which, for a long way west
of the existing frontier, Poles form only a tiny minority
among White Russians and Ukrainians. Only in the
extreme south do Poles live in large numbers near the
frontier, and in this area they are mingled with a Ruthenian
majority, though the predominant culture of Galicia, unlike
its racial affiliations, can be regarded as mainly Polish.
Even Lemberg, however, is but an island of Polish nation-
ality set in the midst of a predominantly Ruthenian country-
side, and the entire belt up to the frontier, in which Poles
and Ruthenians live mingled together, cuts in between the
Russians of the Ukraine and the closely kindred Ruthenians
of the eastern part of Czechoslovakia. The new Polish
State, even according to the Polish statistics, contains
racial minorities amounting to over thirty per cent of the
population. Fourteen per cent of the population are
Ruthenians and Ukrainians, a further four per cent White
Russians, four per cent in the western part of the country
Germans, and eight per cent Jews.

This startling inclusion of seven million Russians and
Ukrainians within the new Poland arises in part out of the
action of the Allied Governments at the Peace Conference,
but also out of the circumstances in which the Russo-Polish
frontier was defined in 1920-21. The Treaty of Riga, en-
tered into at the close of the war between Poland and the
U.S.S.R., pushed the Polish frontier far to the east of the
line originally contemplated by the Allies at Versailles. For
Poland, after her success, with Allied help, in beating back
the Russian advance upon Warsaw, was in no mood to forgo
the opportunities for territorial aggrandisement which were
presented to her by the military and economic embarrass-
ments of the Soviet Union. She had claimed at Versailles

l66 THE COUNTRIES OF EUROPE

her historical frontiers — a claim which would have involved
the passing under her political control of vastly larger
national minorities than are included in her present area.
The Poles had been greatly dissatisfied with the reception
accorded at Versailles to their claims, despite the backing
which France gave to their pretensions in accordance with
the desire of her statesmen to establish a powerful State in
Eastern Europe, both as a counterpoise to Soviet Russia and
as a permanent menace to Germany along her eastern fron-
tiers. Disappointed at Versailles, the Poles, helped by
France to roll back the Russians from Warsaw, seized
their opportunity and thereby created for themselves an
even more difficult and dangerous minorities problem than
was bound to arise in any event out of the inextricable
mingling of races in Eastern Europe. There has been
constant trouble ever since 1918 over the treatment of
racial minorities by the new Polish State ; for the Poles,
strcngly nationalist in outlook, want as far as possible to
unify their country by imposing a Polish culture and outlook
on all the minorities over which they rule. This has led to
endless trouble and constant wrangling before the Minorities
Commission of the League of Nations, which in this as in
other cases has been able to do all too little to protect the
minority groups, despite the safeguards included on their
behalf in the Peace Treaties. It was a tragic irony that
caused Poland to appear, in 1933, as the champion of the
oppressed Jews against their still worse treatment in Nazi
Germany. For Poland contains a very large Jewish popula-
tion, estimated at 3,000,000 ; and there are close connec-
tions between Polish and German Jews all along the
Polish-German frontiers and above all in Upper Silesia.

More than a hundred years had passed since the disap-
pearance of Poland as a nation at the final partition of
1795 when the Poles found in the Great War an oppor-
tunity for the reassertion of their national claims. Napoleon
had indeed revived for a short time the Grand Duchy of
Warsaw ; but Napoleon's new Poland was swept away in
the Peace Settlement of 1815, and thereafter Poland was a

POLAND 167

country divided under three distinct imperial sovereignties.
Warsaw and the largest part of the country belonged to
Russia, Austria-Hungary held Galicia, and Germany
Posen. Of these three areas Galicia alone had obtained
under Austrian rule some measure of autonomy ; and there
the Polish elements in the population dominated the
country with its partly Ruthenian peasant population. The
outbreak of the Great War thus found the Poles enlisted in
the armies of all the three Great Powers of Eastern Europe ;
but the Russian part of the country was speedily overrun by
the Austro-German armies, and from 1915 onwards prac-
tically all Poland fell under the occupation of the Central
Powers. These Powers were well aware of the importance
from their point of view of keeping the country quiet, and in
1916 Germany and Austria-Hungary united in promising
some sort of Polish independence after the war as a reward
for loyalty. In 1917 a Polish Regency Council was set up
under the auspices of the Central Powers, and thereafter
Polish nationalism found itself sharply divided between the
elements in the country which were looking for the realisa-
tion of their independence to a German victory, and a
Polish National Committee sitting at Paris which based
its hopes rather on a French triumph. Marshal Pilsudski,
who became after the war dictator of Poland, belonged to
the former group. In 1914 he led the private Polish army
which he had been organising for years before in Galicia into
Russian territory, and in 1916 he continued to act on the
side of the Central Powers. But in July of that year he fell
foul of the German and Austrian authorities then in control
of the territory of Poland, and proceeded to open up nego-
tiations with the Allied Powers. He was nevertheless per-
suaded to become Minister of War in the Council of State
formed by the Central Powers to administer Poland, and
set to work to form his secret military organisation, which
was able to take control of the country in 1918. Before long
he again quarrelled with the Central Powers ; and he was
arrested and imprisoned in Germany until his release by the
German revolutionary authorities at the end of the war. He

l68 THE COUNTRIES OF EUROPE

then returned to Poland and was at once elected Chief of
State with dictatorial powers, his military record and his
long period of revolutionary activity making him the
natural leader of the new State.

There is no need to enter here into the extraordinarily
tangled history of Polish affairs in the years immediately
following the war. It is enough to say that when Marshal
Pilsudski assumed power the future borders of the Polish
State were still utterly unknown and indefinite. There was
no agreed settlement of the frontier with Russia ; for the
terms of the Brest-Litovsk Treaty had been wiped out by the
defeat of the Central Powers. The relations of the Ukraine
with Russia were still uncertain, and in Eastern Galicia an
attempt was being made under the leadership of Petliura
to establish an independent Ukrainian-Ruthenian State.
There was incredibly confused and many-sided warfare
throughout 1919 ; but the consolidation of the Russian
power gradually reduced the combatants to two. Early in
1920 the Poles launched an offensive against Russia, ad-
vanced far into the Ukraine, and actually took Kiev. This
onslaught was a material factor in unifying Russian senti-
ment, and it was followed by a Soviet counter-offensive
which brought the Russian armies almost to Warsaw.
This counter-invasion in turn roused the Poles to an intense
national effort, and the French, who saw in the impending
collapse of Poland the death-blow to the European system
which they had endeavoured to establish at Versailles,
rushed munitions and military advisers to the assistance of
the Polish Government. The British Government, domin-
ated by anti-Bolshevik sentiment, was also on the side of the
Poles ; but the suggestion of British intervention on behalf
of Poland was met by the threat of the Labour and Socialist
bodies to declare a general strike, and Great Britain, unlike
France, gave only passive support. The French aid, how-
ever, sufficed to enable the Poles to drive back the Russians
in disorder ; and it was under these circumstances that the
Soviet Union was compelled to agree to the preposterous
frontier laid down in the Riga Treaty.

POLAND 169

Thereafter the relations between the U.S.S.R. and Poland
were those rather of an armed truce than of a definitive
peace. Poland, intensely nationalistic, dominated in her
politics by social classes which fear more than anything
else the penetration of Communist influence among the
Polish masses, and conscious of the weakness engendered by
the presence of large dissatisfied national minorities in her
midst, lives in permanent fear of Russia ; while France, her
political projects reaffirmed by the defeat of the Russians,
continued until lately to fortify her eastern dependent with
both diplomatic and financial assistance — an association
likely to be renewed in face of the recrudescence of German
militarism. A Treaty between France and Poland was
concluded in 1 92 r ; and in the dispute with Germany over
the partition of Upper Silesia the Poles could always count
on French sympathy. Not until 1924 were diplomatic
relations established between Poland and the U.S.S.R.,
and even to-day, despite the conclusion of a mutual pact
of non-aggression, Poland remains an armed camp watch-
ing jealously the movement of events in both Russia and
Germany, and garrisoned against discontents within as well
as against her larger neighbours. Since 1921 she has been
allied with Roumania, which needs her help over the Bes-
sarabian question. Indeed, these two countries have formed
together the instruments of the French policy of the cordon
sanitaire, designed to keep off the Russian menace from
Western Europe.

The situation along the eastern frontier of Poland is thus
unsettled enough to account for the persistence of a strongly
militaristic attitude on the part of the governing classes in
the new Polish State ; for, whatever treaties and non-
aggression pacts may be concluded, nothing can remove the
essential insecurity of a settlement so obviously devoid of
principle as that which resulted from the Polish-Russian
conflict of the years following the conclusion of the Great
War. Poland's army of well over a quarter of a million men
at peace strength and her heavy expenditure on armaments
are in existing circumstances and in the existing temper of

170 THE COUNTRIES OF EUROPE

European politics the inevitable outcome of her uncertain
situation. Nor are her problems confined to the east. In the
north, there is the vexed question of Danzig and the Polish
" Corridor " ; and in the south, as we have seen, there is
an inextricable mingling of races. There too the question of
frontiers has been settled without any regard either to
national conditions or to natural boundaries or even to the
unity of economic areas. Poland sticks down like a wedge
between the Ruthenians of eastern Czechoslovakia and
the kindred peoples of the Ukraine. In the Teschen area
an extraordinary frontier has been drawn, giving the Poles
the town and the head waters of the Vistula, and the
Czechs the valuable coal mines in the immediate vicinity.
On the west the Polish frontier is even more arbitrary and
extraordinary, and in the neighbourhood of the free city of
Danzig and in Upper Silesia, emergency arrangements
which have about them no guarantee of permanence or
successful working have had to be concluded.

Upper Silesia presented, indeed, the most difficult of the
problems of territorial adjustment at the end of the war, for
in this region, with its valuable coal mines and iron and
other mineral deposits developed by German enterprise
before the war, Germans and Poles live mixed up together
over a wide indeterminate area for which both countries
put forward insistent claims. The Allied Governments
attempted to deal with this vexatious problem by ordering
a plebiscite to be taken in the disputed area ; but when this
resulted in a majority of votes for union with Germany the
question was referred to the Council of the League of
Nations, which proceeded, instead of assigning the entire
territory to either disputant, to draw a boundary clean
through the middle of this industrial area, using as its chief
canon of judgment the votes recorded in each distinct town
or administrative district. While these readjustments were
in progress the Poles attempted to deal with the situation in
the same way as they had dealt with the Lithuanian claims
to Vilna. Polish irregulars under Korfanty occupied Upper
Silesia with the idea of presenting the Council of the

POLAND 171

League with an accomplished fact. But in this case, in view
of the result of the plebiscite, it was not possible for the
Poles successfully to sustain their claim to the entire area.
In the event they got most of the coal mines (53 out of 67,
or, in terms of output 24 million tons out of 31 million), and
Poland thus became one of the leading coal producing and
coal exporting countries of Europe. Poland further got over
two-thirds of the zinc and lead mines and a full half of the
important iron and steel industry of Upper Silesia. But the
settlement did not succeed in solving at all the problem of
national minorities. Over half a million Poles were left on
the German side of the frontier and over 350 thousand
Germans on the Polish side. This may appear as if Poland
came out of the settlement worse than Germany, but it has
to be remembered not only that the Upper Silesian in-
dustrial area was a vital component part of the
German industrial system, but also that many persons of
Polish nationality voted in favour of Germany rather than
Poland because they hoped to enjoy under German sove-
reignty more stable government and a higher standard of
life. For Polish wages are low, and Polish social institutions
inchoate, and from the standpoint of the workers the
economic considerations often overrode the nationalistic.
Similarly, when the plebiscite was taken in the frontier
districts of Marienwerder and Allenstein in East Prussia,
a predominantly Polish population voted for remaining
under Germany rather than for union with the new Polish
State.

Apart from Upper Silesia, the chief problem of the Polish
frontier in the west is presented by the Polish Corridor
leading to the free port of Danzig. The Polish Corridor is a
long thin ribbon of territory designed to give Poland a
direct outlet to the Baltic. In order to do this it has to cut
clean across German territory, dividing the essentially
German province of East Prussia from the rest of the
German Reich. Across this narrow belt of Polish territory
run the main railway lines from east to west, so that
German trains passing from East Prussia to other parts of

172 THE COUNTRIES OF EUROPE

Germany have to cross the Corridor. This has necessitated
a highly complicated arrangement for the transference of
goods as well as great difficulties of passenger travel. It
would be clearly impossible to subject to the high Polish
tariff goods passing in purely internal trade from one part
of Germany to another ; but unless all goods could go by
sea they must be given the right of free railway passage by
the Poles. The problem has been settled none too satis-
factorily by the device of allowing free transit in sealed
trains ; but trouble is still constantly arising over the
movement of both goods and passengers, and the vexatious
frontier regime sets up a permanent sense of irritation
between Poland and Germany.

Moreover, there is constant trouble over the status and
rights of self-government of the free city of Danzig, which,
with its surrounding countryside, was formed into an
autonomous State under the direct supervision of the
League of Nations, but united with Poland for postal and
certain other services, and brought within the Polish
customs system. Danzig is predominantly a German city,
and the complexion of its elected authorities is overwhelm-
ingly German. There has been constant friction between it
and the Poles ; and the League of Nations has had none too
easy a job, even before the advent of the Nazis, in maintain-
ing at all the precarious settlement reached at the end of
the war. Nor is Poland, which wants to make Danzig an
integral part of its own territory, by any means content
with the present situation. For some time the Poles en-
deavoured by one device after another to reduce to nullity
the nominal freedom of Danzig. When this proved im-
possible they began the construction of a new port of their
own on the Baltic in the near neighbourhood of Danzig,
but lying within the territorial area of the Polish Corridor.
This port, Gdynia, is now in operation, and threatens
Danzig with the loss of an increasing part of its external
trade. For the Danzigers, cut off from the main part of
Germany by the Polish Corridor, cannot resume their old
position in relation to the areas of the west ; and trade with

POLAND

173

1OO ZOO

THE POLISH CORRIDOR

174 THE COUNTRIES OF EUROPE

East Prussia also involves considerable difficulties, as it has
to be conducted across the artificial political frontier. The
situation of Danzig must thus be added to the list of the
dangerous and unsolved problems of Poland in the west.

Nor is the position in the Polish Corridor itself at all
satisfactory ; for while in the northern part of the Corridor
the population is predominantly Polish-speaking, there cuts
right across it at its southern end a belt of German-speaking
people living along the valley of the Vistula and to the
west of Bromberg. Further German enclaves are scattered
over a large part of the Corridor, and in these circum-
stances it is most unlikely that the Germans will accept as
final a situation which divides their territory into two un-
equal parts, and leaves the great agricultural province
of East Prussia in an impossible position of economic
isolation. The two problems of Upper Silesia and the Polish
Corridor, with the closely related problem of Danzig, stand
as fatal obstacles to the establishment of peaceful or secure
relationships between Germany and Poland — all the more
now that violent Nationalism is again in power in Germany.
Nor can such settlements as the German-Polish Arbitration
Treaty of 1925 remove the sense of insecurity which makes
the western as well as the eastern frontier of the new Polish
State a powerful cause of the continuance of military pre-
paredness in Europe.

Economically, Poland is a country of contrasts. The
greater part of its territory is economically undeveloped ;
but it includes, especially in Upper Silesia and in the
industrial areas of pre-war Austrian Poland, highly
developed centres of industry and population which the
new frontiers of the Polish State have cut off from their
old contacts and assigned to the political control of a
Government representing mainly areas far more backward
in an economic sense. Taken as a whole, Poland is pre-
dominantly an agricultural country. Almost half her whole
area consists of arable land, and not far short of a fifth in
addition of pasture, most of the remainder being forest.
She exports large quantities of agricultural products,

POLAND 175

especially meat and eggs, and she is also an important
exporter of timber. But in addition to her agricultural
exports, she is in a position, thanks mainly to the territories
annexed from Germany, to export coal and iron in large
quantities, and she has also substantial export trades in
textile goods and in sugar based on the domestic production
of sugar-beet. While Polish exports find from Danzig and
Gdynia a substantial and increasing outlet through the
Baltic to Western Europe, in the nature of things the most
natural market for a large proportion of Polish exports is
Germany ; and Germany is also the most natural supplier
of the main bulk of Poland's industrial requirements. So
urgent is the need for exchange across the newly established
frontiers of Poland in the west, that trade is bound to
continue on a large scale in spite of acute political animos-
ities. Nevertheless these animosities, combined with the
desire of the Poles to build up their own industries behind
a high tariff wall, have led to constant friction in the trading
relations between Germany and Poland, and since 1925
the two countries have been engaged almost continually
in a tariff war, interrupted by periodical attempts to
negotiate a satisfactory settlement. The failure of these
attempts and the constant measures of economic retaliation
on the frontier have been especially disastrous to the
German province of East Prussia and to the mixed German-
Polish population on both sides of the frontier in Upper
Silesia. It is true that in Upper Silesia itself, as far as local
trade across the new frontier is concerned, special emerg-
ency arrangements have been entered into and for the most
part observed, and a limited freedom of movement across
the frontier has also been established. Indeed, without this,
Upper Silesian industries could hardly carry on at all.
But much of the trade of Upper Silesia is concerned with
external markets ; and this trade, as well as the efficiency of
production, has been continuously hampered by the
division of the area and the establishment of quite different
economic and social conditions on the two sides of the
unnatural frontier.

176 THE COUNTRIES OF EUROPE

Poland, we have seen, is for the most part an economic-
ally undeveloped country. She has, however, great pos-
sibilities of economic growth, for in addition to her resources
of coal and iron and timber and her plenty of good agri-
cultural land, she is self-sufficient in her supplies of oil, and
possesses a considerable surplus available for export. She is
hampered gieatly in her development by defective means
of communication. Poland has in all only about eleven
thousand miles of railway to serve her vast area and rapidly
growing population. Whereas Belgium, for example, with
little more than one-twelfth of the area of Poland, has one
mile of railway for every ten square kilometres, Poland has
less than one for every thirty. Nor must it be forgotten that
the Polish railway system, such as it is, was developed to
serve the needs not of a unified territory, but of areas
forming part of three different States. It is therefore ill-
adapted to the needs of Poland's present territories, and
there is an urgent necessity for the re-planning of existing
communications as well as for the building of new lines.
If Poland could get the capital she could profitably employ
very large sums in the development of her railway system ;
for there is little danger of the railways in her extensive
territory being rapidly superseded by the growth of road
transport. It would be a far costlier business to equip
Poland with an adequate road system than to put her
railways on a satisfactory footing.

But under present conditions there is little chance of the
capital even for the reorganisation of the railways being ob-
tained. The Polish people is far too poor to provide the
money out of its own resources and the foreign investor far
too shy both of railway finance and of lending to new States
as to whose political future he is justifiably uncertain to be
willing to risk the large sums that would be required. Poland
has therefore to carry on as best she can with her existing
railways, supplemented by the comparatively small exten-
sions which she can afford to make out of her own resources
and such foreign loans as France, for example, is willing to
extend to her mainly for political reasons. Fortunately she

POLAND 177

has an extensive system of water-ways to help her. But
Poland is emphatically to be ranked among those countries
which can, at any rate under their present political systems,
develop at all fast in an economic sense only if they are in a
position to borrow large sums of capital from abroad.

The political situation in Poland is one of considerable
confusion. The Seym, the Polish Parliament, is at present
dominated by the supporters of Marshal Pilsudski, grouped
in a bloc under the title of the Non-Party Union with 247
members. Against this pro-Pilsudski majority is arrayed a
medley of smaller parties, ranging from the conservative
National Democrats with 62 members and the Peasants'
Party with 48 members to the separate parties representing
the various national minorities and the Communists who,
completely suppressed in most areas, still manage to return
a tiny handful of members. The official Socialist Party has
24 members, and there are also dissident Labour and
Socialist fractions. The position is complicated by the fact
that Pilsudski himself was formerly, in his days as a revolu-
tionary agitator, the leader of the Socialists, and that he
now occupies an anomalous position between left and
right. He is opposed by the extreme conservative elements
in the country as well as by the Socialists, and he hovers un-
certainly between attempting to dominate the country by
means of a parliamentary majority such as he now possesses
and the desire to govern by dictatorial methods in face of
Parliamentary obstruction. He has recently imprisoned
most of the leaders of the opposition parties.

The Polish Constitution, as it was formulated immedi-
ately after the war, was a thing of checks and balances de-
signed, while establishing a democratically elected Par-
liament chosen on the system of proportional representation,
to limit the use of parliamentary power by the establish-
ment of special machinery for supervising the activities both
of the Seym and of the government. This system, and es-
pecially the adoption of proportional representation, pre-
vented in the years after the war the establishment of any
strong government, for there arose a maze of parties each

178 THE COUNTRIES OF EUROPE

representing some particular sectional interest or point of
view. This state of things was largely responsible for Pil-
sudski ss coup d'ttat of May 1926, which placed him in a posi-
tion of dictatorial power. But Pilsudski was not then pre-
pared to become an absolute dictator. He contented him-
self with insisting on modifications of the Constitution, ex-
tending the power of the President and conferring on him
the right of legislation by decree in case of national emer-
gency. Thereafter a sort of Parliamentary regime was re-
established ; but the alignment of parties was changed by
the coup d'etat, which enabled the friends of Pilsudski to
gain a clear parliamentary majority. The Non-Party Union,
however, is itself not a unified party following a clearly de-
fined policy, but an aggregation of separate groups often
mutually suspicious and inconsistent in their aims, though
they all follow Pilsudski's leadership. Kis prestige as a
national liberator for the moment holds the majority ele-
ments together ; but the removal of his unifying force would
almost certainly be followed by a relapse to the conditions
which existed before 1926.

The dissociation of Pilsudski from the Socialist Party
has greatly weakened the forces of Socialism in Polish
politics, while the virtual suppression of Communism,
which had gained largely at the Socialists' expense, has
rendered politically inarticulate a large mass of working-
class discontent. There have been repeated rumours of the
imminence of working-class revolution in Poland under
Communist auspices ; but, strong as Communism is among
the industrial workers, there are great difficulties in the way
of any effective Communist uprising. The great industrial
areas of Poland are in Upper Silesia, Teschen and other
districts which formed before the war part of the German
and Austro-Hungarian Empires. These regions are far
distant from Warsaw, and a working-class rising in them
would find itself to a great extent isolated from the rest of
the country, and above all unable to secure possession of
the capital and thus take the authority of government
directly into its hands. If the Russians had captured

POLAND 179

Warsaw in 1920 Poland would in all probability have gone
over to Communism. But for the present at least there is
little likelihood of a successful Polish revolution organised
from within.

§ 5. ROUMANIA

RUSSIA'S southernmost neighbour along her western
frontier is the now large and powerful State of Roumania,
which more than doubled both area and population as
a result of the redistribution of territory after the war. Under
the Treaties of Peace Roumania acquired from the Austro-
Hungarian Empire the great upland territory of Trans-
sylvania, and the rich agricultural lands of the Banat and
Bukovina. She further took advantage of her opportunities
during the war to seize the border province of Bessarabia,
which is still in dispute between herself and the U.S.S.R.,
and to complete her possession of the Dobruja, the stretch
of country lying on the Black Sea between Bulgarian Varna
in the south and the mouths of the Danube in the north.
Roumania is thus to-day in population easily the largest of the
countries of South-Eastern Europe, despite the growth of pre-
war Serbia into the new enlarged kingdom of Yugoslavia.
This accession of new territory was not accomplished
without placing considerable racial minorities under the
political sovereignty of the Roumanian State. Roumanians
to-day account for roughly 70 per cent of the population —
nearly thirteen millions out of a total of eighteen. The rest
of the people are divided among a large number of different
nationalities. By far the most numerous group are the
Magyars of Transylvania, whose number has been greatly
swollen by the pushing west of the Roumanian border to
include not only the Transylvanian uplands but the towns
and railway lines at the edge of the plain, which furnish the
principal lines of communication from north to south.
Germans, also mainly in Transylvania, number about a
million, and Jews another million. Russians and Ukrainians
arc numerous in the eastern part of the country and

l8o THE COUNTRIES OF EUROPE

especially in the disputed province of Bessarabia. There are
Bulgarians and Turks mainly in the Dobruja and the ad-
jacent regions, while a certain number of Czechs and Slo-
vaks are to be found in the northern part of the country
near the Ruthenian border. The Roumanian minorities
problem, however, despite its complexity, is not quite as
difficult as that of Poland ; for in a serious form it exists
mainly in Transylvania and Bessarabia, and the minorities
outside this area possess comparatively little coherence or
power of common action. The Germans and the Magyars
have organised separate national parties of their own
within the Roumanian State, and there is also a small party
representing the Bulgarians. But the large Ruthenian and
Russian minorities have not so far been able to organise
themselves along party lines. Nationalist differences are,
however, apt to be aggravated because of their coincidence
with differences of religious affiliation. The bulk of the
people belong to the Russian Orthodox Church ; but the
Greeks and the Roman Catholics have each over a million
and a half adherents, and the Protestant Church has not
far short of this number, while the Jews, as we have seen,
number about a million.

The Roumanian State has grown from small beginnings
to its present dimensions in comparatively recent times. Its
history as a country begins with the recognition of the
autonomy, followed shortly by the union, of the two former
Turkish provinces of Moldavia and Wallachia which con-
stituted Roumania up to the Balkan Wars of 1912-13.
Moldavia and Wallachia, autonomous from 1856 and united
in 1 86 1, finally proclaimed their independence of Turkey in
1877, an(* tnis independence was recognised in the Berlin
Treaty of 1878.

Thereafter Roumania, aided by the richness of her
natural resources, grew rapidly in wealth and prosperity,
especially after the development of the oil fields near the
Transylvanian border. The peasants, however, remained
exceedingly poor, and there was a large landless popula-
tion, more than half the area of the country being held in

ROUMANIA l8l

large estates by a comparatively small class of rich land-
owners. These conditions were responsible for the serious
agrarian rising of 1907, and had led to a persistent demand
even before the war for the reform of the system of land-
holding. On the outbreak of the first Balkan War in 1912,
when the remainder of the Balkan countries united to attack
Turkey, the Roumanians kept neutrality, but were prompt
to demand territorial compensation. As a result of die first
Balkan War they obtained from Bulgaria an extension of
their territory to the south in the neighbourhood of the
Dobruja ; and when the victorious Balkan Allies fell out
over the distribution of the spoils of their victory over Turkey,
the Roumanians joined in the coalition against Bulgaria
which took shape in the second Balkan War, immediately
occupied the southern part of the Dobruja, and were suc-
cessful in retaining it in the Peace Treaty which ensued.

In the Great War Roumania at first remained neutral,
hovering uncertainly between the rival offers of the Allies
and the Central Powers. But in 1916, in return for large
promises, including the acquisition of Transylvania and
the Banat from the Austro-Hungarian Empire, Roumania
joined the Allies, and thus found herself once again at war
with her old antagonist Bulgaria. The Central Powers
promptly met this challenge by invading the country at the
end of 1916, and the whole of Roumania was before long in
their hands, the oil wells being destroyed by the retreating
Allies in order to prevent them from falling into the hands
of the Central Powers. Thus put out of action, Roumania
at the end of 1917 accepted the terms of an armistice with
Germany and Austria-Hungary ; and this was followed by
a dictated peace under which the Roumanians had to agree
to cede important frontier territories to the Central Powers.
Austria-Hungary was to acquire a strip of frontier land
running all round the borders of Transylvania ; Bulgaria
was to regain the territory lost in 1913 ; and the northern
part of the Dobruja was to be left at the subsequent disposal
of the Central Powers. This settlement, however, was
jspeedily annulled when the armies of Germany and

l82 THE COUNTRIES OF EUROPE

Austria-Hungary were compelled to evacuate the country
in the course of 1 9 1 8 ; and with the collapse of German re-
sistance the Roumanians were free to put forward claims to
a great enlargement of their territory. The question was
not, however, settled without further fighting ; for in 1919
war broke out between Roumania and Hungary, and the
Roumanians advanced into Hungarian territory and for a
time occupied Budapest. This victory over disarmed arid
dismembered Hungary completed the post-war settlement
and left the Roumanians free to turn their attention to
the administration of their greatly enlarged territory.

Apart from the problem of national minorities the
question most obviously demanding immediate attention
was that of the land. Already in 1917 the first steps towards
land reform had been taken by the passing of a Land Law
for the expropriation with compensation of the great
estates ; and this process of agrarian reform was carried
further in the years after the conclusion of the war, until
the greater part of the country had been divided up into
small peasant holdings. Roumania is now essentially a
peasant country, dependent above all on the export of
cereals, timber, animals and meat, though the export from
her oil wells is also an important factor in her trade
balance. Of her total territory about 44 per cent is arable,
about 14 per cent grass land, and about 25 per cent forest,
the richest agricultural areas lying partly in the old
provinces of Moldavia and Wallachia and partly in the
Banat and the new eastern provinces of Bessarabia and the
Dobruja. The Transylvanian uplands are comparatively
infertile and sparsely populated, save for a broad belt of
territory lying on their western fringe. The Danubian
country of Wallachia still forms, especially in the neigh-
bourhood of Bucharest, the most densely populated area of
the country ; but the population is also dense and rela-
tively prosperous in the new territories acquired from
Austria-Hungary in the north and in the Banat to the west.

Roumanian politics are still dominated to a great extent
by the question of the land. Between 1919 and the

ROD MAN I A 183

establishment of the present dictatorship by the King the
government of the country alternated between the Liberals,
led by Bratianu until his death in 1927, and the Peasant
Parties under the leadership of Dr. Maniu, with an inter-
lude of government by General Avcrescu at the head of a
coalition dependent on peasant support. But the handling
of the land question and also of the problem of minorities
in Transylvania and elsewhere has been hampered by
dynastic troubles centring round the personality of King
Carol, the last Hohenzollern to retain a European throne.

Post-war politics in Rournania have been throughout
extraordinarily involved and perplexing to the outsider.
The enlargement of the country and the recognised neces-
sity for a large measure of agrarian reform and for the recog-
nition of universal suffrage broke up most of the older parties
and gave rise to the development of numerous fresh poli-
tical combinations. Of the historical Roumanian parties the
Liberals alone remain in being ; but for a time after the
conclusion of the war they were in opposition and the
government was carried on by a series of coalitions. The
Democratic Coalition of the Transylvanian Vaida-Voevod
soon gave way to the administration of General Averescu,
which was chiefly responsible, under traditional conserva-
tive auspices, for carrying through the agrarian reforms
which General Averescu's ambiguous position of authority
among the conservatives combined with great popularity
amongst the peasants put him in the best position to under-
take. But no sooner was the land reform an accomplished
fact than the Liberals under Bratianu persuaded the King
to dismiss the Government and reinstate them in power,
and it was under their auspices that the new Constitution
of post-war Roumania was adopted and the country admin-
istered on highly dictatorial lines from 1921 to 1926. During
this period the opposition parties for the most part boycotted
Parliament, and there was continual unrest in the country,
including repeated Communist uprisings in Bessarabia.

In 1926 political excitements flared up in consequence of
Prince Carol's dramatic renunciation of his right to the

184 THE COUNTRIES OF EUROPE

throne. For the opposition, at loggerheads with the King
over the maintenance of the Liberal dictatorship, refused
to recognise the situation created by Prince Carol's act.
Meanwhile the Liberal Government, in imitation of Fascist
models, carried through an extraordinary electoral law,
under which any party which received 40 per cent of the
votes cast at a general election was to receive 50 per cent
of the seats in Parliament over and above its proportion of
the other 50 per cent, which were to be distributed in
accordance with the voting. This measure, designed to
ensure the success of the Government at the forthcoming
elections, actually led to the downfall of the Liberal Party.
For before the elections were held the state of feeling had
become so strong that the King was compelled to dismiss the
Liberals and call on General Averescu to form a Govern-
ment supported by the peasants as well as i >y the remainder
of the opposition parties. In the ensuing election General
Averescu's party got four-fifths of the seats in the Chamber
and the Liberals were almost wiped out. But in the follow-
ing year the Averescu conservatives quarrelled with the
peasants, and, after an attempt to form a non-party Govern-
ment, ttye Liberals came back to power and conducted a
new general election in which they in turn wiped out
General Averescu's party. The Liberal triumph was,
however, short-lived, for after King Ferdinand's death in
1927 the Regency dismissed the Liberal Government, and
the peasant leader, Dr. Maniu, formed a new Ministry.
The general election which followed pursued the usual
course ; the Liberals \\ere overwhelmingly defeated, and
the peasants returned with an overwhelming majority, and
thereafter, with temporary interruptions due to internal
disputes, maintained their hold upon the country until
King Carol succeeded, despite his earlier renunciation of
the throne, in resuming power with the help of the mili-
tary, and thereafter made himself virtual dictator in 1931.

These facts are given at some length in order to illustrate
the extraordinary working of the Roumanian political
system. For even the astonishing electoral law of 1 926 is by

ROUMANIA 185

no means enough to account for the swing over of votes at
successive general elections. It is clear on the facts that
under present political conditions in Roumania whoever
has control of the governmental machine wins the election,
and under the electoral system the victorious party is certain
of returning with an overwhelming majority. This ob-
viously makes the democratic character of the franchise
largely illusory, and adds greatly to the effective power of
the Crown. For as the Crown can dismiss the Ministry and
put another in its place, and as the Government can be
certain of winning the election, this means that the Crown
can, under normal conditions, practically dictate the com-
position of the Parliament. There are doubtless limits to the
Crown's power if it seeks to stand out against an overwhelm-
ing body of public opinion or to maintain a thoroughly
unpopular Government in power ; but short of this,
Roumania, as the circumstances of King Carol's return in
1930 and the subsequent government of the country have
clearly shown, is far nearer to being an absolute monarchy
than a constitutional monarchy in the west European sense.
In external politics, Roumania's attitude is determined
mainly by her fears — the fear of Russia in the east and the
fear of Hungary in the west. Bulgaria to the south may
some day be again regarded as a menace ; but for the time
being Bulgaria is too weak to cause the Roumanians serious
anxiety. Their fears are centred on Bessarabia and Transyl-
vania, and their desire ever since the war has been to find
as broad a basis as possible for alliances designed to pre-
serve the territorial status quo. Roumania is joined with
Czechoslovakia and Yugoslavia in the Little Entente,
which exists mainly in order to maintain the post-war
settlement of the Hungarian frontier and to prevent the
restoration of the Hapsburg Empire. Shortly after the
formation of the Little Entente she set on foot negotiations
for broadening it by the inclusion of other border States,
especially Poland ; but these negotiations fell through, as
the Czechoslovaks and Yugoslavs were by no means
willing to become entangled unnecessarily in the problems

l86 THE COUNTRIES OF EUROPE

of the Russian border. Roumania thereupon concluded a
separate agreement with Poland, directed evidently against
Russia. The dispute over Bessarabia still stands in the way
of any final adjustment of her relationships with the
U.S.S.R. ; for, though the Russians have followed up their
earlier pledges to prevent incursions into Bessarabia from
Russian territory by a plain declaration that they will not
use force of arms for the recovery of the province, they
refuse emphatically to renounce their claims or to recognise
Bessarabia as Roumanian territory. In fact, while the
U.S.S.R. is pledged not to go to war in order to get Bessa-
rabia back, it is not pledged to refuse to admit Bessarabia
to the Soviet Union should it be able by its own efforts to
regain its freedom of action.

In the summer of 1933, however, the U.S.S.R. entered
with Roumania, as well as with Poland, the other countries
of the Little Entente, and a number of other States, into
treaties which not only give mutual pledges against aggres-
sion but also plainly define the "aggressor" so as to exclude
all forms of military action.

§ 6. THE BALKANS

OUR STUDY of the States lying along the western
frontier of the U.S.S.R. has carried us from Scandinavia
in the north to the Balkan countries in South-Eastern
Europe. In this region, as well as further north, there has
been, as a result of the wholesale redistribution of terri-
tory and populations, a pronounced change in the poli-
tical and economic situation. The expansion of Roumania
arid Yugoslavia and to a less extent of Greece, the defeat of
Bulgaria, and the recreation of Turkey on the basis of her
Asiatic possessions under the leadership of Kemal Pasha
have changed profoundly the distribution of forces, not only
by altering the relative strength of the various Balkan
Powers, but also by modifying very greatly their relation to
the rest of Europe. Roumania, enlarged almost' beyond

THE BALKANS

I87

THE BALKANS

l88 THE COUNTRIES OF EUROPE

recognition and brought into close contact with her new
and powerful neighbour Poland, ceases to be predominantly
a Balkan State and acquires a major interest in the prob-
lems of Central rather than of South-Eastern Europe.
Yugoslavia, stuck none too securely together out of pre-war
Serbia and Montenegro and the Austro-Hungarian pro-
vinces of Croatia, Slovenia, Bosnia and Herzegovina, runs
up to the Italian boundary on the Adriatic, and is brought
by contact with Italy and Vienna into far closer touch
with Western Europe. Greece, despite the defeat of her
aspirations towards an all-Hellenic ^Egean Sea, has
gained a considerable accession of territory and an added
importance in world trade. Only Bulgaria and Albania
remain as purely Balkan States in the old sense of the
word ; and Bulgaria, once the leader in Balkan affairs, is
now helpless in the midst of her aggrandised and victorious
neighbours. For, though her loss of territory during the
war was not in itself great, the increase in the size and popu-
lation of her neighbours has left her easily the smallest of the
Balkan States except Albania, and set back indefinitely her
pre-war hopes of expansion.

The Balkan Wars. In considering the post-war situation
of the Balkan States, it is essential to remember that these
States became involved in the World War immediately
after their emergence from two successive regional wars
of their own. In the first Balkan War of 1912, Bulgaria,
Serbia, Montenegro and Greece were united against
the Turk, and succeeded, as long as they were able to
maintain their unity, almost to the point of driving the
Ottoman Empire clean out of Europe. But the lalling out
over the spoils of victory which .speedily followed this
success, and took shape in the second Balkan War of 1913,
not only reasserted the power of the Turks in Europe but
also resulted for Bulgaria in a serious set-back to her hopes.
What the Bulgarians wanted above all was a secure means
of access to the ^Egean for their commerce, and the posses-
sion of the Macedonian lands largely inhabited by peoples

THE BALKANS 189

akin to themselves, as against the rival claims of the Greeks.
After the first Balkan War the first of these aims seemed to
have been definitely realised, and it was largely over the
second that the victorious Balkan Allies fell out. The second
Balkan War lost Bulgaria the Dobruja, which she had held
since her recognition as an autonomous principality in
1878, and left her with only a short stretch of coast-line on
the ^Egean, including the small port of Dedeagatch, instead
of the much larger territorial accessions for which she had
hoped.

The outbreak of the Great War thus found the Bulgarians
in a mood of acute resentment against their immediate
Balkan neighbours, and avid to regain what they had lost
as a result of the second Balkan War. They had already in
1914 turned towards Germany for financial support in the
hour of defeat, and had obtained from the Berlin Diskonto-
gesellschaft a loan of capital in return for which German
finance acquired substantial concessions in the country,
especially for the development of coal mines and the im-
provement of the railway system. It was as natural in the
circumstances for Bulgaria to enter the war on the side of
the Central Powers as it was for her rival Serbia to be pitted
against Austria-Hungary. The Bulgarians thus backed the
wrong horse yet again, and the territorial settlement after
1918 cut them off from the ^Egean, with only an unsatis-
factory promise of special facilities for the building of a
railway to Dedeagatch and the establishment of a zone of
their own at that none too eligible port. Territorially,
Bulgaria was left with no outlet to the sea save on the east,
and under the necessity, unless Dedeagatch could be made
an effective outlet in face of the political and geographical
difficulties, of sending her sea-borne commerce to Western
Europe by way of the Straits.

Bulgaria. Bulgaria, with her forty thousand square
miles of territory and her six million people, is overwhelm-
ingly an agricultural country. Geographically, the land is
divided into two parts by the Balkan mountains, which run

IQO THE COUNTRIES OF EUROPE

right across the country almost to the sea ; while in the
south the Rhodope range parts her from the coast lands of
the /Egean and from Macedonia and Thrace. Mountainous
in the centre and in the south, she possesses large tracts of
agricultural land on both sides of the Balkan range. 36 per
cent of her land is arable and only about 3 per cent per-
manent pasture, with roughly 30 per cent of forest country.
For the most part, the land is tilled by peasants, who make
up 80 per cent of the total population, on very small
holdings- small even according to the standards prevailing
in Sou th-Eas tern Europe. Agricultural methods are very
primitive, though there have been considerable attempts at
improving them since the war. Before the war wheat was the
chief crop, and the mainstay of the export trade. But after
the war there \\as a great development of the cultivation of
tobacco, which soon accounted for not far short of half of
the total exports, whereas the export trade in wheat shrank
considerably for a time, and has only revived during the
present slump. The cultivation of tobacco had been
extended, especially during the period when Greece and
Turkey were largely out of the market owing to disturbed
political conditions and to the Greco-Turkish War. With
the re-entry of these countries into world trade other forms
of agricultural production had to be developed, and the
Bulgarians turned more largely to the cultivation of sugar-
beet, sesame seed, cotton and maize. But tobacco still
predominates ; and this gives the Bulgarians, in common
with the Turks and the Greeks, an attitude in economic
matters differing substantially from that of their wheat
exporting neighbours.

While, however, Bulgaria has suffered less than these
other countries from the sharp fall in the world price of raw
foodstuffs, she has had gicat economic difficulties of her
own to face. It has been estimated that the immigration of
Bulgarian refugees, including Macedonians, from the
surrounding territories has increased her population by
nearly a million, thus adding to the congestion on her tiny
peasant holdings and to the unsatisfied hunger for land.

THE BALKANS IQ1

In these circumstances production per worker engaged in
agriculture has fallen off, though it has shown some
tendency to rise again during the past few years. In dealing
with the refugee problem the Bulgarians have been helped
by the League of Nations Refugee Loan of 1926 ; but
although something has been done to increase land settle-
ment, the problem has been by no means completely
solved, and especially in the south-west part of the country
on the borders of Yugoslavia and Greece the disturbed
political conditions caused by the strength and lawlessness
of the Macedonian revolutionary organisations have been
greatly aggravated by the difficulty and persistence of the
refugee problem.

Modern Bulgaria, like the rest of the Balkan States, has a
comparatively short life as an independent country. The
old Bulgarian Empire of the twelfth to fourteenth centuries,
after a period of subordination to Serbia, came under
Turkish rule in the latter part of the fourteenth century,
and thereafter Bulgaria disappeared from the map of
Europe until the fruits of the nationalist revival of the early
nineteenth century were garnered with Russian help at the
close of the Russo-Turkish War in 1878. The Treaty of
Berlin established Bulgaria as an autonomous principality,
still nominally under Turkish rule, but not including
Eastern Rumelia, to which Bulgarian nationalists had laid
claim. Eastern Rumelia, however, was occupied in 1885
by a coup dc main and thereafter administered by the Bul-
garian prince as a vassal of Turkey. Not until 1908 did
Ferdinand proclaim Bulgarian independence and unite
the two areas in a single country, taking the title of Tsar
as a sign of Bulgarian pretensions to revive the ancient
Empire. Thereafter, as we have seen, Bulgaria speedily
became involved in conflict with her neighbours ; for her
people, warlike and primitive, were easily roused to a
fervour of nationalism, and the existence of large Bulgarian
populations beyond the frontiers of the new State gave this
nationalism a definite political objective, even though
Bulgaria's success in acquiring the territories which she

ig2 THE COUNTRIES OF EUROPE

coveted would only have created fresh problems of irre-
dentism among her neighbours because of the inextricable
mingling of races and nationalities in the disputed areas.

To-day about 80 per cent of the population of the country
are Bulgarians and about 1 1 per cent Turks, Now that the
Dobruja has been lost, the number of Russians in the
country is comparatively small ; and there are not many
Jews. By religion the mass of the people belong to the
Bulgarian Orthodox Church ; but there is also a substantial
Moslem population, and the Roman Catholics are numer-
ous enough to have some influence.

In the period of re-settlement after the war the agrarian
question dominated Bulgarian politics. The election of
1920 was won by the Agrarians under Stambuliski, who for
the next few years governed the country practically as a
dictator with the support of the left-wing groups and in
face of the strong hostility of the older parties. An Agrarian
Law was at once passed for the division of Church and
Crown lands among the peasants. But there were few large
estates in private possession, and the amount of land avail-
able for division was far too small to meet the demand.
In 1923 Stambuliski was overthrown by a coup d'ttat
organised by the conservative elements in the country in
alliance with the discontented Macedonians, with whom
Stambuliski had quarrelled. His murder in the course of
the coup d'ttat left the Agrarians without an effective leader
and brought to an end his dream of a Green International
of peasants to dominate the political situation of South-
Eastern Europe. The coup d'tiat was followed by a situation
not far off civil war, in the course of which the new Tsankoff
Government rigorously suppressed the Communist and
Socialist elements in the country. In 1926 a form of demo-
cratic government was restored under Liapchev ; and in the
following year the Constitution was amended to provide
for proportional representation, with the usual results of
multiplying parties and making government by coalitions
inevitable. Communism, suppressed under Tsankoff, re-
vived in the guise of a new Workers' Party which won a

THE BALKANS 193

substantial number of seats in the general election of 1931.
But after the fall of Stambuliski the prospect of a workers'
and peasants' alliance had disappeared ; and the Agrarian
Party now joins in governing the country with the bourgeois
parties of the right, centre and left.

Yugoslavia. Bulgaria's immediate neighbour to the
west is Yugoslavia — the new Kingdom of the Serbs, Croats
and Slovenes created at the end of the war out of the old
kingdoms of Serbia and Montenegro and the neighbouring
parts of the Austro-Hungarian Empire inhabited by
peoples of Slavonic race and speech. The Serbs, by adding
to their pre-war kingdom the Austro-Hungarian provinces
of Croatia, Slovenia, Bosnia, Herzegovina and Voyvodina,
made themselves dominant partners in a country with a
territory of over 94,000 square miles and a population of
nearly fourteen million people, whereas pre-war Serbia
had a territory of only 34,000 square miles and a population
of four and a half millions. But even Serbia as she existed
in 1914 was a new country, for she had only just emerged
from the Balkan Wars of 1912-14, and in the course of these
wars she had nearly doubled her area and added one-third
to her previous population. Before there had been any time
to devise a new administrative system or to face the prob-
lems of government and administration in this enlarged
territory, Serbia became involved in a new and greater
war during which practically the whole of her territory
was conquered and occupied by hostile armies and her
national Government forced to retire to alien territory in
the island of Corfu, while Austria-Hungary and Bulgaria
with their armies of occupation actually governed the
country. Thus in 1918, when the Serbian Government was
able to resume occupation of the evacuated territory, it
was faced simultaneously with the problem of reorganisa-
tion within the pre-war area and of uniting the old kingdom
with the vast new territories emancipated from the control
of Austria-Hungary. Hardly less than for Poland was the
creation of Yugoslavia the making of a new State ; and the
OR

194 THE COUNTRIES OF EUROPE

fact that there were the already existing Serbian monarchy
and Serbian Government and party system to be reckoned
with, so far from simplifying the problem, only added to its
difficulty.

Even before the new kingdom had been established
at all, the struggle had begun between the old Serbs, who
wished to make it simply old Serbia writ large, and to
govern the new provinces by a centralised system under
exclusive Serb dominance, and the National Committees
and Assemblies of the emancipated Austro-Hungarian
provinces, which demanded a solution based on full
equality for all die elements to be included in the new
State, and on a considerable measure of regional devolution,
if not actual federalism, designed to safeguard the rights of
distinct racial and religious groups.

For post-war Yugoslavia, though it is appropriately
described as the kingdom of the southern Slavs, is never-
theless a very heterogeneous group of territories. The Serbs
themselves form hardly more than a third of the total
population ; there are now living in Yugoslav territory over
three million Croats, a million Slovenes, half a million
Germans, nearly half a million Magyars and almost as
many Albanians, and a quarter of a million Roumanian-
speaking people. These differences of race and language
are deeply complicated by differences of religion ; for
whereas the Serbs belong to the Orthodox Church, the
Croats are Catholics, and in the total population the
Catholics claim 39 per cent as against 47 per cent belonging
to the Orthodox Church. Apart from these two major
groups there are large numbers of Moslems both in the
south of the country and in Bosnia, amounting in all to no
less than 1 1 per cent of the population, while in Voyvodina
along the Hungarian border there is a large element of
Protestants among the German and Magyar communities.
Jews arc relatively unimportant, numbering only about
73,000 in the country as a whole.

Nor are the differences which lead to an intense demand
for local autonomy racial and religious alone ; they are also

THE BALKANS IQ5

to a large extent cultural. The inhabitants of the old Austro-
Hungarian provinces, and especially of Croatia, Slovenia
and Voyvodina, had assimilated to a great extent the
culture of the old Empire, and are in social matters far in
advance of the Serbian population further south. In addi-
tion, whereas Serbia herself is almost purely agricultural
and inhabited almost exclusively by peasants — old Serbia
contained no large town with the exception of Belgrade —
the people of Croatia are much more urbanised, and there
has been a considerable development of mining and manu-
factures in both Croatia and Slovenia. Yet again, whereas
Serbian agriculture is still essentially primitive, in Voy-
vodina a high level of agricultural technique exists, especi-
ally among the Germans and Magyars, who live to a large
extent in concentrated communities of their own. Voy-
vodina is the most closely populated section of the country,
with a density of over 180 to the square mile ; Slovenia
comes next with about 170, and Croatia not far behind
with over 1 60 ; whereas Serbia has a density of only about
no, and the average for Yugoslavia as a whole is only
about 125.

In these circumstances the more advanced peoples of the
new northern provinces keenly resent a form of centralised
government which has involved in practice the domination
of the old Serbs, and an almost complete disregard of the
demand for local autonomy and the adaptation of methods
of government to the differing needs of the various prov-
inces. This question of centralisation versus some degree of
local autonomy has dominated Yugoslav politics ever since
the creation of the enlarged kingdom.

Nor is it even nearing settlement to-day. It arose, as we
have seen, when the constitution of the new State was
under consideration at the end of the war. Upon the collapse
of the Austro-Hungarian Empire the former Austro-
Hungarian provinces at once proclaimed their independ-
ence and passed temporarily under the control of pro-
visional administrations, pending a definite settlement
concerning their future. They did not feel strong enough to

ig6 THE COUNTRIES OF EUROPE

stand alone, and they were ready from the first, on terms,
to enter into a new combined State of the southern Slavs.
But they were not willing simply to be annexed to Serbia,
and to be governed from Belgrade by the old Serbian
politicians without any consideration of their special needs.
The old Serbs, on the other hand, under the leadership of
Pasic, were by no means willing to give up their power or to
share it on equal terms with the representatives of the new
provinces. They stood for a pan-Serbian policy of unifica-
tion, and they were acutely suspicious both of the Catholi-
cism and of the more industrialised outlook of the Croatian
and Slovenian leaders. Regarding Austria-Hungary as their
traditional enemy, they disliked especially the influence of
Austro-Hungarian culture in the new provinces ; and they
wanted Serbian control of the educational system as well as
of the government as a means of Serbianising the country
as a whole. It was only after considerable difficulties and
long delays that agreement to form a unified State was
secured between the provisional bodies in the Austro-
Hungarian provinces and the old Serbs ; and this agree-
ment by no means settled the problem of the future govern-
ment of the country. A temporary coalition was indeed
patched up between the old Serbian governmental party,
known as the Radicals, and the new Democratic party
formed by a fusion of certain sections of the opposition in
Serbia with the Liberal groups in Croatia and the other new
provinces. This coalition governed the country during the
years immediately after the war, in face of a highly mixed
opposition consisting on the one hand of a large body of
Communists and on the other of the extreme right and the
extreme left among the Croatian parties — the Croatian
clericals and Radic's Croatian peasant party. In this
uneasy coalition the Serbs were successful in retaining their
dominance, and in 1921 they pushed through the Con-
stituent Assembly a highly centralised constitution provid-
ing for the completely unified government of the whole
Yugoslav State. The Croatian peasant opposition, unwisely
perhaps, refused to recognise the validity of the Constituent

THE BALKANS IQ7

Assembly and abstained from attendance, and Communist
opposition was effectively got under, first by cancelling
the mandates of the Communist deputies, and then by the
suppression of the party itself after the murder of one of the
Ministers by a Communist fanatic.

The immediate effect of the new constitution was to
strengthen the hand of the old Serbian Radicals. The
coalition was broken up, and a purely Radical Ministry
under Pasic governed the country until 1924. Then at
length the growth of opposition to the Radical policy of
unification, reinforced by the return to Parliament of the
Croatian deputies, compelled Pasic to resign. For a few
months a Democratic Government held ofiice ; but before
long the Democratic groups fell out among themselves,
largely in consequence of the intransigence of Radic and
his Croatian Peasant Party. Pasic returned to power and
followed up his suppression of the Communists by suppres-
sing the Peasant Party as well, and inaugurating a still more
highly centralised regime. There followed a period of
extraordinary confusion. Radic executed a sudden volte face
and entered into a coalition with Pasic ; but this soon broke
down, and in 1927 the Radicals coalesced with the Demo-
crats, while Radic resumed his leadership of the opposition.
This was followed in 1928 by the disastrous incident in the
Chamber in which Radic and several of his followers were
shot by a fanatical Radical deputy. The Croatians at once
withdrew in protest from the Chamber, and a period of
complete political confusion ensued, until the King cut
the knot by the coup cTttat of 1929.

In the course of the coup d'Stat King Alexander made
promises of decentralisation in order to pacify the opposi-
tion. In the meantime the Constitution of 1921 was abroga-
ted by royal decree and a purely Democratic Government
installed. All existing political parties were completely
suppressed, and forbidden ever to reform. The country,
which under the previous Constitution had been divided
into a large number of administrative districts carefully
designed to break up the old Austro-Hungarian provinces

198 THE COUNTRIES OF EUROPE

and so ensure the success of the policy of centralisation, was
redistributed into a smaller number of new areas to be
called Banats. Each of these was to be under a Ban ap-
pointed by the Crown, with the aid of a provincial Diet.
In 1931 a new Constitution was brought into operation by
royal decree and the new system of provincial government
made definite. This new Constitution presents some extra-
ordinary features. Under it the power of legislation is to be
exercised jointly by the Crown and by a National Congress
consisting of two Chambers with co-equal powers. If the
Chambers disagree the Crown has the power of deciding
between them. Of the Upper Chamber one half is elected
and the other half appointed directly by the Crown, which
has thus the power of controlling almost absolutely its
dominant complexion. The popular Chamber, on the other
hand, is wholly elected under universal suffrage, but by a
system so extraordinary as to reduce to complete impotence
all the various provincial minorities. No candidate is
allowed to stand for election unless his name is entered on
a rational list, and no list is admitted to be valid unless it
includes a representative nominated from every electoral
division in the country. It follows that no group formed
upon a regional basis — e.g. no purely Croatian party — can
nominate a candidate at all, unless it can coalesce to form a
list with other regional groups in every division — virtually
an impossible condition. Indeed, at the elections of 1931
under the new Constitution only one list was able to comply
with the required conditions and all the members appearing
on this list were accordingly returned without opposition.
The Parliament, when it met, thus presented a spectacle of
unanimity in singular contrast to the Parliaments elected
under the system of proportional representation which
prevails over the greater part of Europe. There were no
parties, for all the old parties were still prohibited ; but the
new members proceeded to remedy this defect by forming
themselves into a single party — the Yugoslav Party, to
which they all belong. The Yugoslav State has thus been
made *' safe for democracy " without the disadvantages of

THE BALKANS

an organised opposition. Far more completely even than
the Russian system the new Yugoslav Constitution ensures
the dominance of a single party in the affairs of State.
There has been so far no sign that this dominant party, or
the King, who in effect controls it, is prepared to make any
real concessions to the demand for local freedom by expand-
ing the autonomous powers of the new Diets formed for
each separate administrative area. Yugoslavia exists under
a rigid dictatorship : some of the opposition leaders are in
prison, and the rest silenced. Revolution threatens in
Croatia ; and there is a vast mass of discontent even in old
Serbia. Politically, relations with Italy are bad, and the
temper of the Government is strongly militarist. It is
impossible to believe that Yugoslavia can hold together
permanently under anything resembling her present
artificial system of centralised dictatorship.

Greece. To the south of Bulgaria and Yugoslavia lies
the kingdom of the Hellenes, now including not only the
Greek mainland but also the greater part of Macedonia
and Thrace to the north of the ^Egean Sea, together with
Crete and the ^Egean islands, except Imbros in the north
and Rhodes and the Dodecanese off the south of Asia
Minor. Post-war Greece thus, as we have seen, cuts off
Bulgaria and Yugoslavia completely from the ,/Egean Sea ;
but the international guarantees in respect of the use of
Salonica provide Yugoslavia with an outlet, while Bulgaria,
as we saw, has certain rights in the small port of Dedca-
gatch further east.

In no country were the territorial confusions and read-
justments of the post-war period greater than in the Greek
lands. In 1919 the Greeks claimed, in addition to the
territories which they at present possess, the whole western
coast-line of Asia Minor, together with a good slice of the
interior and the stretch of territory running eastward from
Thrace and the Black Sea, including the command of the
Sea of Marmora. This would have brought the Greek lands
practically to the gates of Constantinople, and in Asia

2OO THE COUNTRIES OF EUROPE

Minor would have shut up the Turks far away in the
mountainous interior of the country. In addition the Greeks
claimed Rhodes and the Dodecanese, still held by Italy,
and Cyprus, held by Great Britain.

Even the boundaries granted to Greece by the Allies in
1920 were a good deal more extensive than the territory
which she at present holds. For the Allies contemplated the
ultimate cession of the Dodecanese, though not of Rhodes,
and the transference from Turkey to Greece of Smyrna and
a considerable hinterland halfway down the coast of Asia
Minor. Only the utter defeat of the Greek armies at the
hands of the Turks in 1921-22 compelled Greece to
retire within the territories which she at present occupies
and to leave the coast of Asia Minor under Turkish
sovereignty.

Even so, Greece gained substantially in territory and
population as a result of the World War ; and these gains
were in addition to the considerable accession of territory
which came to her as a result of the Balkan Wars of 1912-
13. Indeed, the modern Greek State is the result of a
gradual growth extending over almost a century. Greek
independence was established in the eightcen-twenties in
the course of her revolt against the Ottoman Empire ; and
the independent existence of the Greek kingdom under the
joint guarantee of Great Britain, France, and Russia was
definitely recognised in the settlements of 1830 and 1832.
The kingdom of Greece at this stage included no more than
the Morea, or Peloponnese, together with the lands im-
mediately north of the Gulf of Corinth, and the islands in
the western part of the ^Egean Sea. The Ionian Islands off
the west coast were ceded by Great Britain in 1863 ; and
in 1878 the plain of Thessaly was added to the Greek
dominions. Thereafter Greek expansion ceased for the
generation preceding the Balkan Wars. In 1910 she had an
area of about 24,400 square miles, and to this the Balkan
Wars added about 21,600 square miles, almost doubling the
land surface of the country by the addition of Southern
Epirus, the greater part of Macedonia and Western Thrace.

THE BALKANS 2OI

After the Great War the Greeks gained most of the remain-
der of Thrace and a large territory in Asia Minor ; but of
all these gains they retained only about 3,000 square miles,
giving the country a total area at the present time of rather
under 50,000 square miles, and a population of rather under
six and a half millions as against five millions in 1913.

The territorial changes give, however, a very incomplete
picture of the change in the Greek State in consequence of
the war. For there has been since 1918 a wholesale migra-
tion and exchange of populations between the territories
now under Greek control and those of Bulgaria and
Turkey. In 1913 the Greek population of Macedonia and
Thrace was only 40 per cent of the total ; in the area at
present under Greek control it is now 90 per cent in Mace-
donia and about 65 per cent in Thrace, as a result of an
organised system of exchange and settlement carried
through with the financial assistance of the League of
Nations and under the auspices of the International
Refugee Settlement Commission set up in 1923. Thus,
although Greece failed to make good her claim to those
territories in Asia Minor and Eastern Thrace which were
largely inhabited by Greeks, the area now under her
political control has come to include the great majority of
the Greek people, and the alien •elements within it have been
very greatly reduced. Greek aspirations have not, indeed,
been by any means completely or finally satisfied ; for the
Greek claim to Cyprus, Rhodes and the Dodecanese holds
the same position as the Greek claim to Crete used to hold
before the war. The Greeks will not be satisfied until the
Italians implement their pledge that the occupation of the
Dodecanese should be purely temporary and give up
Rhodes, and until Great Britain agrees to the inclusion of
Cyprus within the Hellenic State. But as far as Thrace and
the mainland of Asia Minor are concerned, exchange of
populations seems to have gone far towards achieving a
final settlement of the territorial problem.

Every since her achievement of independence in the
cightcen-twentics, Greece has had a troubled history. The

2O2 THE COUNTRIES OF EUROPE

Bavarian king donated to her by the Great Powers in 1830
was expelled in 1862 as the result of a military revolt, and
thereafter a constitutional monarch was elected and a
unicameral system of parliamentary government instituted.
But neither Greek monarchism nor Greek parliamentarism
ever worked smoothly, and there was constant friction over
both internal and external affairs. Greece was and is an
exceedingly poor country, and she has been from the first
largely in the hands of foreign bondholders, with whom
her inability to meet her accumulating burden of debts has
led to repeated quarrels. Her financial difficulties have been
aggravated again and again by war. Both after the Greco-
Turkish War of 1897, in which the Greeks got much the
worst of it, and after the Balkan Wars of 1912-13, in which
they and their allies were victorious, the national finances
were thrown into serious confusion, and the mounting debt
burden was already a serious problem before 1914. More-
over the Cretan question was a continuous source of dis-
turbance. In 1897 lne Cretans finally secured autonomy
under the Ottoman Empire ; but this in no way satisfied
their nationalist aspirations towards union with Greece,
and in 1908 the Cretans definitely proclaimed themselves
a part of the Greek State. The Greek Government, fearful
of international complications and possible military defeat,
hesitated to endorse the Cretan move, and the consequence
was a military revolt in Athens which overthrew the
Government and placed the country for a time under the
authority of a military league. Under the auspices of this
body Eleftherios Venizelos, whose activities form an
integral part of all Greece's subsequent history, first came
to power. In 1912 the Cretan question was at last solved by
the union of Crete and Greece in the course of the first
Balkan War. In the following year the assassination of
King George brought to the throne King Corustantine, who
speedily came to f>e at loggerheads with Venizelos. On the
outbreak of the Great War, Venizelos, in the interest of
Greek irredentism, proposed that the country should join
the Allied Powers ; but the King, who was a partisan of the

THE BALKANS 2O3

Germans, thereupon dismissed him from the ministry, and
in 1916 Venizelos seceded to Salonica, then in Allied
possession, and set up there a rival Provisional Government.
Under pressure of the Allies, who supported Venizelist
claims, King Constantine was forced to abdicate in 1917
and was succeeded by his son Alexander, the effective
control of affairs passing back into the hands of Venizelos.
Under his auspices the convention with the Bulgarians for
the exchange of populations between the two countries
was arranged in 1919 ; and in the same year, at the request
of the Allies, the Greek army landed at Smyrna and
occupied the western central part of Asia Minor. But in
1920 King Alexander died, and in the following confusion
Constantine was able to return and to expel Venizelos.

This change in Greece's political orientation made the
victorious Allies far less sympathetic to Greek aspirations,
and the support of the Greek claim to Asia Minor was with-
drawn in connection with the repudiation of the Sevres
Treaty between the Allies and Turkey. The Greeks, how-
ever, refused to give way, and in 1921-22 suffered complete
defeat at the hands of the Turks, who, since the Franco-
Turkish agreement of 1921, were receiving the active
diplomatic support of France. Smyrna was recaptured by
the Turks, and the Greek army evacuated in disorder, and
no less than 1,350,000 Greek inhabitants were expelled
from Asia Minor by the victorious Turks, while a parallel
movement for the removal of Turkish inhabitants from
Macedonia and Thrace was organised on the Greek side.
In 1922 these mutual expulsions were regulated by a
Greco-Turkish convention for the exchange of popu-
lations on the lines of the Greco-Bulgarian convention of

The national defeat in Asia Minor produced powerful
reactions in Greece itself. A new revolution broke out and
King Constantine was forced again to abdicate. In the
heat of the national disgrace the Greek leaders who were
supposed to have been responsible for the defeat were
executed in spite of protests from other countries. King

204 THE COUNTRIES OF EUROPE

George II replaced Constantine, but was speedily com-
pelled to leave the country. In 1924 it was decided by
plebiscite to constitute Greece a republic, and the work of
drafting a new constitution was begun. For a brief period
in 1926 General Pangalos succeeded in establishing a
dictatorship, but after his overthrow a new republican con-
stitution was brought into force, and thereafter the country
was governed by a bicameral system of the familiar type.
The president of the Republic is elected as in France by
two Chambers sitting together, and has much the same
powers as the French President. The lower Chamber is
chosen for four years by manhood suffrage ; but since
1930 women have been granted the municipal vote. Three
quarters of the members of the Upper Chamber are also
directly elected, and the remaining quarter chosen partly
by the two Chambers together and partly by special bodies
such as Chambers of Commerce and Universities. But it
is doubtful whether parliamentary institutions can be
regarded as at all securely established on Greek soil. By
far the strongest personality in Greek politics is Venizelos,
and political affairs are dominated mainly by the quarrels
between his supporters and opponents. At the moment of
writing, he has been defeated at a General Election, and
an attempt of some of his partisans to make a military
revolution has been overthrown.

Economically Greece is mainly an agricultural country.
Before the Balkan Wars she had little good agricultural
land except in the islands of the^Egean, and she was largely
dependent on island produce for essential supplies. Her
territorial expansion has now given her excellent agricul-
tural land in Macedonia as well as in the further islands
added to her domain. She is not, however, by any means
sclf-fufficient in foodstuffs. Wheat and other cereals have
to be largely imported from abroad, while she exports
large quantities of currants from her older territories and
tobacco from Macedonia. Wheat, oats, barley, maize,
vines and olives are cultivated on a substantial scale in
addition to currants and tobacco, and there has also been

THE BALKANS 2 05

an extension in other types of fruit growing and in the
cultivation of cotton in recent years, while some rice is
grown in the northern part of the country. There has been
some industrialisation since the war under the stimulus of
a high protective tariff, but even to-day at least three-
quarters of the population live by agriculture, and less
than one-third are in urban areas. Greece has consistently
both before and since the war had a large adverse visible
trade balance ; but to a substantial extent her surplus im-
ports have been covered by emigrant remittances from the
United States, to which there used to be a very large emi-
gration of Greek nationals ; to some extent her accumulat-
ing financial difficulties of recent years have been due to the
fall in these balances on account both of declining emigra-
tion and of the world slump.

Greece's financial difficulties have, however, not been
by any means wholly due to this cause. The war with
Turkey in 1921-22 was financed only by great inflation of
the currency, which after the disaster at Smyrna fell to
six per cent of its par value in terms of gold. The settle-
ment of refugees, which was accomplished by the breaking
up of the great estates as well as by the exchange of peasant
holdings, involved heavy additional overseas borrowing in
1924, when Greece had to submit to drastic control by an
International Financial Commission in connection with the
League of Nations Refugee Loan. An attempt had been
made to stabilise the finances and balance the budget by
means of a capital levy and of additional taxation levied
in 1923, and there was further deflation under the orders
of the International Commission in 1924 and 1925 ; but
the short-lived dictatorship of General Pangalos in 1926
afforded the opportunity for fresh inflation, and the new
Government of 1926 had again to appeal for outside help.
This was granted subject to still further foreign control of
the Greek finances under the League of Nations Stabilisa-
tion Loan of 1928 ; and the United States Government
also granted Greece a loan hi connection with the settle-
ment of the war debt problem. Thereafter up to the

2O6 THE COUNTRIES OF EUROPE

outbreak of the world slump Greek finances appeared to be
in a better position, but the slump soon brought to light
the instability of the settlement which had been achieved.
The great mass of Greek overseas debts are payable in
gold, and the fall in the price-level speedily rendered them
intolerable and led to a default accompanied by a new
quarrel, which is still in progress, with the foreign bond-
holders. Indeed, ever since 1898 Greece has been without
real financial autonomy. She has been compelled to assign
a substantial part of her national revenue to meet overseas
debt claims, and to submit to the authority of a Financial
Commission of delegates representing the leading creditor
countries. Since then her burdens have become more and
more topheavy ; and so far from succeeding in building up
an export surplus, she has continued to import more than
she exports. Potentially, Greece, since the acquisition of
Macedonia and the ^Egean islands, is substantially
wealthier than she used to be ; but she is economically
undeveloped, and the heavy burden of her existing debts,
incurred mainly for non-productive purposes, makes it
impossible for her to borrow from abroad on favourable
terms the capital needed for the internal development of
the country.

Albania. Bordering upon Greece to the south and
upon Yugoslavia to the east and north lies the small
independent State of Albania, with a population of well
under a million. The Albanians are in general the most
primitive of all the European peoples. The greater part of
their country is mountainous ; and the narrow belt of flat
land along the coast is malarial and for the most part un-
inhabited. There is only a tiny proportion of arable land
in the country, and the population lives mainly by the
raising of sheep and goats and to a less extent cattle. There
are no large towns and no industries. The standard of life,
especially in the southern part of the country, is exceed-
ingly low ; and, although the people live by raising stock,
the great majority are vegetarians, and meat, wool and

THE BALKANS 2O7

hides form die chief articles of export. To a great extent
each household continues to be self-sufficient, producing
its own textile goods as well as its own food without recourse
to the market. More than two-thirds of the inhabitants arc
Moslems, a legacy from the long period of Turkish rule ;
for Albania only became an independent State in 1913. In
the north, which is the more civilised part of Albania,
Roman Catholicism has some hold, while the Albanian
Orthodox Church is active in the southern part of the
country. But religious differences are said to count for
little among this primitive people, with its civilisation still
based more upon the family than upon any larger social
group.

Albania gained her independence as a result of the first
Balkan War. In 1912 there was a general rising against
the Turks : and after an offer of autonomy had been made
by the Ottoman Empire the Albanians proclaimed their
independence with the support of Italy and Austria-
Hungary. In 1913 the Powers recognised Albanian inde-
pendence and equipped the country with a foreign king,
Prince William of Wied, who was never in fact able to
establish his position in face of the intrigues of the rival
Powers which were scrambling for influence over the
country. During the war Albania was occupied from the
north by the Allies and from the south by the Greeks, who
were anxious to incorporate the southern part of the
country with the rest of Epirus in the Hellenic State. In
1915 the partition of Albania was agreed upon in one of the
secret treaties made between the Allied Powers ; but in the
following year the Austrians and Bulgarians succeeded in
occupying the country. In 1917, however, the Italians pro-
claimed an independent Albanian republic under Italian
protection ; and in 1918, upon the collapse of Austria-
Hungary, a Provisional Government was instituted under
the auspices of the Allies. This Government was unable to
establish its authority in face of the opposition of the
people, and in 1920 a revolt broke out and a rival National
Government was set up. After some hesitation the Italians

3O8 THE COUNTRIES OF EUROPE

decided to recognise the National Government and to
evacuate Albania, upon which the Yugoslavs made an
incursion from the east and only withdrew when they were
stopped firmly by an ultimatum from the Allies. Thereafter
until 1924 Ahmed Zogu was at the head of the Govern-
ment. But in 1924 he was driven to resign and forced to fly
from the country by an insurrectionary movement under
Monsignor Fan Noli. Zogu thereupon retired to Yugoslavia
where, with Yugoslav aid, he organised an army, invaded
the country and reassumed power. In 1925 a new constitu-
tion was adopted with Zogu as president, and in 1928 he
changed his status and became King Zog. At the time of
his return Zogu had been inclined to rely upon Yugoslav
assistance ; but once established in power he turned to
Italy for help, and it was under Italian auspices that the
new constitution of 1925 was adopted. Italy provided the
resources for establishing the National Bank of Albania
and the Corporation for the Economic Development of
Albania, which was designed to help in the civilisation of
the country. Since then Albania has been for the most part
under Italian influence, which has served to keep in check
the aspirations of Greece and Yugoslavia for the partition-
ing of the territory, and at the same time to subdue those
irredentist tendencies in Albania itself which look to an
extension of its boundaries to include the Albanians still
living under Greek and Yugoslav sovereignty.

§ 7. HUNGARY, AUSTRIA,
SWITZERLAND

THE PRE-WAR Austro-Hungarian Empire, with its fifty-
one million people and its 261,000 square miles of territory,
was divided territorially between the two co-equal domi-
nant partners, Austria and Hungary, which had separate
Parliaments and, since the re-arrangement of 1867, had
been united under the Hapsburgi by a purely personal

HUNGARY, AUSTRIA, SWITZERLAND

209

2IO THE COUNTRIES OF EUROPE

union. Bosnia-Herzegovina, under Austro-Hungarian ad-
ministration since 1878, and finally annexed in 1908, was
held under the common auspices of the Dual Monarchy.
From almost the beginning of the eighteenth century
Hungary, previously subject to Austria, enjoyed a con-
siderable measure of autonomy. But there grew up in
the first part of the nineteenth century that strong move-
ment for national independence which culminated in the
revolution led by Louis Kossuth in 1848, and the pro-
clamation of an independent Hungarian Republic in the
following year. The defeat of the Hungarian Revolution
was followed by nearly twenty years of Hungarian sub-
jection to Austrian rule ; but after the exclusion of Austria
from the German sphere of influence it became necessary
to make fresh concessions to Hungarian demands, and the
new constitution making Austria and Hungary co-equal
partners in the Hapsburg Empire was finally granted.
Certain services, however, including the army, remained
under joint administration ; and the dominance of Austrian
influences in the combined departments continued to give
rise to trouble, which was accentuated during the war as
the subject nationalities of the Austro-Hungarian Empire
began to assert themselves, and the unity of the Empire
as a whole to give way.

Hungary. When in 1918 the Austro-Hungarian
Empire finally dissolved, and National Councils and
Provisional Governments assumed authority in its various
provinces, the greater part of Hungary passed under the
authority of a National Council headed by Count Karolyi,
and Karolyi had at once to face the problem raised by the
proclamation of national independence in the non-Magyar
territories previously under Hungarian control. Almost at
once Roumanian, Czechoslovak, and other national forces
began to occupy parts of the area of pre-war Hungary ;
and even after the armistice the Roumanians were allowed
by the Allies to extend considerably their occupation of
Hungarian territory. In March 1919 Count Karolyi,

HUNGARY, AUSTRIA, S W I

unable to sustain his authority in
without and Socialist and Comimj
resigned office and handed over
Communist groups, which procee
form of government under Bela Ku
of Bela Kun was followed by a
particularly in the country districts,^
endeavoured to assert their authority^
owners, who had a strong hold over
peasantry. But the Hungarians were not left to settle their
internal differences alone. In the summer of 1919 the
Roumanians resumed their advance into Hungary, and the
Bela Kun Government was overthrown. Kun himself fled
to Russia, and the Pcidl Socialist Government, which
attempted to take over authority, was destroyed a week
later by a coup d'etat. The Hapsburg Archduke Joseph
thereupon assumed power as Governor ; but the Rou-
manians countered by a further advance and occupied
Budapest. Under Allied pressure the Archduke was com-
pelled to retire, and in November the Roumanians with-
drew from Budapest after doing a great deal of damage,
and took with them in their withdrawal as much of the
movable property and instruments of production of the
Hungarians as they were able to lay hands upon. The Allies
meanwhile attempted to set up a cabinet representing all
the Hungarian parties ; but Admiral Horthy at the head
of an irregular force speedily occupied Budapest and
assumed the controlling power. The National Assembly
elected in 1 920 equipped Hungary with a new constitution,
to the accompaniment of a White Terror directed against
those who had taken part in the Socialist Governments of
the previous year. In protest against the slaughter of work-
ing class leaders the Labour and Socialist International
attempted in June 1920 to organise an international boy-
cott of Hungary ; but this was unsuccessful, and the
country began to settle down under the new regime with
Admiral Horthy as Regent. In 1921 the Archduke Charles
twice attempted to return to Hungary and assume the

212 THE COUNTRIES OF EUROPE

(crown, but on both occasions he was compelled to with-
draw by the threats of the Little Entente (Roumania,
Czechoslovakia and Yugoslavia) to invade the country if
any 'attempt was made to restore the Hapsburgs to the
throne ; %r the, Succession States of Austria-Hungary felt
a Hapsburon the Hungarian throne would be a per-

, jnagpht jnenace to their new-found independence.

garian Government had been
compelled 'to sign the Trianon Treaty with the Allies, and
to agree to a dictated demarcation of the new frontiers of
the Hungarian State. These frontiers were so drawn as to
confine post-war Hungary within very narrow limits. The
pre-war area of Hungary was 125,000 square miles ; and
of this no less than 90,000 square miles had under the
Treaty of Trianon to be ceded to other States. From a pre-
war population of twenty-one millions Hungary was re-
duced in 1 920 to a population of between eight and nine
millions ; and her new frontiers were so drawn as to leave
in the ceded territories not less than 3,300,000 Magyars, or
nearly a third of the total number of the Magyar nation.
Magyars had constituted 54 per cent of the population of
pre-war Hungary ; in the new post-war State they consti-
tuted as much as 90 per cent, the balance being made up of
7 per cent of Germans and a small number of Slav peoples,
chiefly Slovaks. Hungary is thus now a State possessing a
very high degree of national uniformity in its population ;
but the exclusion of nearly one-third of the Magyar people
from its territory serves to keep in being a strong irredentist
spirit and a very great unwillingness to regard as perma-
nent the territorial settlement of 1920. Any map showing the
political and ethnical divisions of post-war Europe will
reveal that only on the west do the territorial frontiers of
* post-war Hungary coincide with the frontier drawn accord-
ing to ethnical divisions. All along the north there is a long
stretch of territory with a Magyar majority that has been
assigned to Czechoslovakia ; down most of the eastern
frontier there is a similar stretch of territory assigned to
Roumania ; in the south large bodies of Magyars in the

HUNGARY, AUSTRIA, SWITZERLAND

lands round the river Tisa are now under Yugoslav rule ;
and finally in central Transylvania, cut off from the rest of
the Magyars by a broad belt of territory inhabited chiefly
by Roumanians, there are considerable enclaves of Magyar
population under Roumanian rule. Even if Transylvania,
with its Magyar enclaves, must be regarded as permanently
lost to the Hungarian State, it is inevitable that Hungary
should look covetously across her restricted frontiers to
the immediately contiguous territories in which Magyar
populations predominate.

This narrowing of the frontiers of the new Hungary
beyond what could possibly be justified on ethnical grounds
arose mainly from economic considerations. For example,
the boundary between Roumania and Hungary has been
so drawn as to include in Roumania the railway lines
running along the valley to the west of the Transylvanian
uplands, on the ground that these railways form the most
natural means of communication between the upland
areas. In the north railway communications were also an
important factor in determining the new boundaries ;
but especially in the east important parts of Hungary's
pre-war resources of iron and coal were also taken away
and assigned to Czechoslovakia in defiance of national con-
siderations. There was also a strategic element in the
drawing of the new boundaries, which, being drawn in
accordance with the claims of the new succession States,
gave Hungary no natural defences and made her a great
plain easily open to invasion from the mountain regions
which surround her on almost every side.

Confined to this central plain, post-war Hungary is pre-
dominantly an agricultural country engaged in arable
cultivation. Sixty per cent of her area consists of arable
land, and 18 per cent of meadow and pasture ; and three-
quarters of the arable land is normally under cereals. She
is an important exporter of wheat and other cereals and
also of sugar and to a less extent of animals and meat.
Accordingly she has felt very seriously the effects of the agri-
cultural depression, not only because the price of wheat has

214 THE COUNTRIES OF EUROPE

fallen very low, but also because of the barriers erected
against her exports by neighbouring countries for the pro-
tection of their own agricultural interests. Industrially post-
war Hungary is in a very difficult position. She lost under the
Peace Treaty four-fifths of her iron ore and a substantial
fraction of her coal ; and she now requires to import most
of her coal and a large proportion of the manufactured
goods needed for domestic consumption. She retained,
indeed, especially in Budapest, the majority of the large
factories existing in the country ; but, as these had been
cut off from many of the sources from which they used to
draw their raw materials, there has been great difficulty in
keeping them at work, and Hungary was suffering seriously
from unemployment even before the world depression.
Nevertheless, she had managed with the aid of her agri-
cultural exports to balance her trade and build up in 1930
a small export surplus. Her chief markets are Austria,
Czechoslovakia and Italy ; and the restriction of imports
into these countries has since hit her very hard. She has
also been hit by the diversion to other routes of a large part
of the through traffic which used to go by way of the
Hungarian railways ; and ever since the war her financial
position has been precarious in the extreme.

Hungary made her first attempt to regulate her own
financial situation in 1 92 1 , when the Hungarian Government
established a new State institution for the issue of bank
notes. But in 1923 her financial difficulties compelled her to
appeal to the League of Nations for help of the same sort
as had been afforded to Austria in the previous year. A
guaranteed League loan of the type that had been given to
Austria was refused ; but the Hungarians were compelled to
accept a large measure of foreign financial control, includ-
ing the establishment of a new Bank of Issue under foreign
advice, and in return for this submission they were allowed
to raise a market loan of fifty million dollars subscribed
chiefly in Great Britain, the United States, Italy and
Switzerland. Thereafter the work of stabilisation went on
rapidly, and in 1926 the Special Commissioner appointed

HUNGARY, AUSTRIA, SWITZERLAND 215

by the League of Nations was able to resign on completion
of the task assigned to him. But the world crisis of 1929 and
the following years soon plunged the finances of Hungary
again into chaos, in face of the falling money yield of her
exports and the rapidly increasing real burden of her
external debts. The League was driven again to intervene,
and fresh loans had to be made to help the Hungarians
through. The effect of these loans is discussed elsewhere in
this book in connection with the measures taken by the
League to assist other distressed European countries
through the financial crisis.

It is easy to see that Hungary within her new frontiers is
very unhappily placed in an economic as well as in a poli-
tical sense. Budapest, with its million inhabitants, was
formerly the capital of a State with twice the population
of present-day Hungary and more than three times the
area. The industries of Budapest had been built up to
supply the needs of this extensive area, and could not well
be readjusted without serious difficulties to the contracted
internal market of post-war Hungary. Hungarian manu-
factured products were excluded by high tariffs from the
surrounding areas ; and the chief industries — flour milling
and sugar refining — suffered especially from the desire of
her neighbours to appropriate these food-preparing trades
for themselves. The position of Budapest was not quite so
difficult as that of Vienna, but it was difficult enough to
present a very serious problem. Moreover, Hungary more
than any other country suffers from the national enmities
of her neighbours as well as from their desire to build up
for themselves systems of economic self-sufficiency. The
countries of the Little Entente live in perpetual fear of
Hungary growing again strong enough to attempt to re-
assert her pre-war domination. Conscious that the post-war
restriction of her territory cannot be justified on national-
istic grounds, they are determined to keep her under by
main force ; while among the Hungarian people resent-
ment at national losses mingles with the relics of the pre-
war imperialistic temper to maintain nationalist spirit at

2l6 THE COUNTRIES OF EUROPE

a dangerous heat. The status quo in Hungary is therefore
permanently unstable ; and while the country, disarmed
under the Treaties of Peace and restricted within largely
indefensible military frontiers, is in no position to take the
offensive, there remain in the strained relations between the
Magyars and their neighbours all the potential seeds of
future territorial trouble. No one can reasonably regard the
post-war settlement of Hungary as fair, and no one can
confidently say that it possesses any of the essential elements
of lasting stability.

Austria. Post-war Austria is, like Hungary, a pre-
dominantly Catholic country with a population possessing
a high degree of national homogeneity. But whereas the
Magyars constituted a nationality apart, 97 per cent of the
population of post-war Austria are German-speaking, and
of the same race and culture as their neighbours across the
national frontiers in the German State. For this reason,
whereas Hungarian aspirations are centred upon an en-
largement of the Hungarian State, a large section among
the Austrians, placed in an even more difficult position by
the Treaties of Peace, thinks rather in terms of political and
economic union with Germany. It was manifest in 1918, and
it is manifest to-day, that Austria cannot possibly build up
for herself a balanced national life within her restricted
frontiers, and especially that Vienna, once the capital of a
great Empire and now reduced to the capital of a small and
predominantly agrarian State, is doomed to decay and
semi-starvation as long as she remains isolated economically
on all sides by tariff barriers and other artificial restrictions
in the way of international trade and intercourse. The
problem of Austria is above all the problem of Vienna, and
of the relations of Vienna with the small and infertile
agricultural territory which alone was left to her by the
Treaties of Peace.

Pre-war Austria, the dominant partner in the Austro-
Hungarian Empire, had a population of over thirty
millions and a territory of 1 16,000 square miles. The Peace

HUNGARY, AUSTRIA, SWITZERLAND 217

Treaties reduced her to a population of six and a half
millions and a territory of 32,000 square miles. But even
these figures do not completely measure her declension, for
Vienna was in effect the banker and Austrian industry to
a great extent the supplier of the needs of the pre-war terri-
tory of Hungary as well. Moreover, Austria has lost her old
access to the sea, and her ports at Trieste and Pola and in
Dalmatia, as well as the coast of Bosnia and Herzegovina.
Austria is now a purely inland State with a territory mainly
mountainous and not permitting of any high degree of
cultivation. Over 90 per cent of her total area can be
fairly described as mountainous, and nearly 40 per cent con-
sists of forest. Less than a quarter of the total land area is
under cultivation in any form. Vienna, with its population
approaching two millions, contains not far short of a third
of the total population of the country ; and the feeding of
this vast urban population involves, in face of the shortage
of agricultural land, a large importation of cereals. Austria
must therefore export if she is to live. But she has lost in the
territories ceded to her neighbours many of the raw ma-
terials on which she used to rely. She has little coal within
her frontiers, though she has iron ore in plenty, and her
abundant timoer resources furnish materials for the wood
and paper industries that supply an appreciable part of her
exports. In the absence of tariff barriers the textile, metal,
timber and paper industries might enable Austria to live
by exchange at a satisfactory standard of life. But, like
Hungary, she is ringed round by a group of countries
anxious to sell her their exports and exceedingly reluctant
to take her own in exchange. Consequently, despite the
most drastic restrictions on imports, Austria has suffered
steadily from a large adverse balance of trade, the con-
tinuance of which has been rendered possible only by
means of repeated borrowing from abroad. In as far as she
has been able at all to meet the service of her heavy ex-
ternal debts this has been done only with the aid of fresh
loans. Again and again since 1922, when her first appeal for
help to the League of Nations was granted and a loan of

2l8 THE COUNTRIES OF EUROPE

twenty-five millions provided mainly by Great Britain,
France, Italy and Czechoslovakia, she has had to appeal for
further help and to submit her finances and her internal
policy to rigorous external control under the auspices of the
League of Nations. Austria's finances are at present under
the control of a League Commissioner ; and she is enabled
to carry on at all only with the aid of fresh doles grudgingly
accorded by her creditors, who are not willing to face the
political consequences of leaving her in the lurch.

As in the case of Hungary, the break-up of the Austro-
Hungarian Empire towards the end of the war led to the
proclamation of national independence over a large part
of pre-war Austrian territory. In Austria itself the National
Assembly, which met in 1919, desired to merge what was
left of the country with the new German Republic ; and this
attempt, promptly vetoed by the Allies, who were unwilling
to sanction an extension of German influence into southern
and eastern Europe, was renewed with no better success in
1920 and 1921. It was made clear to the Austrians that the
Allies, and above all France, would on no account agree to
a political union between Austria and Germany, and that
the Austrians must reconcile themselves for the time at
least to making the best of national independence within
their restricted area. A definite renunciation of the policy
of union with Germany was made a condition of the League
loan of 1922, and thereafter the Austrians had to struggle on
as best they could under Allied financial dictation. Their
difficulties were made the more acute by the pronounced
differences of political complexion between Vienna and the
rest of the country. Vienna was, and has remained, a Socialist
city > governed by a Socialist municipality which has shown
itself, in face of all its troubles, the most enterprising
municipal government in Europe. But the impoverished
peasants who constitute the main part of the population of
Austria outside Vienna are by no means Socialists. They
have been so far mainly under the influence of the Catholic
Christian Social Party, and disposed to look with extreme
jealousy on any sign of Viennese domination. In the period

HUNGARY, AUSTRIA, SWITZERLAND 219

immediately after the war Vienna was almost starved
through the refusal of the peasants to send in supplies ; and
the constitution of post-war Austria as a federal State, with
Vienna as one of its nine largely autonomous provinces,
has by no means settled the problem of the hostility between
town and country. At first after the war the Socialists were
able to control the Government, but subsequently they
were driven out except in Vienna ; and the country has
been governed by the Christian Socials in alliance with the
smaller bourgeois parties. More than once Austria has been
threatened with an actual Fascist revolution, and in 1927
the country was for some time on the verge of civil war, the
strikes among the Socialist workers being broken by military
violence with the aid of the peasant population. The Social
Democrats have indeed constituted the largest party in the
Austrian Assembly, but they have never been able to regain
a clear majority over the Christian Socials and the pre-
dominantly pan-German Agrarian League.

In 1931 the Austrians, driven to the verge of despair by
the effects of the world depression, renewed their attempt
to bring about some form of union with Germany, and in
agreement with Dr. Briming's Government in Germany the
proposal was brought forward for an Austro-German
Customs Union — in other words for complete economic
but not political union between the two countries. But this
proposal too was promptly vetoed by the French, and pres-
sure was put upon the Germans as well as the Austrians to
withdraw it. The question of its consistency with Austria's
and Germany's obligations under the Treaties of Peace was
finally referred to the Hague Court for settlement ; but it
was made clear that whatever the Court said France would
not tolerate an economic union which her politicians re-
garded as the first step towards a political amalgamation.
Under Allied pressure the Germans were compelled to re-
nounce the project ; and Austria, in desperate straits
financially, was made to give further guarantees of good
behaviour as a condition of receiving additional temporary
assistance from the League of Nations.

22O THE COUNTRIES OP EUROPE

Since then, the position has been further complicated by
the rise of an Austrian Nazi movement in close touch with
the South German Nazis. Hitler is himself an Austrian by
origin ; and the inclusion of Austria in the German Reich has
been from the first one of the aims of the Nazi movement.
For the present, the path of the Nazis to power is barred by
the Christian Social Government of Heir Dollfuss, sup-
ported by the irregular force known as the Heimwehr, which
corresponds to some extent to the German Stahlhelm. The
Government has imposed a rigid dictatorship, and abro-
gated the powers of Parliament ; and it has sought to enrol
the help of the Pope and of Fascist Italy in resistance to a
Nazi revolution. As the western part of Austria is the only
obstacle to continuity between Italian and German ter-
ritory, it might be supposed that the two Fascist Govern-
ments would be united in desiring its absorption in Ger-
many. But Mussolini, fearing the complications in Central
Europe which a Nazi triumph in Austria might arouse,
has so far refused his aid, and has firmly given encourage-
ment to the Dollfuss Government. This, however, holds
power only by a precarious tenure ; and it is impossible
to foretell the future of Austria even for a few months.
In face of a Nazi coup, the Austrian Socialists, who are very
well organised, might be expected to put up a better resist-
ance than the Germans ; but Herr Dollfuss has disarmed their
irregular forces, and it is doubtful if they could maintain
themselves in face of their weakness in the country districts.

Switzerland. Adjoining Austria on the west, with the
tiny principality of Liechtenstein1 tucked in between, lies
the Federal Republic of Switzerland, mountainous like her
eastern neighbour, but by contrast very highly developed

1 Before the war, Liechtenstein, while preserving its independence,
was associated in customs and other matters with Austria-Hungary.
Since the war, without entering into the Swiss Republic, it has handed
over to Switzerland the administration of its posts and telegraphs, and
has become a part of the Swiss customs area. It has, however, only the
tiny population of 10,000, though it ranks as an independent sovereign
State.

HUNGARY, AUSTRIA, SWITZERLAND 221

both industrially and commercially, and suffering from no
such disadvantage as the swollen proportions of the capital
city in relation to the hinterland. Switzerland is indeed,
after Great Britain and Belgium, the most highly indus-
trialised country in Europe. Over 50 per cent of the oc-
cupied population are engaged in industry and trade, and
another 7 per cent in the transport services, and only 27
per cent live by agriculture in all its forms. Switzerland is a
considerable importer on balance of cereals and other food-
stuffs, which she pays for partly by her exports of manu-
factured goods and partly with the profits of her important
tourist traffic. The relative magnitude of " tourism " in
furnishing employment to the population of Switzerland
is, however, often exaggerated. 2,700,000 tourists were re-
corded as visiting Switzerland in 1929, the year before the
world slump began ; but the total number of persons em-
ployed in Swiss hotels of all kinds was only 63,000 as against
224,000 employed in the metal and engineering trades
alone. " Tourism " is a vital element in the economic life of
Switzerland, and one great factor in enabling her to import
far more goods than she exports ; but she is primarily an
industrial country and not merely a holiday resort. Her
metallurgical industries are on a large scale and highly ad-
vanced, though they are based to a great extent on imported
raw materials. She has an export of cotton goods and of
silks, and also of dyestufis ; and only of woollen goods does
she import more than she exports. The trade in clocks and
watches also plays an important part in her external com-
merce, but it is far less important than her metallurgical
and textile industries. Of agricultural products she exports
cheese and condensed milk ; but her imports of all the
staple foodstuffs far exceed her exports.

The league which formed the basis of the Swiss Con-
federation goes back to the thirteenth centur^. Switzer-
land's history is one of gradual expansion through the
inclusion of new areas in the Confederation. In 1815 her
neutrality was jointly guaranteed by Austria, Great Britain,
Prussia and Russia, and with the addition of three new

222 THE COUNTRIES OF EUROPE

cantons by the Pact of Zurich modern Switzerland assumed
her present form. The year of revolutions, 1848, brought
her a new constitution after the internecine conflict of 1847
between the Protestant and the Catholic districts ; and
with some amendments, especially in 1874, the constitution
of 1848 remains in force to-day. It is based on the principle
of federation. Each of the twenty-two Swiss cantons (or
rather twenty-five, for three of the cantons are divided)
exists in constitutional theory as an independent sovereign
State, which has only yielded up to the Confederation cer-
tain definite powers of unified government. There remains
great jealousy on the part of the independent cantons
against any encroachment by the federal power ; but stress
of circumstances has led in practice during the past half
century to a great increase in the authority of the Con-
federation, as new services have had to be developed and
old services unified under federal control. Up to 1914 the
Radical Party, which stood for a centralising tendency, was
always in a majority in the Federal Government, but since
the war the introduction of proportional representation has
destroyed this majority and caused Governments to be
based on coalitions of parties. The Radicals still form in
1933 the largest party, but they are followed closely by the
Social Democrats, with the Catholics, who stand for the
maintenance of local rights, not far behind. The Agrarians
have also a substantial representation.

Thus in Switzerland, as in other countries, proportional
representation has led to a multiplication of parties, and to
the carrying on of government by the balancing of minority
forces. In Switzerland, however, the system does not work
out in quite the same way as in other countries, owing to
the use made of the referendum. Switzerland has applied
this method far more largely than any other country ; and
in general its influence on her politics has been markedly
conservative. Most proposed innovations have been reject-
ed, and the necessity of an appeal to a direct vote of the
electorate has restrained Governments from bringing for-
ward proposals for drastic change. Switzerland has thus

HUNGARY, AUSTRIA, SWITZERLAND 223

enjoyed up to now the most stable and unchanging political
system of any country in Europe ; but it has been mainly
because of her special position that she has been able to
maintain her internal tranquillity hi face of the inflexibility
of her political system. The Swiss constitution is eminently
unfriendly to innovation and to political extremes. Of late,
however, following upon the growth of Socialism, there has
been a considerable swing towards Fascism among the
middle classes, which form an important element in the
population ; and there has been more than one suggestion
of a Nazi revolution in some of the German cantons.

Switzerland has a total population of rather over four
millions, predominantly German-speaking. Nineteen of
her twenty-five cantons have German-speaking majorities,
five French-speaking majorities and one an Italian-speaking
majority. In terms of population over two and three-quarter
millions of her population speak German, about 800,000
French, under a quarter of a million Italian, and the rest
other languages, including the curious Romansch dialect.
But it should also be observed that there are over 400,000
foreigners resident in the country, apart from tourists. In
religion there is a preponderance of Protestants over Roman
Catholics, the Protestants forming about 57 per cent of
the total population and the Roman Catholics about 41
per cent. The division between the two groups is largely
geographical. The Swiss are thus without either racial or
religious unity ; but their long tradition of common govern-
ment has given them a keen sense of nationality even with-
out these bonds of cohesion. Switzerland's foreign policy
has been guided above all by the conception of neutrality.
This, as we have seen, was jointly guaranteed by the leading
Powers in 1815, and the fear that her neutrality might be
prejudiced held Switzerland back from entering the League
of Nations immediately after the war. When in 1920 she did
enter the League and afford a home for its headquarters,
this was done only on the explicit pledge that her neutrality
should be in no way prejudiced by her acceptance of the
Covenant.

224 THE COUNTRIES OF EUROPE

As the headquarters of the League Switzerland has un-
doubtedly gained in international economic importance.
Besides her high degree of industrial development she pos-
sesses a very highly organised banking system and has taken
a large part in recent years in international financial
operations. She has built up for herself a gold reserve very
large in relation to the size of the country and of its com-
merce ; and this gold reserve actually grew in 1931 to five
times as large as it had been five years before, through the
flight of capital from other countries and the action of the
Central Bank in converting its holdings of foreign exchange
into gold as a protection against the effects of financial in-
stability. Switzerland is also important economically as the
centre of a considerable number of international combines,
especially in the metal and engineering industries. Switzer-
land's metallurgical development would undoubtedly be
even greater than it is but for her lack of coal. She has en-
deavoured to make up for this by a very great development
of water power, which is employed largely in her industries
as well as in transport. Indeed, the development of electri-
fication in recent years has helped greatly to enhance
Switzerland's economic importance, though during the past
few years her export trade has been seriously curtailed by
the maintenance of the gold standard, and she suffered in
the years immediately after the war from the high valuation
of her currency in terms of foreign moneys. Accordingly
there has been a considerable amount of unemployment
in Switzerland, and this has led to a growth of Socialism
and working-class unrest, with the consequence, as we
have seen, of provoking a counter-growth of Fascism among
the middle classes and the peasants.

§ 8. CZECHOSLOVAKIA

CZECHOSLOVAKIA, with her population of nearly fifteen
millions and her area of 55,000 square miles, is economically
the most important of the new States carved out of the

CZECHOSLOVAKIA 225

pre-war Empire of Austria-Hungary. In the old Empire
Bohemia, Moravia and Silesia formed part of Austria,
whereas Slovakia and Ruthenia to the east were in Hun-
garian territory. The State of the Czechoslovaks was, in
fact, born in exile during the Great War ; for from the
beginning of the war a triumvirate, led by President
Masaryk, set out deliberately to win the favour of the Allied
Powers for the creation of a Czechoslovak National State.
This triumvirate (Masaryk, Benes and Stefanik) had its
headquarters for the most part in Paris ; but throughout
the war Masaryk and his colleagues went to and fro from
one Allied capital to another seeking support for their essay
in the making of a nation. They organised on the Allied
side an army composed of exiles and deserters from the
Austro-Hungarian forces ; and this Czechoslovak national
army saw service on many fronts and especially as an
auxiliary to the Tsarist forces in Russia. When Russia
went out of the war after the Revolution of 1917, the
Czechoslovaks found themselves isolated far from home and
cut off from the support of the Allies. The Russians, after
the Bolshevik Revolution, fearful of the presence of this
potentially hostile army within their territory, attempted to
disarm the Czechoslovak troops ; but the Czechoslovaks
resisted disarmament and, helped by the Allies with
munitions and supplies, held for a time a vast area of
Russian territory in Siberia and on the Volga, thus cutting
off the new Russian Government, and incidentally the
Germans, from the possibility of securing food supplies from
the east. The Czechoslovaks thus came to be an important
factor in the civil war fought on Russian territory after the
conclusion of the Great War, and their final evacuation, by
way of the Far East, was long delayed.

Meanwhile in October 1918 the Czechoslovaks in Austro-
Hungarian territory had proclaimed their independence ;
and with the conclusion of the war, Masaryk and his
colleagues were able to return to their own country and
set to work upon the formal establishment of the new
„ State, which received prompt recognition from the Allied

HR

226 THE COUNTRIES OF EUROPE

Powers. When the new frontiers came to be drawn the
Allies were in a mood to be generous to the Czechoslovaks ;
and in the territorial adjustments under the Treaties of
Peace only very tiny minorities of Czechs or Slovaks were
left outside the territory of Czechoslovakia, while near the
frontiers substantial elements of other nationalities were
included — Germans in the west and north, Magyars along
the frontier of Hungary, and Ruthenians in the east. The
result was a long narrow land-locked State, extending for
600 miles from east to west, but only 50 miles across from
north to south at its narrowest part and 125 miles at its
broadest. Czechoslovakia has thus an immensely long land
frontier, exceedingly difficult to defend against attack. She
borders upon five States — Austria, Hungary, Roumania,
Poland and Germany — and only in the case of Poland is
there, along the range of the Carpathians, a sharply defined
frontier. Czechoslovakia is accordingly most unwilling to
stand alone, and her foreign policy ever since the war has
been governed largely by the desire to ally herself with
powerful enough neighbours to ensure her from attack.
Acutely suspicious of the irredentist aspirations of dis-
membered Hungary, she has formed part of a bloc, known
as the Little Entente, in which she is allied with Roumania
and Yugoslavia, largely with the object of preserving the
territorial settlement laid down in the Peace Treaty with
Hungary. With Austria her relations have been far less
unfriendly, but, as we have seen, she lives in permanent
fear of an attempt to restore the old Austro-Hungarian
Empire ; and she was successful in the years immediately
following the war in preventing more than once the return
of the Hapsburgs to the Hungarian throne.

For a long time the Little Entente has been regarded in
Europe as belonging to the bloc of Central and East Euro-
pean nations under the political influence of France. But of
late the growing uncertainty of France's political orienta-
tion has tended to make her eastern allies draw more closely
together among themselves, and rely more largely upon
their own combined resources. Thus in February 1933 the

CZECHOSLOVAKIA 227

Little Entente was considerably strengthened by the signing
of a new Treaty between the three States concerned.
Czechoslovakia, Roumania and Yugoslavia bound them-
selves to follow a common foreign policy and to enter into
no external obligations except by general consent. Under
the new arrangement a permanent council consisting of
the three Ministers for Foreign Affairs has been set up to
direct foreign policy with the assistance of a permanent
bureau, one section of which will sit continuously at
Geneva. There is to be also a joint economic council of the
three countries ; and it is proposed as rapidly as may be to
bring the existing political treaties of the three into the
greatest possible uniformity. Joint action is to be taken in
respect of the navigation of the Danube, the co-ordination
of railway, air and postal services, and the adjustment of
tariffs on a preferential basis. There is also to be close
banking collaboration among the three Central Banks
concerned. Czechoslovakia, Roumania and Yugoslavia
have thus taken a long step towards the creation of a
political confederation*, which may turn at a later stage
into an economic confederation as well. Whether this close
union among three of the succession States can later be
broadened out into a confederation wide enough in effect
to reconstitute pre-war Austria-Hungary as an economic
unit, by the inclusion of the new States of Austria and
Hungary within its scope, must remain for the present
doubtful ; for the Little Entente has been based so far on a
sharp hostility to Hungary which it will take long to over-
come, and the Hungarians have by no means renounced
their aspirations for a reconsideration of the terms of the
Peace Treaty. But undoubtedly, the coming together of the
countries of the Little Entente into a much closer and more
lasting relationship is the most important step that has yet
been taken in Central and Eastern Europe towards over-
coming the tendency for economic as well as political
nationalism to entrench itself within areas so small as to
result inevitably in a strangling of economic activity and a
serious lowering of the European standard of life.

228 THE COUNTRIES OF EUROPE

Czechoslovakia inherited a very large proportion of the
industrial equipment of the old Austro-Hungarian Empire.
It has been estimated that no less than four-fifths of the
industrial resources of pre-war Austria-Hungary fell to the
share of the new Czechoslovak State. Czechoslovakia is
therefore by far the most important industrially of the new
countries created by the Peace Treaties. Her neighbours to
the south and east are mainly agricultural countries which
need to export large quantities of foodstuffs in order to pay
their debts and meet the cost of necessary imports, whereas
Czechoslovakia is a large-scale exporter of coal and
manufactured products. In these circumstances it would be
natural for her trade to be carried on largely with her
agricultural neighbours ; but in fact her closest trading
relations have been with Germany, largely owing to the
restricted purchasing power of the agricultural countries of
Eastern Europe and her own close approach to self-suffici-
ency in food supply. Nevertheless her trade with Hungary
and Roumania and Poland comes next in importance after
her trade with Germany, and may be expected to grow
rapidly if settled conditions are restored in Eastern Europe.
Owing to her position as a purely inland State, Czecho-
slovakia is dependent for her outlets to the sea upon her
share in the navigation of certain important rivers and on
her rights at certain ports. The Peace Treaty gave her
important rights in the navigation of the Elbe and Oder ;
and she is also greatly interested in the navigation of the
Danube. Hamburg is the port through which the largest
quantity of Czechoslovak goods passes to overseas markets ;
but Trieste, Fiume, Stettin and Danzig are also considerable
outlets for her commerce.

Thanks to her ability to supply her population with
foodstuffs grown at home, Czechoslovakia has been able
hitherto to maintain a favourable balance of trade. She
needs to import some of her raw materials, especially iron
ore from Sweden ; but these imports are far more than
balanced by her exports of coal and manufactured goods.
She is important as a producer of iron and steel and

CZECHOSLOVAKIA 229

engineering products. She has large and well-organised
textile industries in almost all branches of textile production
— cottons, woollen goods, flax and jute, silk and artificial
silk. In addition she is a large producer of refined sugar on
the basis of her developed agricultural output of sugar beet.
Her industries are mainly centred in the Czech end of the
country, with Slovakia as an important source of raw
materials as well as food, and Ruthenia in the east as a
comparatively undeveloped agricultural province. Forty-
two per cent of her area is arable, 18 per cent pasture and
meadow, and roughly 33 per cent forest ; and her forest
area makes her an important producer and exporter of
timber and wood products. In common with the other
succession States, Czechoslovakia has enacted important
land laws breaking up big estates, especially in Slovakia.
Under the Act passed by the National Assembly in 1920
something like half a million families were settled in
peasant holdings on land previously occupied by great
landlords. But, except in Ruthenia, standards of cultivation
are relatively high, and agriculture is pursued on fairly
scientific lines.

Czechoslovakia, however, counts in the affairs of Europe
far more as an industrial than as an agricultural country.
As we have seen, she is well equipped with coal and able to
export a surplus beyond her own requirements, and she has
also abundant water supplies which she has used in recent
years as the basis of a rapid development of electrification.
In addition to her steel and engineering industries and her
textiles, she is growingly important as a producer and
exporter of light industrial products. Her glass and porce-
lain industries command a world market ; and the famous
Bata boot factories have a large export trade, especially to
the countries of Central Europe. Czechoslovakia thus
combines a high degree of self-sufficiency in the matter of
supplies with a manufacturing equipment designed essen-
tially for a wide export market. She is therefore deeply
interested in the removal of the existing barriers in the way
of external trade, especially in manufactured goods ; but

23O THE COUNTRIES OF EUROPE

the agricultural element in her population is large enough
to make her unwilling to sacrifice the agricultural interests
in order to expand her industrial exports. This hampers her
in entering into arrangements with the agricultural States
of Eastern Europe for the freer exchange of goods. For
Czechoslovakia is in the position of an industrialised State
which is also, though only to a small extent, a debtor on
international account, and therefore desires to export more
than she imports. She has been able to a substantial extent
to force her way into world markets on a basis of mass
production and low wages ; and the careful administration
of her finances has enabled her to escape from the alternat-
ing periods of inflation and deflation through which most
other countries in Europe have had to pass. Czechoslovakia
is potentially a very rich country, but she can hardly hope
to garner her potential wealth until conditions allow her to
raise the standard of living of her inhabitants without
dangerously imperilling her export trade. Her statesmen
are therefore among the influences making most strongly
for stabilisation in European political and economic affairs,
and her foreign policy, continuously in the hands of Dr.
Benes through a long succession of Governments, has been
more consistent, perhaps also more opportunist, than that of
any other important country.

Czechoslovakia has, however, very difficult internal
problems to face. She is a country of greatly mixed nation-
alities. Of her total population Czechs and Slovaks, between
whom there are important cultural differences, together
constitute about two- thirds ; but Germans are nearly a
quarter, and there are also important minorities — Magyars
5 J per cent, Ruthenians 3^ per cent, Jews i £ per cent and
Poles £ per cent. By religion the great mass of the people
are Roman Catholics, more than three-quarters of the
total population belonging to the Roman Church, whereas
only 7 per cent are Protestants, and the remainder divided
among a number of other Churches. National rather than
religious differences therefore present the main problem.
When the new Czechoslovak State was first created the

CZECHOSLOVAKIA 23!

German minorities refused to recognise the accomplished
fact, or to take any share in the government ; and for a long
while there was a duplication of party cleavages along both
national and economico-political lines. Each of the main
parties among the Czechoslovak elements in the population
had its counterpart in a corresponding party among the
Germans, and in some cases there were also separate
Magyar parties. The Communists alone, from the time
when they split away from the Social Democrats in 1920,
formed a unified party without regard to national differ-
ences. Only in 1926 did the German parties belonging to
the bourgeois bloc agree to enter into coalition with the
Czechoslovak parties for the conduct of the government.
Since then, although the national parties have maintained
their separate existence, the fundamental cleavages have
tended to be in terms of economic and political rather than
national differences. This is an important sign of the con-
solidation of the new State within its frontiers as defined by
the Treaties of Peace.

There still remain, however, difficult problems of nation-
ality within Czechoslovakia's frontiers. The most difficult
problem of all arises out of the position of the Ruthenians
in the east of the country, for the Ruthenians, who belong,
as we have seen, to the same racial group as the Ukrainians,
are peasants living at a low standard of life and culture, and
having very little in common with either the Czechoslovaks
or the Germans. The Ruthenian National Council voted
in 1918 for union with Czechoslovakia, and the Czecho-
slovaks promised to concede autonomy to the Ruthenians
within the new State. But this promise has never been at all
completely carried out, though a form of federal admin-
istration was finally established in 1927, with some degree
of provincial autonomy in local matters. The real reason
for uniting Ruthenia with Czechoslovakia had very little
to do with nationality : the object was rather to link the
Czechoslovak State to Roumania, and thus to make the
encirclement of Hungary more effective. It is true that
no other State except Russia could have established any

232 THE COUNTRIES OP EUROPE

better claim than Czechoslovakia to annex Ruthenia ; and
of course annexation to Russia would not be considered in
face of the political alignment of post-war Europe. The
Ukrainians of Ruthenia are in fact cut off from Russia,
as we have seen earlier, by territories of mixed popu-
lation assigned to Roumania and Poland. Doubtless union
with Czechoslovakia offers the Ruthenians some material
compensation, in that union with the industrial part of the
country provides an outlet for Ruthenian agricultural
produce within a single tariff area, and also means more
rapid economic development than would be likely to occur
if Ruthenia had become a part of either Poland or
Roumania or had remained attached to Hungary. But,
short of the adoption of truly federal institutions, the
Ruthenians are not likely to settle down contentedly under
the new conditions. Nor is Ruthenia the only area in which
there is a demand for autonomy ; for, while the Czechs
and Slovaks are closely allied in race and culture, there are
none the less significant differences between them, and there
has arisen in recent years a demand for self-government in
Slovakia as well. The political problems of the Czecho-
slovak State cannot be regarded as in any way finally
settled by the reforms of 1927, though the forces of disrup-
tion are less strong than in most of the other succession
States.

In the period immediately after the war Czechoslovakia
was governed by a coalition between the Socialists and the
Agrarians ; and it was under the auspices of this coalition
that the new constitution of 1920 was adopted and various
advanced measures of social reform instituted, including a
levy on capital and a breaking up of the great estates. This
coalition, however, was brought to an end by a split among
the Socialists. Strong Communist groups arose among the
Czechoslovak industrial workers, and in 1920 a split oc-
curred in the ranks of the Social Democratic Party. Before
the split the Social Democrats resigned from the Govern-
ment, and the coalition cabinet was replaced temporarily
by a non-party Government of officials. But when the

CZECHOSLOVAKIA 233

Social Democratic Party had definitely split into two sec-
tions— a Social Democratic majority and a Communist
minority — the majority resumed their place in the Govern-
ment, though their forces had been considerably weakened
by the quarrel. The third Socialist-Agrarian coalition of
1921 was replaced in 1922 by a predominantly Agrarian
Government kept in office by Socialist support ; and this
Government continued until 1925. The elections of that
year were marked by a serious set-back to the Social
Democrats ; and the Government was then reconstituted
on the basis of an Agrarian-Catholic coalition which was
broadened out in the following year into a general anti-
Socialist bloc. This bloc retained office until the two major
parties — the Catholics and the Agrarians, quarrelled in
1929. In the general election which followed the Socialists
made considerable gains ; and a new Government was
formed on the basis of a general coalition of Socialist and
non-Socialist parties, with the Communists as the leading
opposition group. This anomalous coalition has since con-
tinued to govern Czechoslovakia ; but through all the
changes of the post-war years Czechoslovak policy, especi-
ally in international affairs, has in effect maintained a very
high degree of continuity, irrespective of the political com-
plexion of the Government; in power.

§ 9. GERMANY

IN OCTOBER 1918 the long sustained military resistance
of the German Empire abruptly collapsed, and the Great
War ended with the Armistice of the following month and
the Allied victory which had been inevitable from the
moment when the United States declared war upon the
Central Powers. For, despite the attitude of President
Wilson, and his famous Fourteen Points, there was not,
from the moment of the American declaration of war, any
real prospect that the Allies would accept a negotiated

234 THE COUNTRIES OF EUROPE

peace based on no annexations or indemnities, and thus
agree to forgo the anticipated division of the spoils of
victory.

The collapse of 1918 brought to an end the great German
Empire which had been consolidated in the course of the
nineteenth century under Prussian leadership, and in-
volved the establishment of a new Germany, shorn of its
colonies and of an important part of its territory in Europe,
and equipped with republican institutions, not so much
because it had deliberately chosen a republic in preference
to a monarchy as because the continued rule of the Hohen-
zollerns had been made impossible. This Weimar Republic,
set up on the morrow of the war, endured until the Nazi
coup of 1933, when it collapsed no less abruptly than it had
come into being, leaving the Nazis to work out, with results
which it is impossible to anticipate at present, the struc-
ture of a new German State.

We have thus three different Germanics to consider ; for,
although both the pre-war German Empire and the Weimar
Republic may seem to have passed away, they are both
very relevant to any consideration of Germany's future.
Was the short-lived German Republic only an episode, and
is Germany now heading straight for a restoration of the
pre-war imperial system, or is the new Germany which is
being born under Nazi rule to be something radically differ-
ent both from the pre-war Empire and from the post-war
Republic ? Or, again, will the Nazi revolution fail to pro-
vide a permanent basis for the new German society, and
give place to yet another revolution, which will establish
a fourth form of German State ?

Before we set out to consider any of these distinct political
Germanics, we must say something of the underlying Ger-
many which persists through all the changes in political
structure and organisation. For although the economic con-
figuration of the German territories changed with extra-
ordinarily swiftness in the course of the nineteenth century,
and the country was transformed from a predominantly
agrarian into a great industrial State, there are certain

GERMANY

235

236 THE COUNTRIES OF EUROPE

underlying characteristics of the German people and the
territories which they inhabit which form the indispensable
basis for any judgment upon their political and economic
future.

In the first place a very large part of Germany is, from
the agricultural point of view, poor soil. There is no great
fertile black belt like that of Russia. In the north-east
especially the season for agriculture is short, and the cold
winters make impossible the forms of cultivation which
exist further south and west. In the west, though climatic
conditions are more favourable, much of the land is of
inferior quality. There are great mountain areas, and a
large part of the land surface is covered with forests.
The response of nature to the efforts of the cultivator
is meagre, until he brings to his aid the resources of
modern science. In some respects the most remarkable
achievement of Germany in the nineteenth century
was her rapid success in improving the yields of the
leading crops without losing, through the extension of
arable cultivation, her importance as a producer of
livestock. In this transformation the emancipation of
the serfs, the enclosure and redistribution of the land,
the development of the agencies for co-operative credit,
the growth and application to agriculture of the chemical
industries, and the subsidising of the cultivation of sugar-
beet, all played an important part. Germany, in adopting
over a large part of her surface intensive systems of agricul-
tural production, and in raising her crop yields per acre
to a point well above those secured in countries with far
more naturally fertile land, accomplished an astonishing
agricultural revolution without which she could certainly
not have brought about the great advance of her industries
during the latter part of the nineteenth century. But in
face of all these achievements the poverty of the land
remains an abiding fact ; and this is especially important
in those areas in the north-east where agricultural difficul-
ties arise from climate rather than from soil, and can least
be overcome by the application of scientific methods.

GERMANY 237

Of great importance through the history of all the suc-
cessive Germanics which we shall have to consider is the
broad distinction between east and west, with the Elbe as
the approximate dividing line. West of the Elbe, and to the
south, Germany is for the most part a land of small peasant
cultivators, though there are some large estates in the north-
west. These peasants till the land themselves with little or
no aid from hired labour. Their standard of life is, and has
always been, low in relation to that of the urban popula-
tion ; and their social attitude has much in common with
that of peasants in other Western countries, with the
difference that, largely under State tutelage, they have far
more capacity for co-operative organisation than the
peasants of France, or of any other West European coun-
try. The Raffeisen system of credit banks goes back to
1849 ; and there are approximately twenty thousand rural
credit societies in Germany to-day, in addition to over
thirty thousand co-operative societies of other kinds. The
German peasants have learnt to act together economically,
and they learnt this lesson earlier than the peasants in any
other country, even Denmark, though they have not
pushed co-operation anything like so far in the field of
marketing as the Danes have done in modern times.

On the other hand, eastern Germany is, and has been for
centuries, an area of large agricultural estates. This is the
home of the Junkers, and of the landless labourers who live
by working upon the land of the great proprietors. The
country is for the most part poor, and the landlords have
always been exorbitant in their claims. The land workers,
unorganised and with a quite recent tradition of serfdom
behind them, have had little power of self-protection, and
their standards of living have remained much below those
even of the peasants of western Germany. A little was done
under the Weimar Republic to break up some of these
great estates and to settle peasant cultivators upon them ;
but even to-day the underlying difference between the
agricultural economies of eastern and western Germany
remains unaltered. The Junkers have not been driven from

238 THE COUNTRIES OF EUROPE

their strongholds by the Weimar Republic, although
economically they have had a bad time, and most of them
are heavily in debt, both to the State and to a less extent to
private creditors.

Pre-war Germany had an area of about 209 thousand
square miles, whereas the Germany of to-day, including the
Saar district, has an area of about 182 thousand square
miles. Thus, although the German losses as a result of the
war were considerable when they are reckoned in terms of
economic resources, territorially they lopped off only a
small part of the total land surface of the country, certainly
not enough to modify from the agricultural point of view
the broad generalisations which we have just advanced.
We can, therefore, without the risk of making seriously
misleading statements, ignore the difference between pre-
war and post-war Germany in considering the general
agricultural situation of the country. Of the total land sur-
face of post-war Germany, one of the German States,
Prussia, alone includes about 62 per cent, and nearly 61
per cent of the total German population lives in Prussian
territory. Prussia still occupies, as she has occupied since
Germany became more than a geographical expression,
the position among the German States of unquestionable
predominance in area and population. Of the total area
of Germany rather more than a quarter consists of forest
land, about half as much again of arable, and about a
sixth of pasture and meadow. She has a total population of
about 65 millions, and throughout the nineteenth century
the birth-rate was exceedingly high ; so that there was
strong pressure, despite emigration, which was directed
largely to the United States, to improve standards of culti-
vation. Apart from this, it would have been impossible to
maintain and raise the standard of living for the rapidly
increasing population, in face of the poverty of the soil and
the absence until recently of a developed industrial system
by means of which the country could afford to pay for large
foreign imports of foodstuffs. But for the rapid rate of
agricultural improvement, the situation of the German

GERMANY 239

people would have been throughout the nineteenth cen-
tury very serious indeed ; and for this reason, as we have
seen, the strongest endeavours of the State have been
continually directed to the development of scientific
methods of cultivation and of the process of agricultural
education.

Industrial Germany is not very rich in natural resources,
and, as we shall see, is appreciably poorer now than she was
before the war. But her great potash deposits, a large part of
which she still retains, were a most important factor in
enabling her to improve agricultural yields despite the
poverty of her soil. Her coal is largely concentrated in the
Ruhr area, which produces now nearly four-fifths of the
total domestic supply of hard coal, excluding lignite. Iron
resources she had in abundance before the war ; but most
of these were lost when Alsace-Lorraine, acquired in 1871,
was taken back by France in 1918. She has, however,
considerable supplies of iron left within her own territories ;
and it is upon her resources of coal and iron as well as upon
her potash and other mineral deposits that her modern
industrial system has been primarily based. Germany
needs more now than she did in the nineteenth century to
import large quantities of raw materials for the conduct of
her manufacturing industries, but she does possess, even
shorn of her lost territories, the fundamental requisites for
the carrying on of an advanced system of capitalist pro-
duction centred upon the heavy industries. But in accord-
ance with the concentration of her coal supply her indus-
trial population is highly concentrated upon a few densely
populated areas, above all the Ruhr, and to a less extent
Upper Silesia and Saxony. Any average figure of the density
of population of Germany gives an entirely misleading
picture of the real distribution of the people.

Apart from the underlying economic conditions, religious
differences are of importance. North Germany is mainly
Protestant, though Prussia includes a considerable Catholic
minority. Saxony, Brunswick, Thuringia, and the Mecklen-
burgs are also mainly Protestant. On the other hand, the

24O THE COUNTRIES OF EUROPE

south, including both Bavaria and the great industrial area
of the Rhineland, is mainly Catholic, and so is Upper
Silesia. Prussian leadership in the country as a whole has
tended to give the German Empire a predominantly
Protestant colour ; and this has been one of the factors
making against the completion of the process of centralisa-
tion. For Catholic Bavaria, insisting strongly upon her
autonomy, constituted herself the leader of Catholic
opinion in Germany as a whole. German Protestantism is
overwhelmingly Lutheran, and the great majority of
German Protestants are united in the Evangelical Church
Union, over which the Nazis are now making a determined
effort to establish a complete control ; but the Protestants,
being in a position of predominance, have never needed
to unite into any political parties of their own, whereas the
Catholics have organised politically as well as culturally,
and have been throughout the history of Germany an in-
fluential and organised minority taking their own line in
political affairs .

Geographically, Germany is essentially a Central
European Power, and her contacts with other countries are
of importance in north, south, east and west alike. To the
north, her frontiers lie along the Baltic, and she is brought
into close association with the Scandinavian countries, with
whose history that of North Germany is inextricably inter-
twined. To the west she is the neighbour of France, and
along the short coastline looks out across the North Sea
towards Great Britain ; and her great ports, and especially
Hamburg, have very close commercial and financial asso-
ciations with London and with the other financial centres
of the West. To the south she stretches down to the borders
of Austria, once an important member of the predominantly
German group of States forming the Holy Roman Empire,
and still, in her post-war impotence, the connecting link
between Germany and Italy. Since the war, however,
Germany meets in the south not one State but many,
founded upon the ruins of the Austro-Hungarian Empire.
Both economically and politically, and also culturally, her

GERMANY 84!

connections with Czechoslovakia as well as Austria are
close ; for there is in Czechoslovakia a large German ele-
ment in the population, and this element until quite
recently refused to accept the fait accompli of the new
Czechoslovak State, and many of its members still continue
to think in terms of pan-German unity. To the east pre-war
Germany had a long frontier line, marching with that of
Russia ; but now she is cut off from direct contact with
Russia by Poland and by the new small States bordering
upon the Baltic. But, as we have seen in an earlier section,
there were never natural frontiers on the eastern side of
Germany ; for the great plain stretches right across eastern
Germany and Poland far into Russia without any clearly
marked geographical differentiation. Moreover, further
north, East Prussia, now separated from the rest of Germany
by the Polish Corridor, lies far to the east, and Germany's
interest in the Baltic brings her near to Russia by sea, des-
pite the disappearance of a common frontier by land.

Thus centrally placed, Germany is bound to be con-
cerned in practically every problem of international im-
portance that arises in Europe. This was the case even
before Germany could be said to exist at all as a nation ;
for throughout the Middle Ages the Holy Roman Empire,
the temporal symbol of the unity of Christendom, was
mainly a German Empire, and the Emperors most often
had their seats in Austria or in one of the numerous German
States. There is thus a long tradition of political association
between Germany and Austria and the rest of Southern
Europe ; and this tradition still reasserts itself as a living
force in the European politics of to-day. Probably the
notion of a German hegemony in Central Europe would
never have taken the form which it did during the World
War had it not been for the existence of this tradition ; and
it is certain that, in the new Germany which is being
formed now, the traditional connection of the German
State with Southern Europe is destined again to assume a
position of importance. One aim of the Treaties of Peace
was to cut off Germany from contact with the south ; but

242 THE COUNTRIES OF EUROPE

it is already clear that this is one of the provisions of the
Peace Treaty which the movement of irresistible forces
will decisively alter.

Pre-War Germany. With these preliminary comments
we can turn to consider very briefly the rise of modern
Germany and the evolution of that German Empire which
collapsed in 1918. It is above all necessary to remember, in
considering the development of modern Germany, that she
emerged from the Middle Ages far later and far less com-
pletely than the other countries of Western Europe. Long
after Great Britain had become predominantly a capitalist
country, and almost every relic of the medieval system had
disappeared, Germany was still a land of serfs and gilds,
and of industry and commerce, as well as agriculture,
carried on mainly under very primitive conditions. After
France had established a regime of personally free peasant
cultivators and had developed large-scale industry and
commerce and a strongly centralised national State,
Germany was still governed, as far as she was governed at
all, by an infinity of petty princelings, and only Prussia,
under strongly despotic rule, at all resembled a national
State in the modern sense. German industry, based on the
technique of machine production, grew up almost wholly
in the latter half of the nineteenth century ; and even the
emancipation of the serfs in a purely personal sense, apart
from their freeing from labour dues and inferiority of
status as land holders, was deferred until the early years of
the nineteenth century. The German Empire did not be-
come a fully accomplished fact until 1870 ; and even the
Zollverein, which prepared the way for it, was not effectively
in being until 1834.

In the historical evolution of modern Germany the
contrast between east and west is again of predominant
importance. For, whereas in the west the manorial system
decayed and serfs took on gradually the character of free
cultivators by stages roughly corresponding to those of the
similar evolution in the other countries of Western Europe,

GERMANY 243

in the east serfdom in the most extreme form was often
positively imposed at a time when in the more advanced
areas of Europe it was being mitigated or abolished. The
imposition of the most extreme form of serfdom in respect
of personal status as well as of labour dues upon the German
population east of the Elbe came about largely in the
sixteenth century, whereas from that time in the west the
severities of serfdom were being at least somewhat relaxed.
The Thirty Years' War in the first half of the seventeenth
century greatly impoverished most parts of Germany, and
was followed by a rapid process of consolidation of large
estates, especially in the east ; and the backwardness of
Germany in both an economic and a political sense was
largely the legacy of this impoverishment. In the middle of
the eighteenth century, Frederick the Great did much, not
only to follow up the work of the Great Elector, Frederick
William, a century earlier, in consolidating the power of
Prussia and bringing his scattered territories under a more
unified administration, but also to promote industrial im-
provement. But the beginnings of modern Germany in an
economic sense date essentially from the Napoleonic era.
Between the sixteenth century and the eighteenth century
many serfs in the west had been given their personal free-
dom ; but Napoleon totally abolished serfdom in the
subordinate kingdoms which he set up on German territory
at the height of his power, and though he did not succeed
in making his system permanent, the results of his work both
in breaking down the isolation of the tiny German States
and in sweeping away many of the relics of medievalism
over a large part of Germany left an abiding mark on the
institutions of the whole country.

It was largely under the influence of the French Revolu-
tion and the Napoleonic system that the freeing of the Prus-
sian serfs was carried through, and that the status of
serfdom was definitely abolished by the Prussian Edict of
1807. Thereafter one German State after another made an
end of the personal status of serfdom, though in many cases
the requirements of service by the peasant as a condition of

244 THE COUNTRIES OF EUROPE

his land-holding survived much longer, and these relics of
the old servile status were only got rid of gradually during
the nineteenth century, partly by commutation for pay-
ments in money and partly by the surrender of an appre-
ciable fraction of the land occupied by the peasants to the
nobles. Even in 1914 the peasants in some parts of Germany
had not finished paying off the annuities by which they
were compelled to redeem the burdens arising out of their
past condition of serfdom.

From 1807, however, with Prussia taking the lead,
serfdom was being gradually done away with, and the
change in the status of the peasant was being followed up by
measures for the redistribution and enclosure of the land,
and the improvement of the methods of cultivation. Enclo-
sure came in Germany long after the corresponding move-
ment in Great Britain ; and even so its progress in the west
was relatively slow owing to the great difficulties en-
countered in the broken and mountainous country in which
many of the holdings lay. At the same time Prussia was
taking the lead in a movement for the sweeping away of
medieval restrictions on the conduct of industry and trade.
Prussia began the process of municipal reform in 1 808, and
in 1810 the power of the gilds — associations of small masters
invested with local monopolies for the conduct of industry
and commerce — was drastically curtailed. This process was
continued in subsequent enactments, until in 1845 the Efl&
jurisdiction practically lapsed, while the other German
States carried on a corresponding process of reform, lagging
in many cases some way behind what was done in Prussia.
In the eighteenth and early nineteenth centuries, despite
the strangling effect of the innumerable separate tariff
barriers maintained by the different German States, nothing
was done to promote freer trade over Germany as a whole ;
and even in Prussia Frederick the Great made no attempt
at unification of tariffs. But early in the nineteenth century,
first by internal unification within States, then by agree-
ments between particular groups of States, and finally on
a wider basis in the Zollvcrcin of 1834, freedom of internal

GERMANY 945

trade over Germany as a whole was gradually achieved.
Fresh members one by one joined the Zollverein, which
was renewed in 1853 and again, in 1865 ; but Austria was
kept outside lest her influence might counteract that of
Prussia, and so prevent the building up of a unified German
State under Prussian leadership. By the 'sixties, under
strong State encouragement, largely influenced by the
doctrine of economic nationalism preached by List and his
followers, German industry was beginning to take on a
more modern form, and the coal and iron trades were
being strongly developed. The Zollverein, the emancipa-
tion of the serfs, and the strengthening of Prussia's hold over
the rest of Germany had made the way plain for the crea-
tion of the German Empire ; and the Prussian wars of the
i86o's completed the preparatory process. With their
culmination in the Franco- Prussian War of 1870, Bismarck
brought the new German Empire to full achievement.

With the iron fields of Lorraine added to her previous
industrial resources, Germany was in a position to advance
rapidly to the status of a fully developed industrial power
— the more so because the new discoveries of Gilchrist and
Thomas in the 1 870*5 made the Lorraine ores a far more
satisfactory basis for the producing of steel on competitive
terms. From 1865 to the end of the 'seventies the new
Germany, largely in imitation of the Free Trade policy
which seemed to have been so successful in Great Britain,
pursued her economic development under a liberal
industrial regime. Internal tariff barriers had been swept
away, and external barriers were kept definitely low ; but
the onset of the industrial depression of the middle 'seven-
ties altered the situation from the standpoint of indus-
trialists and agriculturists alike, and combined pressure
from the Junkers and the great industrialists resulted in the
tariff of 1879, under which the industrialists consented to
agricultural protection on condition of securing higher pro-
tection for their own products. The continued fall of agri-
cultural prices in the 'eighties, and the rapidly increasing
competition of cereals from the New World, soon made the

246 THE COUNTRIES OF EUROPE

protection accorded in 1879 inadequate from the stand-
point of the Junker landowners ; and in the middle 'eighties
they insisted on a sharp rise in the rates of duties on
agricultural goods. The industrial tariff still remained low
according to post-war notions ; and in 1892, with the revival
of industrial prosperity, both industrial and agricultural
duties were again lowered. But in 1902 Germany finally
went over to a system of high protection for industry, com-
bined with a relatively high tariff upon agricultural
imports.

Through all this period, under high and low tariffs alike,
German industrialism had been advancing at an extra-
ordinarily rapid rate. Between 1871 and 1901 German
coal production rose from 32 million to 89 million tons, pig
iron production from under 2 million to over 6£ millions,
and steel production from an almost negligible amount
to 5 million tons. German exports of domestic goods rose
in money value by more than 60 per cent over the same
period, and the establishment of the gold standard in 1873
definitely signalised Germany's advance to the status of a
great industrial country. This advance continued no less
rapidly in the early part of the twentieth century. In 1913
Germany produced nearly 190 million tons of coal, about
i6J million tons of pig iron, and over 17 million tons of
steel, whereas Great Britain produced 287 million tons of
coal, only io\ million tons of pig iron, and rather over 7^
million tons of steel. In the heavy industries Germany had
thus forged ahead at an unprecedentedly rapid pace, and
had easily displaced Great Britain from her position as the
world's greatest producer of iron and steel, though of course
her total output was in 1913 far behind that of the United
States.

Politically no less than industrially, Germany was during
this period proclaiming with ever-growing insistence her
right to be considered as a Great Power ; and that rivalry
between Germany and Great Britain which, added to the
old enmity between Germany and France and the desire
of the French to regain the provinces lost in 1871, led up

GERMANY 247

to the Great War, was taking an ever more menacing turn.
Germany, late in the field as a Great Power, was at a
serious disadvantage in attempting to build up for herself
in imitation of her rivals an extensive colonial empire ;
and in pursuance of this object, as well as of the status
which she desired, she set out to rival Great Britain by sea
as well as France by land. The history of this rivalry and of
its culmination in the Great War has been told in outline
in an earlier section of this book ; and there is no need
to repeat it here. It is enough to say that Germany, with a
population far exceeding that of either France or Great
Britain, and growing at a more rapid rate than either,
with a rapidly developing economic system which had
already brought her practically to an equality with Great
Britain and the United States as an exporting country,
and with a political system which still retained from its
development out of Prussian autocracy pronounced
features of militarism, was in no mood to accept the position
of world inferiority which she considered as enforced upon
her by the maintenance of the status quo, while Great
Britain and France regarded with growing misgivings and
hostility the rapid development of a power which was felt
as a menace to their own established position in Europe
and in the world as a whole.

Germany during the War. When war came, the
Germans hoped to end it rapidly by taking the offensive.
Their entire strategy had been planned upon this basis ;
for they recognised that if they were compelled to fight a
defensive war against the combination of nations likely to
be arrayed against them they would be placed at a serious
disadvantage by their dependence on imported foodstuffs
and raw materials. They knew that they were not strong
enough to command the seas by challenging the combined
British and French fleets in open battle ; and this meant
that, if the war was to be won rapidly, it must be won on
land, by a swift offensive against France before there was
time for either Great Britain or Russia to bring their

248 THE COUNTRIES OF EUROPE

potential land resources into the field. When once this hope
of a speedy triumph over the French army had disappeared
with the successful checking of the great German advance
towards Paris, it became plain that Germany would have
to accept the consequences of a defensive struggle, and the
war had accordingly to be fought under the disadvantages
imposed on Germany by a powerful blockade, which
both involved a drastic restriction in the supplies available
for the civil population and demanded intense efforts to
maintain even the most necessary supplies of munitions
and foodstuffs for the armies at the front. That this effort
could be sustained over a period of four years, and that it
was not broken in the end until the American armies had
begun to make their weight felt upon the battlefields of
Europe, indicates the intensity of the national effort made
by the German Government, and of the sufferings which
the highly disciplined German people was prepared to
undergo without breaking out into open revolt.

There was indeed much discontent in Germany as the
war was prolonged and the promises of victory still made
by the military leaders carried less and less conviction
among the mass of the people. Autocratic methods of
internal government had in 1917 to be to some extent
modified, and the forms of civil government which had
been largely superseded on the outbreak of war had to be
reinstated. In June 1917 the Reichstag adopted the famous
resolution in which, while pledging itself to the continued
defence of the Fatherland, it declared its desire for a peace
based on an accommodation without annexations or
indemnities. Despite the failure of the indirect peace
negotiations of 1917, the publication in January 1918 of
President Wilson's Fourteen Points greatly strengthened
the demand for peace within Germany ; and this became
more active as the impending collapse of the Austro-
Hungarian resistance became more manifest, as the suffer-
ings of the German people increased, and as the intensified
submarine campaign failed to produce the anticipated
results in stopping the supply of men and munitions to the

GERMANY 24Q

Allied armies, or in starving out the civil population of
Great Britain. By September 1918 the military leaders had
become aware not merely of the inevitability of defeat, but
also of the impossibility of continued resistance for more
than a very little longer. Their reserves of troops were ex-
hausted, and they realised that at any moment the fighting
line might break.

When at the beginning of October Prince Max of Baden
was made Chancellor, and the more radical parties hoped
that their chance to bring about a negotiated peace had
come at last, it was only to be confronted immediately on
assuming office with the news from the military leaders
that peace must at all costs be made without a day's delay,
no matter what the terms enforced on Germany might be.
The despairing attempt to lead out the German navy to
a pitched battle with the British fleet led immediately to
the refusal of the sailors to fight ; for, kept in harbour
through the long years of war, the navy even more than
the army at the front had developed strong pacifist tenden-
cies and was in no mood to throw its lives away at the call
of the military leaders. The naval mutiny at Kiel on
October 3Oth was the real beginning of the German
Revolution ; and it is significant that the task of keeping
the revolutionaries quiet was instantly entrusted to a
leading member of the Social Democratic Party. Noske,
who became famous later as the protector of the German
Republic against Communist and left-wing Socialist
revolts, was sent to Kiel to deal with the situation created
by the mutiny.

By this time it was plain that the maintenance intact of
the German front in the west could only be a matter of
days, and that the break-up of the German forces was
bound to come speedily unless an armistice could be con-
cluded. The Kaiser, who had left the capital in panic in
order to confer with the military leaders, alternated be-
tween desperate hopes of re-establishing his position in
Germany by force of arms, and a willingness to listen to
the advice of those who were pressing him to abdicate on

250 THE COUNTRIES OF EUROPE

both internal and external grounds. For it was widely
held in Germany that the Allies would never make
peace on tolerable terms as long as the Kaiser remained
upon the German throne, whereas his abdication might
prepare the way for an honourable peace on the lines of
President Wilson's Fourteen Points. It was, moreover, held
that public opinion in Germany would prove too strong
for the existing form of government to be maintained, and
accordingly that the abdication of the Kaiser might clear
the way for a compromise which would preserve the
Hohenzollern succession and save the country from either
a plunge into anarchy or the establishment of a Socialist
Republic on the Russian model. But the Kaiser was unable
to make up his mind ; and finally the Chancellor, Prince
Max of Baden, had to proclaim his abdication without
receiving his positive consent. By this time matters had
gone too far for any constitutional compromise to be
possible. Max of Baden realised that his position had
become untenable, and resigned power into the hands of
the Socialists ; and the Social Democrats, far less because
they desired to make a revolution than because they were
well aware that, unless they proclaimed the revolution as
an accomplished fact, power would speedily pass out of
their hands into those of the extremists on their left, finally
took the step of proclaiming the birth of the German
Republic. By this means they hoped both to re-establish
internal order and to put the Allies into a mood to treat
with leniency a Germany publicly dissociated from the
German Empire which was held responsible for the war.
Ebert, accordingly, became the provisional President of
the new German State, and Scheidemann the effective
leader of a new Provisional Government, which was to be
responsible for the conclusion of the Armistice and for
settling the outlines of the new German system.

But the Armistice terms, when they were received from
the Allies, proved to violate every one of President Wilson's
Fourteen Points, and even the Social Democrats toyed for
a while with the idea of resuming armed resistance. The

GERMANY 25!

military leaders, however, made it clear that this was out
of the question, and that any terms, no matter how onerous,
had to be accepted if the armed forces were not to break
up in sheer disorder. In these circumstances the Armistice
was signed, and the withdrawal of the German forces was
at once begun. Despite the permeation of the army by
pacifist feeling and acute social unrest, Hindenburg suc-
ceeded by a remarkable effort in withdrawing the armed
forces into Germany in good order. He was well aware
that, if discipline were once relaxed, the entire German
fighting machine might break up at a touch into scattered
units beyond any kind of co-ordinated control. But the
Social Democrats were as anxious as he was to avoid dis-
order, and they accordingly collaborated with him to the
full in carrying through the retreat, and in accomplishing
the subsequent disbandment of the armed forces.

The Weimar Republic. The German Social Demo-
crats, with power thus thrown upon them, found them-
selves under the necessity of immediately formulating their
proposals for the constitution of the new German State.
But they were not in a position to act alone ; for they had
to take account of the working-class groupings further to
the left, and of the possibility, if they failed to retain the
leadership of the working-class movement, that the revolu-
tion might pass out of their hands and under the control
of the left-wing leaders — which they evidently regarded as
the most terrible thing that could possibly happen.

Before the outbreak of war, German Social Democracy
had formed a united party, but this unity had already
begun to break up in 1914. Karl Liebknecht alone voted
against the war credits in the Reichstag in 1914 ; but in
the private meeting of the Social Democratic Party which
preceded the decision to vote the credits, fourteen members
of the party voted in the minority, and this group formed
the nucleus of an opposition which became more and more
articulate as the war went on. Until 1917 the Socialists
who were definitely opposed to the war remained within

252 THE COUNTRIES OF EUROPE

the Social Democratic Party ; but in that year they found
continued association with the majority no longer possible,
and the Independent Socialist Party was constituted as a
separate body. There had been large-scale strikes in the
German munition works as early as 1916, and in the spring
of 1917 these strikes were renewed on a larger scale. More-
over, in July 1917 the first mutiny broke out in the German
navy. In the early months of 1918 there was a still more
widespread strike among the German munition workers ;
but this, like the earlier movements, was crushed by the
opposition of the Majority Socialists and the continued
loyalty of the German Trade Union leaders to the cause of
the Central Powers. As the year 1918 advanced, and the
last reserves were combed out of the factories into the
army, unrest at home caused the German Government to
endeavour to remove the more active working-class leaders
by sending them to the trenches ; but this policy only
resulted in spreading unrest to the army, and thus helped
greatly to prepare the way for the November Revolution.
When the Revolution broke out, the whole situation was
so uncertain that each party was hesitant how to act. The
general mass of working-class opinion was undoubtedly in
favour of some form of Socialism ; but the working classes
were sharply split between the Majority Socialists, the
Independents, and the Spartacists under the leadership of
Karl Liebknecht and Rosa Luxemburg, who, while they
remained still within the Social Democratic Parties, had
moved much further to the left, and had taken the lead in
stirring up unrest among the workers and soldiers. The
Majority Socialists, when control of the State was handed
over to them by Prince Max of Baden on the dissolution of
the imperial regime, had to decide upon their course in the
light of an immediate threat of revolution from the left. Even
in the opinion of the bourgeois leaders it was at that moment
out of the question for anything except a Socialist Govern-
ment to attempt to govern the country. But the Independ-
ent Socialists were unwilling to participate in any Govern-
ment unless it was clearly laid down that it would seek to

GERMANY 253

establish Socialism in the form of a Socialist Republic
largely modelled upon the Russian system, and to this the
Majority Socialists, with their belief in constitutional
government, were entirely unwilling to agree. The result
was a highly ilnsatisfactory and unstable compromise. The
Majority Socialists, under pressure, declared in favour of a
" Socialist Republic," and agreed to the formation of an
inner Cabinet of Ministers or Council of Commissars — it
was not quite clear which — consisting entirely of Socialists.
But they insisted on drawing the departmental Ministers
from the old official classes ; and the control of the Cabinet
over these non-Socialist Ministers was to a large extent
nominal in departmental matters. The Cabinet itself con-
sisted of three Majority Socialists and three Independents ;
but from the first the Majority Socialists acted coherently
together in close consultation with the non-Socialist
Ministers, and the Independents found themselves largely
excluded from an effective share in the control of policy.
Moreover, there arose between the two sections of the
Cabinet an immediate quarrel over the question whether
a Constituent Assembly should be elected by universal
suffrage to decide the form of the new State ; while the
Spartacists, under Liebknecht's leadership, passed into
more and more open hostility to the Provisional Govern-
ment, and insisted more and more energetically on the need
for a further revolution which would definitely institute a
Socialist system.

Before the end of the year the differences between the
Majority Socialists and the Independents had become too
acute for further collaboration to be possible. The Inde-
pendent Socialists resigned from the Government, leaving
the Majority Socialists a free hand ; and significantly,
Noske at this point joined the Cabinet, and shortly after-
wards assumed control of the military organisation of
Germany. Meanwhile the excluded Independents joined
forces with the Spartacists in an attempt to seize power,
though some of the more moderate Independents refused to
associate themselves with this movement, and from this

254 THE COUNTRIES OF EUROPE

tiipe began to retrace their steps towards the Majority
Socialist Party. After desultory fighting in Berlin and else-
where the Spartacist attempt was defeated, largely by means
of an improvised organisation got together by Noske under
the leadership of anti-Socialist officers of the old army ;
and in the course of this struggle Liebknecht and Rosa
Luxemburg, having been arrested by Noske's reaction-
aries, were deliberately murdered, though it was publicly
put out that they had been killed in the course of an attempt
to escape from the authorities. The death of the leaders
brought the immediate movement in Berlin to an end, and
left the Spartacist forces disorganised. But this was by no
means the end of the struggle, and throughout the succeed-
ing months there occurred a series of revolutionary strikes
in many parts of Germany — ruthlessly suppressed by Noske
and the growingly confident body of reactionaries whom he
had called in to aid the Social Democrats in restoring order.
Meanwhile the elections for the Constituent Assembly
were carried through under universal suffrage. Of the 42 1
seats the Majority Socialists with the aid of their powerful
organisation secured 163, while the Independents, with no
adequate party machine behind them, got only 22. The
Spartacists, having boycotted the Assembly, were not
candidates, and the combined Socialist parties found them-
selves in a minority in the Assembly as a whole. Of the
remaining seats 42 fell to the Nationalists, the more extreme
representatives of the old regime, and 2 1 to the People's
Party, which stood mainly for the great industrialists. Both
these parties refused to accept the new Republic as an
accomplished fact, and were therefore clearly ineligible for
participation in a Government designed to set it up on a
permanent basis. Apart from 10 seats which fell to the small
fractional parties, this left 163 seats, a number precisely
equal to that held by the Majority Socialists, shared between
the Centre Party, representing the Catholics, and the
Democrats, formed on the basis of a coalition of the more
liberal bourgeois groups. The Social Democrats, faithful to
their principle of parliamentary democracy and insisting

GERMANY 255

that the time could not be ripe for the establishment of
Socialism until a clear Socialist majority of the electorate
had been secured, immediately preceded to reconstitute
the Government on the basis of a coalition with the Centre
and Democratic Parties. Ebert remained provisional
President, and the Social Democrat, Scheidemann, became
Chancellor in the new Government ; but seats in the
Cabinet were equally shared between the Majority Social-
ists on the one hand and the combined bourgeois parties on
the other, and it was under the auspices of this Coalition
Government that the National Assembly proceeded to the
drafting of the new Weimar Constitution. Weimar, in-
cidentally, was selected as the place of meeting for the
National Assembly largely in order to enable it to get away
from the disturbed conditions prevailing in Berlin and the
other great industrial centres, where it might have been
more under the control of the Soldiers' and Workers'
Councils set up during the revolution.

Moreover, the drafting of the new Constitution was
undertaken not by a Socialist but by Herr Preuss, a well-
known official of the Prussian Ministry of the Interior ;
and under his draftsmanship it took the form by no means
of the constitution for a Socialist Republic which the
Independents and the Spartacists desired, but of an eclectic
bourgeois democratic system of government, based on a
mingling of the Parliamentary precedents set by the
Constitutions of Great Britain, France and the United
States. The formation of the new Coalition Government
and the drafting of the Weimar Constitution made perfectly
definite the breach, already implicit in the suppression of
the January insurrection, between the Majority Socialists
and those who wished to turn the collapse of the old order
in Germany into an immediate Socialist revolution.

While the Constitution was being drafted at Weimar, the
Allies at Versailles were elaborating the Treaty of Peace.
When their proposals were presented to the German
Government the Majority Socialists were at first unable to
believe that such terms were really to be forced upon them,

256 THE COUNTRIES OF EUROPE

and made an attempt to negotiate for improved conditions
by beginning with an indignant refusal. But it was speedily
made plain to the German Government that the Allies
meant what they said, and were determined upon the
imposition of a peace embodying the principle of the
" spoils to the victors," and involving the almost complete
disarmament of Germany as well as the payment of very
heavy, though still unspecified, sums in reparations for
war damage. The leader of the Majority Socialists, Scheide-
mann, having committed himself to an indignant refusal of
these terms, refused to change his attitude even when it was
made plain that nothing better could be secured, and the
Democrats also left the Government, which was then
reconstructed in June 1919 under Gustav Bauer — another
Majority Socialist and Trade Union leader — as a coalition
between the Social Democrats and the Centre Party. This
Government signed the Peace Treaty under protest, and
instituted the policy of " fulfilment " which came in later
years to be chiefly associated with the name of Stresemann.
In the meantime Noske was continuing his work in the
active suppression of the left-wing Socialists. In order to
give a clear account of his activities it is necessary to retrace
our steps and consider what had been happening in Bavaria
while the movements already described had been going on
in the rest of Germany. The revolution in Munich was
among the first in Germany to assume a definite shape, and
even before the Armistice had been signed the old royal
family had been excluded and a left-wing Socialist Govern-
ment, under the Independent Socialist, Kurt Eisner, as
President, had assumed control. This Government, follow-
ing the example of the Social Democrats in the Reich,
proceeded to the election of a Bavarian Constituent As-
sembly, with the result that an anti-Socialist majority,
based mainly on the Catholic peasantry, was returned.
Disputes speedily followed within the Bavarian Socialist
Government, and on February 2 ist Kurt Eisner was assassi-
nated by a reactionary fanatic. There followed a period
of utter confusion. The Majority Socialists constructed

GERMANY 257

a new right-wing Socialist Government ; but this was
unable to maintain its authority in Munich, where an
extremist revolution broke out towards the end of February
under an adventurer named Lipp. The rapid overthrow of
his Government was followed by the creation of a Com-
munist Government under the leadership of Axelrod. But
the Majority Socialists in Bavaria, in combination with the
reactionary parties, now invoked the assistance of Noske ;
and on May ist, Reich government troops captured Munich,
and the Communists underwent bloody suppression.

At the same time revolutionary movements were being
actively suppressed by Noske in other parts of Germany,
and by the middle of the year, thanks to Noske's activities,
the Workers' Councils had been almost completely sup-
pressed save in a few areas, and the Majority Socialists
and their bourgeois allies had the situation well in hand.

So matters dragged on through the rest of 1919, with no
vital change save that after the signature of the Peace
Treaty the Democrats came back into the Government.
But in the meantime the forces got together by Noske and
the remnants of the old reactionary parties had begun to
reassert themselves in political matters. Confident that they
had now thoroughly suppressed the extreme Socialist left,
they began to bring pressure to bear upon the Social
Democrats for a more definitely reactionary policy. On
March loth, 1920, General von Luttwitz and other generals
presented an ultimatum to the Social Democratic members
of the Government ; and the rejection of this ultimatum was
immediately followed by the outbreak of the Kapp Putsch.
Under the leadership of Kapp, a Prussian official, the
counter-revolutionaries marched on Berlin and captured
the city. The coalition Government fled to Stuttgart, and
there summoned the National Assembly to meet. They
further endeavoured at this moment of danger to invoke
against the reactionaries the forces which they had hitherto
been endeavouring to suppress. At the orders of the Trade
Unions a General Strike was declared, with the participa-
tion of almost the whole of the German working class, the

IR

258 THE COUNTRIES OF EUROPE

Catholic Trade Unions associated with the Centre Party
taking part in it along with the Socialist Unions. With this
aid furnished by the workers, the position of the leaders of
the Kapp Putsch was speedily made untenable ; and,
realising that they had no chance of success, they disbanded
their forces and surrendered to the Government. But al-
though the Kapp Putsch thus signally failed it undoubtedly
exerted an important influence in weakening still further
the hold of the Majority Socialists upon the Government.
Immediately after it the Bauer Government resigned, and a
new Government based on the same parties as before was
formed under another Social Democrat, Miiller, solely as
an interim administration pledged to the holding of new
elections. These elections, held in June, resulted in serious
Socialist losses, and immediately afterwards a new coalition
Government was formed under the leadership of Fehren-
bach of the Centre Party, on the basis of a bourgeois coalition
from which the Socialists were excluded. In the meantime
there had been, in the month following the Kapp Putsch,
a serious rising in the Ruhr under Communist leadership —
the Spartacists and certain of the Independents having by
now united to form the Communist Party. This, like pre-
vious movements on a smaller scale, was promptly sup-
pressed by Noske — almost the last act of the Social Demo-
cratic Government before its fall. Thus, when the Social
Democrats handed over power to a bourgeois coalition, they
were able to congratulate themselves that they had success-
fully broken the forces of the revolutionary working-class
movement in Germany, and that the country could once
more be governed, even by non-Socialists, on strictly
constitutional lines.

We have told in some detail the story of the successive
phases of the German revolution up to 1920, because an
understanding of what happened to Germany during these
eighteen months is essential to a realisation of the basis
upon which the Weimar Republic rested. The new German
Constitution, set up at Weimar, was the work of a coalition
of middle parties, Social Democrats, Centre, and Democrats,

GERMANY 259

carried through in face of a strong opposition from the
adherents of the old regime on the one hand and from the
Independent Socialists, Spartacists, Communists, and
Workers' and Soldiers' Councils on the other. The left-wing
groups wanted to proceed at once to a Socialist republic,
and to leave the election of a Constituent Assembly and the
drawing up of a definitive new Constitution in abeyance
until the Socialists had definitely established their power on
the basis of the Workers' and Soldiers' Councils created
during the November Revolution. They held that the first
step should be to make the power of the Socialist movement
secure in Germany, and that questions of the form of
government could only be considered when the country
had at least to some extent settled down under a definitely
Socialist regime.

The parties of the right and the remnants of the old
official classes and the old army leaders were at bottom no
less hostile than the left-wing Socialists to the Weimar Con-
stitution. But, realising that it was for the time impossible
for them to assume office themselves or to constitute a State
more to their own liking, they threw their weight on the
side of the middle parties and the Social Democrats with the
object of suppressing the left wing, with the mental reserva-
tion that when once the left had been sufficiently dealt with
they would be free to resume activities on their own behalf.
The Kapp Putsch, instituted by a number of the more
extreme among the reactionary elements, was clearly pre-
mature, and received no united support even from those
who sympathised wholly with its objects. In 1919 and 1920
the adherents of the old regime were still playing a waiting
game, and using the Social Democrats to do the work of
preventing Socialism which they were not strong enough
to do for themselves.

Between these two extremes stood the two middle
bourgeois parties and the Majority Socialists. The Democrats
were for the most part sincere republicans, desirous of
turning Germany into a constitutional republic on the
model of France or the United States. Largely supported

26O THE COUNTRIES OF EUROPE

by the Jews and by the intellectual classes, they were
unable at any time to command a really large popular
following ; but they were able to give important help to the
other middle parties in carrying through the new Consti-
tution and keeping a " moderate " regime securely in power.
The Centre Party differed from the Democrats in that it
stood predominantly for the interests of the Catholic Church,
and was based largely on the votes of the Catholic peas-
antry and the smaller middle classes in the Catholic parts
of Germany, while it had also a large number of ad-
herents among the Catholic Trade Unionists, especially
in the Ruhr. Collectively, the Centre Party can hardly have
been said to have had on most matters any policy at all.
It ranged in social and economic doctrines from right to
left, and was held together rather by its common allegiance
to Catholicism than by any clear-cut principles of political
or economic action. In the circumstances of 1919 and 1920
it wished to create and preserve the Weimar Republic ;
for it had no love for the old Empire based on the hege-
mony of Protestant Prussia, and it was also acutely hostile
to any attempt at the establishment of Socialism. With these
two parties the Social Democrats were compelled to col-
laborate if they were determined to base their actions on
constitutional and Parliamentary principles ; for only with
the aid of the Democrats and Centre were they in a posi-
tion to command a majority in the Constituent Assembly
or to maintain their power at all. The attitude of the Social
Democrats was that, while they professed to be, and doubt-
less believed themselves to be, Socialists, they held that any
immediate attempt to establish Socialism would be both
contrary to democratic principles and likely to provoke a
serious reaction at a later stage. For, in their view, Germany
could only become ripe for Socialism when a majority of the
German people had been converted to Socialist views.
Finding themselves called upon to assume power with only
the alternative of handing it over to the extreme left, under
circumstances in which this condition was clearly not real-
ised, they refused to go further than to attempt to constitute

GERMANY 26l

a thoroughly democratic bourgeois republican State, in
the hope that this would provide a basis on which they
would be able at a later stage to build up Socialism when
the majority had become converted to their point of view.
But in practice this middle policy involved them, as we
have seen, in invoking the aid not only of the bourgeois
parties but also of armed reactionary forces for the sup-
pression of their fellow-Socialists further to the left ; and
the more bitter the struggle became the more the Social
Democrats were tempted to depart from their Socialist
principles, and the greater grew the hatred between them
and the left-wing forces, now becoming concentrated in the
Communist Party. For when men have fought with one
another in the streets, when Socialist has killed Socialist
across the barricades, it is no longer much use talking about
Socialist unity ; and in fact the unity of the German work-
ing class, broken in the early days of the revolution, has
never been successfully re-established, with the consequence
that the Nazi movement, when its time arrived, was able
to mount rapidly in influence and in the end to scatter the
disunited Socialist forces without their offering any effec-
tive resistance. The seeds of the German Socialist collapse
of 1933 were sown in the months immediately following the
November Revolution of 1918.

Between 1920 and 1923 Germany appeared to be
gradually settling down. Governments alternated between
different party groupings. In 1921 Fehrenbach's non-
Socialist Ministry was replaced by a new coalition under
Wirth of the Centre Party, including the Socialists. But by
this time the Socialists, instead of half the seats, had little
more than a third. In 1922, Wirth was replaced by Cuno, at
the head of another Coalition Government of the bourgeois
parties, from which the Socialists were again excluded. Then
in 1923 the Socialists returned as members of a Government
under Stresemann of the People's Party, a grand coalition
extending further to the right than any previous Govern-
ment in which the Socialists had agreed to take part. To-
wards the end of 1924, when Stresemann gave place to

262 THE COUNTRIES OF EUROPE

Marx, the Socialists were again left outside the Govern-
ment, and did not resume their participation in it until
1928.

These successive changes of Government are closely con-
nected with the movement of events both in Germany
itself and in the relations between Germany and the Allied
Powers. In January 1921 the total demanded from the
Germans in reparations was first fixed — at a fantastic
figure which had to be modified out of all recognition in
later years. In 1921, too, a further blow was struck at the
new German State by the handing over of a considerable
area in Upper Silesia to the Poles after the plebiscite con-
ducted under the auspices of the League of Nations. There
was a Communist rising in Saxony, easily suppressed, and
on the other hand the reactionary Government now in
power in Bavaria offered strong resistance to disarmament,
and Munich became the chief refuge of the reactionary
extremists who had been associated with the Kapp Putsch
and with other movements directed against the Weimar
Constitution. Erzberger, one of the leaders of the Centre
Party, who had been the chief promoter of the Reichstag
peace resolution of 1917 and the most active negotiator of
the Treaty, was murdered by reactionaries who escaped
from the country unpunished ; and the campaign of
political assassination was thus extended from the extreme
left to members of the middle parties unpopular with the
reactionary elements. But the Wirth Government on the
whole attempted to pursue a moderate and conciliatory
policy in home affairs, and at the same time to improve
relations with the Allied Powers. Its outstanding figure, the
great Jewish industrialist, Walther Rathenau, was the chief
agent of the Treaty signed at Rapallo between Germany
and Russia in April 1922, and Rathenau also made heroic
efforts to re-establish German prestige abroad by asserting
her freedom to follow an independent foreign policy with-
out a positive break with the Allied Powers. But Rathenau,
despite the great services which he had performed as the
organiser of the German munitions industries during the

GERMANY 263

war, was desperately unpopular with the extremists of the
right, and in June 1922 he shared the fate of Erzberger and
Liebknecht, being assassinated in Berlin in broad daylight.
The murders of Erzberger and Rathenau were the chief
cause of the formation towards the end of 1922 of the
Reic/isbanner, a semi-military organisation of Social Demo-
crats and Centre Party supporters for the defence of the
Republic against reactionary extremists. But the murders
weakened the position of the middle parties, and the
establishment of the Cuno Government in November 1922
with the participation of the People's Party was definitely
a move to the right.

Reparations, the Ruhr, Inflation and Recovery. Mean-
while a serious crisis was developing over the question
of reparations. The Germans maintained that they had
been making every possible effort to fulfil the enormous
demands made upon them by the Allies both for the pay-
ment of money and for deliveries in kind ; but towards
the end of 1922 the strain became too great to be borne,
and, after deliveries had fallen definitely behind, the Cuno
Government made a demand for a moratorium, while the
Reparations Commission established under the Peace
Treaty definitely announced that a German default had
taken place. In these circumstances Great Britain was
willing to negotiate for an adjustment of the terms imposed
on Germany ; but the French and Belgians, in a majority
on the Reparations Commission, refused any accommoda-
tion, and in January 1923 marched into Germany and
occupied the Ruhr, thus beginning a struggle which lasted
though the greater part of the year. For the Germans, main-
taining that the occupation was contrary to the terms of the
Treaty, decided upon a course of passive resistance, and
endeavoured to mobilise the entire forces of the country
behind the movement. A proposal, with this object, once
more to include the Socialists in the Government led to an
ultimatum from Bavaria, now under wholly reactionary
control ; but the proposal was not persisted in at the time,

264 THE COUNTRIES OF EUROPE

and for some months longer the situation in Bavaria hung
in the balance. Meanwhile passive resistance in the Ruhr,
which involved the necessity of supporting a large part of
the population out of public funds in view of the suspension
of productive activities, placed a tremendous strain on the
German public finances, which were already in a bad
enough condition owing to the large payments made to the
Allies and the disorganisation of German industries in
consequence of the war and the subsequent blockade.

There was only one way in which the costs of the Ruhr
defence could possibly be met, and this was inflation.
During the months for which passive resistance continued —
between January and August 1923 — internal prices in Ger-
many rose to an unexampled height, and the German
mark depreciated still more rapidly in external value.
During the previous years the German currency had
already become seriously depreciated. In May 1921 the
current rate of exchange was 62 marks to the dollar, but
by September of that year it had fallen to 105. The Upper
Silesia award caused a further serious depreciation, and by
the end of November 1921 the mark was at 270 to the
dollar, or only i$ per cent of its par value. There for a
time depreciation was arrested ; but in 1922, in face of the
effort to make large payments to the Allies, and of the fears
caused abroad by the assassination of Rathenau, the mark
began again to depreciate heavily. In July 1922 it was at
493 to tne dollar, and in August at 1,200. Then, with the
beginning of the quarrel with the Allies which led to the
Ruhr occupation, it shot up to over 8,000 in the middle of
November, and a flight from the German currency by
German nationals as well as by foreigners set in.

But even this depreciation was as nothing to that which
followed the Ruhr occupation. The mark, which had
recovered a little from the low speculative level reached in
November 1922, soared in January, the first month of the
occupation, to over 40,000 to the dollar. There it was for
the moment held again by strong efforts on the part of the
German Government and the Reichsbank ; but before long

GERMANY 265

the resources at the disposal of the Germans for maintain-
ing the external value of their currency were exhausted,
and between May and November 1923 the mark-dollar
exchange reached a fantastic degree of depreciation, until
in the latter month a dollar was valued at the astonishing
figure of 4,200,000,000,000 marks. In other words, in the
course of the Ruhr struggle the external value of the mark
to all intents and purposes totally disappeared, and over
the same period prices in Germany also reached a level
hitherto undreamed of in any country. At the end of the
war in 1918 they reached four times the pre-war level ; in
1920 nearly fifteen times, and in 1921 over nineteen times.
At that point the real depreciation began. The average for
1922 was 34,000 times that of 1913, and in 1923 price levels
became as fantastic as foreign exchange quotations and
the official index recorded a figure of 16,620,000,000,000,
as compared with 100 in 1913. This process obviously
could not go on indefinitely. While it lasted it inflicted
tremendous hardship on all those classes whose incomes
were relatively fixed, and compelled everyone into whose
possession any money came to spend it instantly in the
knowledge that if he waited even an hour it was likely to
lose a large part of its value. Wage rates had to be recal-
culated daily in accordance with new price levels ; but by
the time they had been paid out price levels had risen much
further still. All debtors benefited to the extent that,
however large the sums which they had borrowed before
the inflation might be, these could soon be paid off with
the price of half a dozen eggs or even a postage stamp.
Consequently the owners of real capital assets as distinct
from money made enormous gains, in that mortgages
could be completely written off, and actual goods had come
to be the sole recognised economic values. Germans who
could sent their money abroad and changed it into foreign
currencies, and immense profits as well as losses were made
by speculation in marks as the inflation proceeded.

But while some classes profited by the inflation, its con-
tinuance soon threatened to bring all business to a stand-still.

266 THE COUNTRIES OP EUROPE

For no one could in the circumstances venture to make
any forward contract in terms of money, or even to promise
to deliver goods at a fixed price in a week's or a day's time.
The whole German economic system was accordingly
threatened with utter collapse, and when this became too
plain to be any longer ignored the passive resistance in the
Ruhr had to be abandoned. A new currency, the Renten-
mark, based nominally on the value of landed property,
was introduced to replace the now valueless mark cur-
rency, and Germany reconciled herself to coming to terms
with the Allies, and agreeing, as the price of peace, to any
terms which she could hope even temporarily to meet.

The Ruhr occupation, while it was disastrous to the
German finances, was a burdensome expense to the Allies,
and the German resistance, though it had in the end to be
given up, had sufficed to show up the absurdity of Poin-
care*'s policy of endeavouring to exact reparations by
violence. For it was plain that the ability of Germany to
pay reparations must depend on her internal prosperity,
and that if in the future she was to be able to pay anything
at all her finances must somehow be established on a
sounder basis, and the value of her currency restored.
Under these circumstances the Allies became willing to
come to terms with Germany ; and, after an international
expert committee under the presidency of the American
General Dawes had reported upon Germany's ability to
pay, it became possible to secure general acceptance of the
Dawes Plan, under which the Allied claims to reparations
were considerably staled down, and a new loan, to be
raised in the Allied countries, was conceded to Germany
as the means of re-establishing her financial position.
Under this plan, moreover, the temporary Rentenmark
was displaced by a new unit of currency, the Reichsmark,
based upon gold and possessing the same gold value as the
pre-war mark. Prices in terms of the new currency were
sharply brought down to somewhere near the pre-war
level, and by a method of severe deflation some sort of
equilibrium was restored to the German economic system.

GERMANY 267

From 1924 onwards, Germany entered definitely on a
new phase of her post-war history. Under the Govern-
ments of Stresemann (August 1923), Marx (November
1924), Luther (January 1925) and Marx (May 1926), the
policy of fulfilment under the conditions laid down by the
Dawes Plan was systematically pursued ; while Stresemann,
in control for the most part of German foreign policy, helped
greatly in rebuilding Germany's international position from
a political point of view. To this period belongs the Locarno
Treaty of December 1925, which is discussed in another
section. Before this, in July 1925, the French and Belgians
had evacuated the Ruhr ; and three years later, in 1928, the
Armies of Occupation were also withdrawn from the
northern Rhineland. At the same time, under the new
conditions created by the stabilisation of the mark and the
Dawes Loan, it became possible for Germany to embark
upon a thorough-going policy of industrial reorganisation,
carried out largely with the aid of foreign capital. For the
effect of the Dawes Plan and of the Locarno Treaty was to
restore the belief of foreign investors, especially in the
United States, in Germany's economic future ; and there
was, as we shall see in a later section, a tremendous out-
pouring of American capital into Germany. This was used
largely for the reconstruction and rationalisation of the
German heavy industries ; but large sums were also
borrowed by the German States and municipalities, and
applied to the execution of great schemes of public works.
At the same time the flight of German capital definitely
came to an end with the stabilisation ; and the German
people began out of their own resources to supply consider-
able amounts of new capital for the development of
industry.

It has often been suggested that much of this borrowed
money which flowed into Germany in an uninterrupted
stream between 1924 and 1928 was wastefully used, and
that the reorganisation of the German economic system was
carried through with quite unnecessary extravagance.
This charge is made both in respect of the sums borrowed

268 THE COUNTRIES OP EUROPE

by the States and municipalities, which imposed a large
burden on the German taxpayers, and of the sums applied
to industrial development in private hands. But it has to be
remembered that in 1924 and the following years the
Germans were basing their calculations of what they could
afford to borrow on the anticipation that the world would
continue to advance rapidly in economic prosperity, and
that prices would remain, if not stable, at any rate high
enough not to cause serious dislocation, or greatly to exag-
gerate the burden of current borrowings. Above all they
calculated on a continued ability, as long as their own con-
ditions remained stable, to go on borrowing money in the
United States until the increase in their productive re-
sources enabled them to supply for themselves the new
capital they required, and to meet out of their own resources
the necessary payments for interest and sinking fund on
what they had borrowed. It was the sharp cutting off of
the American investments in Germany in the course of the
American boom of 1929 that brought the perilous economic
structure of the reconstructed German system crashing
down, and made impossible the maintenance of the
unstable equilibrium that had existed during the previous
four years.

In the light of later events it is clear enough that Germany
did over-borrow and was extravagant in the reconstruction
of her economic system. But it is difficult to blame the
Germans over much for this, as they only shared with other
capitalist countries, and above all with their chief creditor,
the United States, the belief that the economic difficulties
which were the legacy of the war had been successfully
overcome, and that industry could rely upon a steadily
increasing return for some time to come. Nor is it easy to see
how, when the Germans had once accepted the policy of
endeavouring to fulfil the Peace Treaty and to meet the
revised Allied claims for reparations embodied in the
Dawes Plan, they could have managed at all without an
amount of borrowing from abroad which was bound to
become a top-heavy burden in face of any serious fall in the

GERMANY 269

level of world prices. It is easy to be wise after the event,
but it is not at all surprising that Germany borrowed all she
could in view of her intense shortage of capital and the
great opportunities for industrial activity which seemed to be
opening up before her. It is perhaps rather more surprising
that the American investors were willing to put so many
eggs into the German basket ; but in this case too the ex-
planation lies in the widespread belief that the world had
entered on a new phase of advancing productivity which
nothing was likely to interrupt.

The new phase in German politics which began with the
adoption of the Dawes Plan was also marked for a consider-
able period by a disappearance of the internal conflicts
which had persisted ever since 1918. In 1923, while the
struggle in the Ruhr was still going on, there had been
a serious quarrel between Bavaria and the Reich, and in
Bavaria numerous reactionary plans for a German Revolu-
tion had been hatched. In that year Bavaria was under the
practically dictatorial rule of von Kahr, who was mainly
concerned to preserve the autonomy of Bavaria against
interference by the Reich. But there were other forces in
Bavaria which were intent on planning a new German
counter-revolution ; and Hitler, who had become in 1921
leader of the Nazis and as early as that year had begun
planning with General Ludendorff a new march on Berlin,
chose the later months of 1923 for an attempt at insurrection
in Munich. He succeeded in capturing the Bavarian
dictator, von Kahr, who escaped and raised the country
against him. The Hitlerite insurrection was suppressed
without very much difficulty, and von Kahr resumed his
authority. In other parts of Germany, too, there had been
in 1923 serious threats of insurrection from both right and
left, and, in August, General Gessler had been given dicta-
torial military powers over the Reich as a whole. A Socialist-
Communist coalition under Dr. Zeigner came into power in
Saxony, and the Reich Government promptly demanded its
resignation. In face of its refusal to give way the Reich
forces marched upon Saxony and suppressed the Saxon

270 THE COUNTRIES OF EUROPE

Government, installing a right-wing Social Democratic
Government in its place. There were similar troubles on
a smaller scale in other parts of Germany. General Gessler,
however, and his successor, von Seeckt, appointed in
November 1923, succeeded in overcoming the forces of
unrest, and suppressed by decree both the Communist
Party and the Nazis. Thereafter the conclusion of the Ruhr
struggle and the acceptance of the Dawes Plan introduced
more settled conditions ; and with the revival in industrial
activity and the restoration of the price system, Germany
settled down to a more tranquil period of internal develop-
ment. In February 1924 the von Seeckt dictatorship came
to an end ; but this adoption of the method of military
dictatorship in 1923-24 clearly presaged the resort to extra-
constitutional methods of government which has been
renewed in later years.

It is unnecessary to follow in detail the revival of German
economic prosperity during the years between 1924 and
1929. Despite the slightly falling level of prices, Germany
during this period increased the value of her exports from
6 1 milliards of Reichsmarks to over 13 \ milliards, and
turned an unfavourable balance of commodity trade of
over 2 J milliards into one of under 400 millions, while there
was actually a rising favourable balance during the next two
years. It is true that most of this decline in the unfavourable
balance came only in 1929, after the falling off of borrow-
ings from abroad, and that in 1927 and 1928 the unfavour-
able trade balance was larger than it had been in 1924.
But this was due to large capital imports from America ;
and the really significant figure is that of the rise in the
value of German exports. The figures of tonnage for exports
are no less significant. In 1924 they were under 16 million
metric tons, and in 1929 nearly 55 millions. Obviously the
rationalisation of German industry had already produced
an enormous effect in increasing German productive
capacity and competitive power.

Germany thus seemed after 1924 to be definitely settling
down under the new post-war conditions and accommodating

GERMANY 271

herself to her new position in Europe. The German
Republic seemed to be growing stronger at the expense of
both the extreme right and the extreme left ; and it
seemed reasonable to argue that, as long as economic
prosperity could be maintained, there was no serious threat
of revolution from either side. But this was only the calm
before the renewed storm ; for, with the coming of the
world depression, Germany's economic position speedily
deteriorated in face of the continued claims of the Allies for
reparations and of the large burden of foreign payments
which had to be met.

The position on the eve of these renewed troubles is
fairly well illustrated by the representation of parties after
the Reichstag elections of 1928. Of the parties discussed
earlier in this section, the Independent Socialists had now
disappeared ; some of them had gone over to the Com-
munists, while the right wing had rejoined the Social
Democratic Party, which had become less clearly a reac-
tionary force after the German economy had begun to
settle down. In 1928 the Social Democrats were easily the
strongest party in the Reichstag, with 153 seats out of
a total House of 489 members. They had thus rather less
than one third of the total number of seats. The Com-
munists on the extreme left had 54. The three parties which,
either together with the Social Democrats or without them,
had formed the main support of the successive Governments
of the new German Republic had between them 144 seats,
or, if the Bavarian People's Party, usually allied with the
Catholic Centre, is included, 161. Of these, the Centre
Party had 61 seats and the Bavarian People's Party 17, the
People's Party 45 seats, and the Democratic or State
Party 25. Forty-four seats went to various minor parties,
chiefly representing the Peasant Right, while the National-
ists, still in opposition to the established regime, had 78, and
the Nazis, still at the very beginning of their great growth
under the influence of economic depression, had only 12.
It was thus clear that on the balance of parties there was no
majority either for Socialism or for a right-wing attempt

272 THE COUNTRIES OF EUROPE

to overturn the Republic ; for even if the People's Party,
which was not republican in theory, be counted in with
the Nationalists and certain of the smaller groups, they did
not together command as many seats as the Social
Democrats alone, and not many more than the Centre,
Democrats and Bavarians combined. In these circum-
stances it was evident that there was a majority in favour of
a middle Government, designed to preserve the Republic
against both extremes ; and the Majority Socialists were
fully prepared, as they had been in the troubled years
before 1924, to play their part in maintaining a Govern-
ment of this type. As the largest party, the Social Demo-
crats were called upon to form a Ministry ; and their
leader, Miiller, became Chancellor in a mixed Govern-
ment including the People's Party, the Democrats and one
representative of the Centre.

Germany in the World Slump. Now contrast tins
position with that which arose in 1930. At the Reichstag
election of that year the Social Democrats lost 10 seats and
the Communists gained 23. The Centre and the Bavarian
People's Party together registered a gain of 10 seats, while
the Democrats lost 3. The Nationalists sank by 37, and the
People's Party by 15. These losses of the old right-wing
parties were the result of the rapid rise of the Nazis, \\ho
returned 107 members as against only 12 in the Reichstag
of two years before. It should be observed that under the
German electoral system there is no fixed number of seats,
the number of members returned depending on the total
votes cast, so that in 1930 the increased poll resulted in a
corresponding increase in the total number of seats to be
allotted among the parties.

The explanation of this change is obviously to be found
in the earlier effects of the world economic depression,
which had strengthened the extreme right and the extreme
left at the expense of the parties standing nearest to them,
without correspondingly affecting the Catholic Centre. In
March 1930 Muller's Government resigned, and a new

GERMANY 273

Government was formed under Dr. Briining, and armed
with large emergency powers, exercised through the Presi-
dent (Marshal Hindenburg had become President in 1925
on the death of the Socialist, Ebert). This change of
Government took place before the General Election of
1930 ; but after the election Briining formed a new Govern-
ment, and continued to govern the country with growingly
stringent emergency measures as the economic depression
deepened.

Now take the third picture — that of the General Elec-
tion of July 1932, representing the state of feeling at a far
more advanced stage of the economic depression. Again
the Social Democrats lost seats, sinking by another 10 to
133. Again the Communists gained seats, from 77 to 89.
But these changes were relatively small, as were the changes
in an opposite direction, in the strength of the Centre
Party, which was reinforced by having one of its leading
members, Dr. Briining, in control of the Government. The
Centre gained 6 seats, and its Bavarian allies 3, raising
them to 75 and 22 respectively. The Democrats were
practically wiped out, sinking from 22 to 4. The Nation-
alists maintained their position, losing one seat only. But the
People's Party, which stood nearest to them, almost shared
the fate of the Democrats, sinking from 30 to 7. Several of
the smaller parties were completely wiped out. But at this
election the Nazis returned 230 members as against 107 in
1930 and only 12 in 1928. Clearly economic depression had
produced a remarkable revulsion of feeling towards the
Nazi movement.

It is true that after this extraordinarily rapid advance
the Nazis lost ground at the second election held only a few
months later, in November 1932. On that occasion their
seats fell from 230 to 196, while the Nationalists rose from
40 to 54, and the People's Party from 7 to 1 1 . But there was
no corresponding gain upon the left. The Communists
indeed gained n seats and returned 100 members ; but
the Social Democrats lost 12, the Centre 5, the Bavarians 2,
and the Democrats 2 more, reducing their total strength to

274 THE COUNTRIES OF EUROPE

only 2 members. It was confidently predicted at the time
that this Nazi setback meant a permanent reverse and the
beginning of the decline of the Nazi movement. But these
predictions were soon to be falsified by the coup of January
1933, and by the new elections held under Hitler as Chan-
cellor.

The rise of the Nazi movement is discussed in more detail
in a later section of this book, and no more has been said
about it here than is necessary to explain the immediate
political reactions of the depression in Germany, and to
show the close connection which exists between the rise of
Nazism and the increasing economic troubles of the German
Republic. Nor need we at this stage pursue the history of
the German economy during the depression in any detail.
It is necessary only to single out for treatment those features
which were peculiar to Germany, and involved her in the
taking of special measures differing from those which were
common to most of the countries of Europe.

We shall see elsewhere the tremendous efforts made by
Germany under the Briining Government to maintain ex-
ports and to keep down the volume of imports in order to
meet external claims without going off the gold standard.
Here we are concerned with the effects of this tremendous
strain upon the structure of the German economic system.
In effect it became necessary, in order to prevent a general
collapse of the German economy, for the Reich to extend
enormously the field of its economic control. The collapse
of the Credit Anstalt in Austria in May 1931 had serious re-
percussions upon the position of the German banks. Already
in September 1930 the success of the Nazis at the elections
had been an important factor in causing the withdrawal of
foreign short-term credits from Germany ; and in the
autumn of that year the Reichsbank had to provide nearly
1,000 million Reichsmarks in gold and foreign exchange in
order to meet withdrawals. In the early months of 1931 the
position was for a time somewhat easier, but the collapse
of the Credit Anstalt at once caused a new run on the Ger-
man banks, and in June and the first half of July over 3,000

GERMANY 275

million Reichsmarks were withdrawn abroad. In spite of
the help given by the Reichsbank, one of the leading Ger-
man banks, the Danat bank, was obliged to suspend pay-
ment on July 1 3th, 1931, and a run on the German banking
houses made it indispensable to declare a moratorium. The
Government thereupon had to come to the assistance of the
German banks, and especially of the Danat bank, and also
to negotiate in August the Basle Standstill Agreement,
under which the foreign creditors of Germany agreed
drastically to limit the withdrawal of money from the
country. But it was impossible for State intervention in the
affairs of the German banks, having once begun, to stop at
that point, and stage by stage, in order to ensure their
solvency, the German Government had practically to take
over control of them and supply out of its own limited re-
sources enough money to enable them to carry on. Drastic
limitations were imposed on the withdrawal of funds, es-
pecially for foreign payments ; and the German banking
system came after 1931 to be virtually a part of the State
machinery of the Reich.

Nor could the Government stop short in the field of
banking ; for, in face of the world crisis and of their heavy
capital obligations, the leading rationalised. German in-
dustries were also getting into more and more serious
financial difficulties. The Government was compelled to
come to their assistance as well ; so that during the past
two years an elaborate system of State control has been ex-
tended over many of the greater industrial concerns in
Germany, and reorganisation, accompanied by a consider-
able writing down of capital, has been carried through under
the direct auspices of the State. It has often been suggested
that this means in effect that Germany has now passed over
to a virtual system of Socialism conducted under the aus-
pices of anti-Socialists. But there is in reality the greatest
possible difference between a Socialism embarked upon
voluntarily by people who believe in it and even the most
drastic forms of State control imposed unwillingly in con-
sequence of an extreme emergency by a Government which

276 THE COUNTRIES OF EUROPE

retains an undiminished faith in the merits of private enter-
prise.

During this period unemployment was rising sharply, and
a large part of the huge plants erected during the previous
years was laid idle by the impossibility of rinding markets
abroad, and by the cessation of constructional activity at
home. But it is one of the features of large-scale rationalisa-
tion that it is economic only if the great plants can be kept
running at full speed, in order to spread the high capital
costs involved in them over the largest possible quantity of
goods. The highly equipped German economic system was
therefore even less well able than less highly rationalised
industries in other countries to stand up to the conditions
of world depression. In a sense, Germany suffered from
being too efficient as a producer ; for her calculations of
efficiency had left out of account that flaw in the world
economic system which prevents it from rinding an assured
market for all the goods that it is equipped to produce.

In the meantime, under the terms of the Hoover mora-
torium, the payment of reparations had been definitely
suspended for a year in the spring of 1 93 1 , and, as we have
seen, this suspension had been followed by a series of
Standstill Agreements in respect of Germany's short-term
foreign debts, though she had still to find the interest on
long-term capital invested in Germany, and especially on
the Reconstruction Loans carried through in connection
with the Dawes and Young Plans. A moratorium in respect
of these long-term borrowings was only declared in the
summer of 1933 > an<^ even then payments on the Dawes
Loan of 1924 were maintained intact, and interest, as dis-
tinct from sinking fund, payments were kept up on the
Young Loan of 1930 as well.

The Young Plan of 1929 had been intended further to
modify the claims of the Allies for reparations, and to in-
volve a definite advance on the terms embodied in the
Dawes Plan of 1924. But, owing to one fatal omission, the
Plan of 1 929 actually turned out less favourable to Germany
than the continuance of the Dawes Plan would have been ;

GERMANY 277

for, whereas the Dawes Plan had included a provision for
scaling down payments in correspondence to any serious
fall in the level of world prices, this clause was excluded from
the Young Plan. This omission showed extraordinary lack
of foresight, in that, when the Young Plan agreements were
made, the world depression and the serious fall in prices
which accompanied it were already well on the way. It is
doubtful whether Germany could in fact have made, under
the conditions of the world depression, any payments at all
on account of reparations, however drastically these might
have been scaled down, if she had at the same time to main-
tain payments on her commercial borrowings abroad. But
in any event the annuities provided for in the Young Plan
were obviously far beyond her ability to pay, either under
the circumstances of depression or even in the event of a
world recovery, except by the old unreal method of bor-
rowing from the United States what she then transferred
to the Allies — for them in turn to transfer the most part of it
to the United States in payment of war debts. The Young
Plan, even more obviously than the Dawes Plan before it,
was bound to break down in the long run ; but it broke
down far sooner than most people had expected, because
of the rapid onset of the world slump.

These conditions had at least one good result ; they com-
pelled the Allies, years after they ought to have done so, at
last to face realistically the reparations question, and to re-
cognise that all hope of collecting any substantial sum in
reparations from Germany had totally disappeared. It had
been possible to get money out of Germany as long as the
Americans were prepared to lend it, but it was not possible
for a moment longer. It still took some time after the de-
claration of the Hoover moratorium for the Allies, and es-
pecially the French, to become ready to recognise this
truth. But by the middle of 1932, when the Hoover year
expired, they had been driven to recognise it ; and the
Lausanne settlement of July 1932 was utterly different from
any settlement that would have stood a chance of accept-
ance at any earlier date. For, whereas every previous plan

278 THE COUNTRIES OF EUROPE

had been based on the continued payment by Germany of
large annuities over a long period of years, the Lausanne
agreement was based on the new principle of accepting a
far smaller sum in final payment of all reparations claims ;
and the principle, hitherto maintained even by Great
Britain, of endeavouring to collect from Germany enough
to meet the instalments due on the Allied debts to the
United States was definitely abandoned. Before the Lau-
sanne agreement the aggregate instalments due from
Germany under the Young Plan amounted to a capital sum
of approximately 25,000 million dollars. The Lausanne
payments, even if they were exacted in full, could not
amount to more than 2,000 million dollars, while there was
to be a complete moratorium on all payments for four years.
In fact, few people believed after Lausanne that Germany
would ever make any further reparations payments at all ;
and although the Allies were not prepared to wipe the slate
quite clean, those who signed the settlement must have been
conscious that this was for all practical purposes what they
were doing. To-day, at any rate, no one expects even the
Lausanne payments or any part of them actually to be
made. The reparations question was thus at last detached in
effect from the settlement of the American debt, although
it must of course be borne in mind that the agreement
reached at Lausanne was in form only conditional on a
satisfactory adjustment of war debt claims with America,
and that it has not even to-day been ratified by the Allied
Powers.

Germany is a country dependent for her prosperity
almost as much as Great Britain on her export trade.
Moreover, her exports are even more highly concentrated
than those of Great Britain upon a comparatively narrow
range of industries. Her textile trades are far less important
than Great Britain's in the world market, and her exports
of coal are relatively small. She depends to a very high
degree upon her ability to export steel, engineering and
electrical goods, and the products of the chemical trades.
This means that the demand for German exports depends

GERMANY 279

very greatly upon world activity in the constructional
industries, although she is also to an important extent a
producer of minor metal goods and the cheaper luxury
goods purchased by the private consumer. This last class
of goods, is, however, one against which in any emergency
practically every country is likely to adopt the expedient of
high protection ; so that in general the dependence of
Germany upon her metal, electrical and chemical trades
remains the outstanding factor in her economy from the
external point of view. This gives her a tremendous econ-
omic interest in a revival of world prosperity ; for there is no
chance, despite the great effort which she has made in
recent years to reduce her dependence on imports, that she
can live of her own at a satisfactory standard of life, or
establish a balanced economy based on the exchange within
her own markets of industrial and agricultural products. To
do this would mean producing foodstuffs at exceedingly
high costs in relation to world prices, even if it could be
done at all ; and it would involve further a complete
reconstruction of her industrial system and the sacrifice of
a very large part of her existing capital assets. She has thus
economically the strongest possible motives for pursuing a
policy designed to restore the freedom of international
exchange, or at any rate to give her assured markets in
foreign countries and especially in Europe, which is by far
the most important market for her exports. At the present
time this strong interest which the German economic
system possesses in creating conditions favourable to the
tranquil development of European industrial activity is
overlaid by the aggressive nationalism which has swept
across the country as a by-product of economic adversity.
But it can hardly fail to reassert itself in the long run, under
whatever political rule German affairs may be carried on.
Even Nazism, if it remains in power, will be bound to
accommodate itself to the requirements of the German
economic system, since it will be no more able than any
other political authority to stand the cost of maintaining a
vast mass of unemployed workers, or to forgo the revenues

THE COUNTRIES OF EUROPE

from a large part of the national industrial plant. It may
take some time for these underlying economic forces to
assert their predominance ; but, failing a world war, it will
be impossible for them to be ignored for any long period.

§ 10. SCANDINAVIA

To THE north-west of Europe, and connected with it only
by land bridges, lie the three countries which are commonly
grouped together under the name of Scandinavia — Norway,
Sweden and Denmark. This grouping is based upon a racial
and cultural rather than a geographic similarity ; for the
three countries show considerable differences of climate,
and whereas Denmark is a small, flat, agricultural land
supporting a fairly dense population, Norway, at the other
extreme, is large and thinly-populated and so mountainous
that the major part of its soil is returned as " totally un-
productive." The racial unity is, however, very real. The
population of all three countries is descended from the Norse-
men mentioned in Part One, with very slight admixture.
(The Swedes are probably the ethnically purest stock in
Europe ; and the problem of minorities is practically non-
existent in Scandinavia, apart from Finland and the Ger-
man minority in Slesvig.) At various times in the history of
Europe the three countries, or two of them, have been
united under a single crown ; but since the dissolution in
*9O5 of the union between Norway and Sweden they have
been under separate Governments. Scandinavian rule,
following the Norse explorations of the ninth and tenth
centuries, at one time extended far beyond Scandinavia
proper ; but of this empire all that now survives of any
importance is the union of Iceland with Denmark under
the Danish Crown, Norway's possession of Spitzbergen in
the Arctic Ocean, and the rights of Norway and Denmark
on the Continent of Greenland, a dispute about which was
finally settled in 1933.
The most interesting fact about the Scandinavian Powers

SCANDINAVIA 28l

is their development from an adventurous freebooting past
to a present of pacifism, high culture and liberal institutions.
To the student of history the names of Denmark, Norway
and Sweden call up pictures of Viking raids, of Canute's
wide empire, of the Stockholm Blood-bath, and of the
conquering expeditions of Gustavus Adolphus and Charles
XII ; but the observer of the twentieth century is more
likely to think of Ibsen's plays, of Nansen exploring the
Arctic or directing famine relief for the victims of the
European War, of Danish co-operation and Danish high-
schools, or of the electoral law or prison system of Norway.
All three countries were neutral during the European War,
and it seems in the highest degree improbable that any one
of them will ever take part in another. One (Denmark) has
even declared for total disarmament, and all three have
submitted territorial disputes, not only with one another,
to international arbitrament. In their case, and in their
case only, it appears that the national vigour which formerly
went into maritime and military adventures has been able
to turn itself, without being weakened or dissipated, into
peaceful pursuits.

Norway. Norway, the northernmost of the three
countries, is a long mountainous strip of land running
through thirteen degrees of latitude and terminating at its
northern end well within the Arctic Circle. In the town of
Hammerfest the sun, during the summer months, never
sinks below the horizon, and much of Norway, owing to the
long twilight, has practically no night at all in summer.
Though it is so far north, however, the Gulf Stream, which
sweeps close around the coast of Norway, keeps the temper-
ature extraordinarily even, especially as the mountains
afford protection from the dry continental cold of Russia.
This fact, as well as its natural beauties, has brought to
Norway a considerable and growing amount of summer
tourist traffic.

The average height of Norway above sea-level is 60 per
cent greater than the average height of Europe as a whole.

282 THE COUNTRIES OF EUROPE

This is not due to the presence of very high mountains, for
the highest peaks are only six thousand feet odd, but to the
enormous proportion of mountainous over flat land. This
feature is continued into the sea, giving the long fiords and
the thick flurry of islands which fringes all the coast. The
actual coast-line of Norway, with all the indentations
included, is roughly six times the length it appears to be
on the map. Hence Norway's enormous fishing industry,
and her large mercantile marine. The mountain slopes also
give rise to many rivers of great speed, which are or will be
available for hydro-electric power. It is calculated that there
are about twelve millions of horse-power available from
Norwegian rivers, of which ten millions are as yet un-
exploited. This will in due time go far to make up for
Norway's deficiency in coal.

This immense mountain area means, of course, that a
great deal of the soil of Norway is uninhabitable and useless
for economic purposes. The population is nearly three
millions, distributed in the ratio of 22$ per square mile — a
density lower than that of any European country but
Russia. One town only, Oslo, has over a hundred thousand
inhabitants. Only 2.5 per cent of the total land area is
arable, 24.2 per cent is wood or forest, and 72 per cent is
returned as " totally unproductive." A little grain, mostly
oats and barley, is grown in Norway, but the principal
agricultural crop is potatoes.

It follows that Norway is a heavily importing country.
Nearly all her breadstuff's must come from abroad, and she
also requires to import a great deal of coal, of which some
conies from Spitzbergcn, which is an almost uninhabited
territory in the Arctic Ocean belonging to Norway. Other
Norwegian imports of considerable size are textile manu-
factures and vehicles ; her mineral imports are mainly
coal, as she has a considerable native output of iron and
silver. Great Britain and Germany provide the largest share
of imports, with the United States a long way behind.
Norway pays for her imports by a large export of timber,
wood-pulp and paper, and of fish and fish-products, the

SCANDINAVIA 283

latter forming 25 per cent of total exports. The canning in-
dustry— principally, of course, the canning of fish — has been
going ahead rapidly, as have electro-metallurgical indus-
tries of various kinds. Great Britain is the chief buyer of
Norwegian goods. Norway has also a large carrying trade,
which helps to reduce the apparent adverse balance be-
tween imports and exports. The Norwegian mercantile
marine is enormous in proportion to the population (over
four million tons in 1931) ; and when it is remembered that
it suffered tremendously severe losses during the submarine
campaigns of the war, the figures are all the more remark-
able.

Norway's population is very nearly homogeneous, the
main exceptions being about 20,000 Lapps, and a few Finns
in the extreme north. 97 per cent of the inhabitants are
Lutherans ; but religious toleration is universal except for
Jesuits. The general level of literacy is very high, and the
penal system remarkable for its humaneness.

Vigorous and important during the early Middle Ages,
Norway was subsequently for many centuries the weakest
of the three Scandinavian countries. After the Union of
Kalmar (1397) had united all three under the Danish
Crown, Norway, unlike Sweden, remained in subjection to
Denmark until the end of the Napoleonic Wars, when the
victorious Allies transferred her to Sweden, in order, partly,
to punish Denmark for her attitude during the wars. Reviv-
ing Norwegian national feeling, however, found this Union
more and more irksome, despite large concessions of self-
government ; and in 1905, after a long period of disputes
centring mainly around the appointment of diplomatic and
consular representatives, it was annulled. Since then
Norway has been a separate sovereign State ; she was
neutral during the European War, and has recently made
new trading treaties with various countries, including
Great Britain.

Norway is a limited hereditary monarchy, with a Parlia-
ment, the Storting, elected by proportional representation,
everyone over 23 having the right to vote. Norway was one

284 THE COUNTRIES OF EUROPE

of the first countries to grant the franchise to women (1907).
The Storting is elected as a whole, but when elected divides
into two Chambers, one-fourth of the members forming
the Lagting, and the other three-fourths the Odelsting. The
two Chambers meet and discuss separately ; but if they
disagree twice the Storting meets as a whole to settle the
issue. There are 150 members of the Storting, elected so that
the proportion of town to country representatives is two to
one. The members are paid, and must be at least thirty
years old. The King has a veto, but it can be overridden.
Norwegian local government is unusually free from central
control.

The present Norwegian Cabinet is Liberal Left, having
succeeded a Peasants' Party Cabinet in 1933. As is com-
mon in countries with proportional representation, most
Norwegian Governments hold office either in coalition or
virtual coalition with other parties. The Norwegian Labour
Party, however, does not enter into coalitions. It is remark-
able in being the only left-wing Socialist party in Europe
with any great Parliamentary strength — it is the largest
single party in the Storting. It is strongly Marxist in its views,
and was for some time affiliated to the Third International,
from which it broke away in 1923 ; it remains, however
revolutionary in aim, and has not linked up with the Second
International. In 1927, for a brief while, the Norwegian
Labour Party formed a Socialist Government, which, how-
ever, was brought down by a financial panic, Mowinckel,
the present Premier, taking its place.

Sweden. Sweden, the largest of the three Scandinavian
countries, has a population of 6 millions, almost all Swedes,
distributed in the ratio of 35.4 to the square mile. Stock-
holm, the capital, has nearly half a million inhabitants, and
there are three towns with more than a hundred thousand.
Sweden has much less mountain area than Norway, and is
more continental in climate ; the Russian winds sweep
over it from the east, freezing the Baltic in winter and
causing considerable variations of temperature on the

SCANDINAVIA 285

Swedish mainland. Sweden has more productive resources
than Norway ; 9.3 per cent of the land is cultivated, and over
half of the whole area is forest, providing enormous resources
for the Swedish timber and paper trades. Large, however,
as the forest area is, there are indications of exhaustion,
and a policy of afforestation has become necessary.

Sweden is not self-sufficing as regards foodstuffs. Much
grain has to be imported, though Sweden is fairly well
provided as regards animal products, and does, as a matter
of fact, export a certain quantity of butter and bacon. About
three-quarters of Swedish farmers own their own land ;
there are a good number of small farms, though not nearly
so many as in Denmark. Just under one-third of the popu-
lation lives in the country. Besides foodstuffs, Sweden has to
import a great deal of coal, as she has only very limited
home supplies. Before the war, coal was imported mainly
from Great Britain ; but during the war German coal was
largely substituted, and this has still been the position up
to the present, though the British Trade Agreement of 1933
is designed to restore British coal to the Swedish markets.
Textile manufactures also form a large proportion of Swed-
ish imports.

Swedish imports and exports tend on the whole to
balance. The two principal groups of exports are timber
products and iron. The timber comes from the great forest
areas, and is floated down over the 20,000 miles of inland
waterways which Sweden possesses ; it is then sold as
timber, or wood-pulp, or paper, or matches. The great
Swedish Match Combine, made famous recently by the
suicide of Ivar Kreuger, is responsible for a very high
proportion of Europe's consumption of matches. As to the
iron, Swedish iron has been famous for centuries. The
northern mines, in the Lapp region, produce some of the
richest-bearing ore in the world, and four-fifths of the
product is exported. Swedish production of iron and steel
has, however, been declining in recent years. For exports as
a whole, Great Britain is Sweden's best customer, but
Sweden imports more from Germany.

286 THE COUNTRIES OF EUROPE

The Swedes, like the Norwegians, were brought under
the Danish Crown in 1397 ; but in the sixteenth century,
under the leadership of Gustavus Vasa, they freed them-
selves, partly by means of the massacre that was known as
the Stockholm Blood-bath. Thereafter Sweden grew to the
position of a great Baltic Power, and played an important
part in European politics, particularly during the seven-
teenth century. Gustavus Adolphus was one of the leading
figures in the Thirty Years' War, and at the end of the
century Charles XII made an attempt to turn the Baltic
into a completely Swedish lake, and invaded Russia. Like
other and later invaders of Russia, he failed, and Sweden
lost most of her Baltic possessions, though she retained Fin-
land and part of Pomerania until the end of the Napoleonic
Wars, when those districts were given to Russia, Sweden
receiving Norway in compensation. During the nineteenth
century, partly owing to her small population, Sweden
declined in importance as a Power. She maintained neu-
trality during the European War ; but as one of the prin-
cipal avenues of entry for goods into Germany, she found
this position at times difficult, and the Allied countries
were upon more than one occasion inclined to be sus-
picious. Sweden is bounded by Norway on the western,
and Finland on the eastern side. The Norwegian boundary
presents few difficulties, though provision has to be made
for nomadic Lapps, who know and care nothing for
national boundaries, but drive their reindeer impartially
to and fro ; as regards Finland, the principal dispute, that
concerning the Aaland Islands, was settled in 1921 in
favour of the Finns.

Sweden, like Norway, is a limited monarchy, adminis-
tered under a constitution drawn up in 1809 an<^ amended
in 1919, when the franchise was given to women. The
Lower Chamber of the Parliament or Riksdag consists of
230 members elected for four years by all over twenty-
three ; the Upper of 150 members of over thirty-five,
elected for eight years by the members of the provincial
councils. There is a property qualification for members of

SCANDINAVIA 287

the Upper Chamber, and elections to both are conducted
by proportional representation. If the two Chambers dis-
agree upon a question of finance they hold a joint session
at which decision is reached by a majority vote. Much of
the business of the Riksdag is, however, transacted through
standing committees, which have very wide powers of dis-
cussion and amendment.

As in Norway, no party holds a clear majority in the
Riksdag. The largest single party in both Chambers is the
Social Democratic Party, founded in the 'eighties of last
century and long led by Hjalmar Bran ting, which upholds
a moderate Socialist policy. There have been several Social
Democratic Governments since the war, including the
present one, which came into office in September 1932.
There is also a Right Wing Party, and an Agrarian Party ;
but the Swedish Liberals have split on the question of
prohibition.

Prohibition and the liquor trade generally is in fact a
bitterly debated question in Sweden, where from 1775 a
government monopoly of the trade resulted for a time in
a great promotion of drinking, especially spirit-drinking.
The Swedes had for long an unenviable reputation for
drunkenness. This does not, however, appear to affect
adversely the health or culture of the population. The death-
rate in Sweden is one of the lowest in Europe, and the level
of education among the highest. The enormous number of
telephones — i to every 14 of the population, as against
i to 40 in Great Britain — is perhaps one indication of a
certain level of education. Ninety-nine per cent, of the
Swedes are Lutherans ; there are therefore no religious, as
there are no racial, minorities to cause difficulties.

Denmark. Denmark consists of the major part of the
peninsula jutting out northwards between the Baltic and
the North Sea, together with three islands in the Baltic.
The Faroe Islands, north of the Orkneys, are part of the
Danish possessions, and the King of Denmark is also King
of Iceland, which is now an independent State. In 1920,

288 THE COUNTRIES OF EUROPE

after a plebiscite had been taken, the Danish-speaking
part of Slesvig, which had previously been under German
rule, was transferred to Denmark. Apart from the Germans
in Slesvig, among whom the German Nazis seem at the
moment to be trying to stir up unrest, there are no racial
minorities in Denmark. The population is three and a half
millions, distiibuted over an area of 16,576 square miles.
Copenhagen is the only large town. The established religion
of Denmark is Lutheran. A tiny minority (less than 2 per
cent) belong to other communions ; but there is complete
religious toleration.

The main interest of Denmark is that it has totally
changed its character, as a community, during the past
hundred years. Other countries have altered in various
ways and have gained or lost in importance ; but Denmark
has completely changed. Medieval Denmark was a power-
ful, fighting, feudal monarchy. In the tenth century Sweyn
conquered for his son Canute a vast maritime empire
stretching from England to the borders of Poland. This
fell to pieces ; but again in 1397, by the Union of Kalmar,
Denmark, Norway and Sweden \\ere united under a Danish
king, and Denmark was an important Baltic Power for
many centuries. In the Napoleonic Wars, Denmark,
though officially neutral, was in fact sympathetic to
Napoleon ; and Great Britain, fearing lest the Danish fleet
should be used against her, demanded its surrender and
bombarded Copenhagen. At the Peace of Paris, Denmark
was punished by the removal of Norway, which was placed
under the Swedish Crown. Thereafter Denmark became
less and less important as a European Power. In 1866, after
a useless attempt to resist, she was forced to acquiesce in
the Prussian occupation of Slesvig-Holstein, though the
Powers at the same time agreed to guarantee Danish terri-
tory and the Danish Crown. A liberal constitution had been
granted in 1849 ; but this had been seriously modified in
the direction of giving more power to the landowners, and
there was a great deal of unrest.

The great economic change came when the Danish

SCANDINAVIA 289

farmer took to co-operation, in order both to reduce the
power of the landlords and middlemen, and to build up
Danish agriculture on a new basis so that it should not be
ruined by American cereal production.

The first co-operative dairy was started in Jutland in
1 882 ; but political and economic education of the Danish
people had begun long before, mainly owing to Bishop
Grundtvig and his programme of People's High Schools,
of which the first was founded as early as 1844. The Danish
peasant was thus far better equipped than the average
European agricultural producer for understanding the
economic purpose of co-operation and for putting it into
force.

Danish co-operation, once started, went ahead rapidly.
Co-operative dairies are fast ousting the remaining private
dairies ; and co-operative societies and dairies have been
followed by co-operative factories for pig products and
co-operative egg so leties. The result of this is that Danish
exports of these goods have enormously increased, while at
the same time the adoption of intensified methods of pro-
duction and co-operative purchase have greatly increased
the yield of arable land. Denmark, however, though an
agricultural country, is not completely self-supporting as
regards food ; a considerable quantity of cereals is imported.
It should be noted, of course, that Danish agriculture is
based upon highly intensive cultivation and stall-fed
animals.

Side by side with the growth of co-operative association
has gone the division of the land among the people, much
speeded up by a law of 1919. There are now hardly any
large estates in Denmark ; the land is divided up into small
farms (many of them the tiniest possible patches of groundj.
Tenancy is rapidly disappearing ; nearly 90 per cent of the
land is owned outright. Denmark is the only State which
has succeeded in making a society of peasant farmers
effectively self-governing. This is partly due to the wide
understanding and appreciation of the principles under-
lying voluntary co-operation, and partly to the very high

KR

290 THE COUNTRIES OF EUROPE

level of education. Elementary education has been com-
pulsory since 1814 ; but the chief feature of the Danish
educational system is the " People's High Schools,"
institutions for the continued education of adults, which
are privately run, though in receipt of grant from State
funds. These High Schools, together with the many agri-
cultural schools and other institutions — in fact the Danish
system of education as a whole — have attracted the interest
and admiration of educationalists all over the world.

Denmark is mainly an agricultural country, only about
400,000 persons being employed in shops and factories.
Her exports of animal products — butter, cheese, bacon and
eggs — enormously exceed all her other exports put together.
She imports her other requirements, principally textile
goods, coal (of which she has none), metal goods and
machinery, and some cereals. There is a mercantile marine
of considerable size.

Denmark exports to Great Britain far more than to any
other country ; for Danish agriculture has been built up
largely for the supply of the British market, above all with
dairy produce and bacon. Especially for the latter there is
no possible alternative market for exports on anything like
the present scale ; for Great Britain is the only really large
importer of pig-products in Europe. Accordingly, Denmark
is in keen competition with the British Dominions, and
especially with New Zealand, in the British market. She
went off the gold standard with Great Britain in 1931 ;
and when, after the threat to her exports arising out of the
Ottawa agreements, New Zealand proceeded to a further
devaluation of her currency in order to bring it down to the
same value as that of Australia, Denmark was compelled
to follow suit with a corresponding further devaluation of
the Danish krone.

Hitherto, Denmark has drawn the largest part of her
exports from Germany ; but the new trade agreement
negotiated with Great Britain in 1933 is designed, like the
similar agreements with the other Scandinavian countries,
to increase the proportion of imports — especially coal —

SCANDINAVIA 2gi

derived from Great Britain ; for Denmark cannot afford to
risk her position in the British market by refusing conces-
sions to the British exporters.

The increase in the number of small farmers for many
years caused political difficulties, owing to the weight of
landowners in the Government ; and the constitution
was revised in 1915. Under the present constitution Den-
mark is a limited monarchy, in which the king appoints
the ministers, but cannot make war or peace without the
consent of the Riksdag. The Riksdag is divided into two
Chambers, the Folketing of 149 members elected by all men
and women over twenty-five on the system of proportional
representation, and the Landsting of 78 members, 56 elected
by Folketing voters of over thirty-five through electoral
colleges, and 19 by the pre-igi5 Landsting. If the two
Chambers disagree and the Folketing persists in its views
after a fresh election, the Landsting may be dissolved. The
King's consent to a law is necessary. The largest party in
the Folketing are the Social Democrats, who represent the
town workers, the few agricultural labourers and the
smaller peasants ; the present government was formed in
1929 by a coalition of the Social Democrats with the
Radical Liberal Party.

Denmark entered the League of Nations, and in 1932
decided to disarm herself entirely.

§ ii. BELGIUM AND HOLLAND

BETWEEN France and Germany, on the north coast of
the European Continent, lie the Low Countries, Holland
and Belgium, which have the distinction of being the most
fought-over area in Europe. Not only does the southern
part of this area lie, as students of history have again and
again to notice, right athwart the path of any landward
expansion of the two great neighbouring Powers ; the Low
Countries also contain the mouths of some of the most
important rivers of Western Europe. Both of these facts have

THE COUNTRIES OF EUROPE

made for war. Of the famous battlefields of European his-
tory, a great many, of which Bouvines, Gourtrai, Blenheim,
Neerwinden, Waterloo and Ypres may serve as examples,
lie on Belgian soil, and the question of the navigation of the
Scheldt has troubled Europe almost as much as the ques-
tion of Alsace-Lorraine.

In the Middle Ages the Low Countries were linked to-
gether, but the wars of religion drove them sharply apart,
the northern portion achieving independence, while the
southern remained under the domination of one or other
larger Power until well on in the nineteenth century. For
a brief period after the Napoleonic Wars, Belgium was
placed under a Dutch king ; but this proved one of the
least stable parts of that unstable settlement, and was
reversed in 1830-31, since when both countries have been
independent States. Both are thickly populated and highly
developed, Belgium industrially, Holland more on agri-
cultural lines ; both are too small and too vulnerable by
land to be great European Powers ; and both have large
colonial possessions, though the great days of Dutch
colonial empire are past.

Belgium. Belgium is the most crowded country in Europe.
Its population of 8 millions is distributed in the ratio of 688
to the square mile ; but this general figure minimises the
actual density, as the western provinces are comparatively
empty, whereas in Brabant, for example, the density rises
to 1,325 per square mile. Nor is this due to the existence of
enormous towns. Brussels has 850,000 inhabitants, and Ant-
werp just under 300,000 ; but there are only two other towns
with over 100,000. It is the great cluster of smaller towns
and hamlets which accounts for the bulk of the population.

As might be expected from the foregoing, Belgium is
primarily an industrial country, in fact, one of the oldest
industrial countries in Europe. The coal of the Liege region
was known in the late Middle Ages, and the iron and steel
industry was developing by the end of the eighteenth cen-
tury ; Napoleon I made great use of Belgium (then in

BELGIUM AND HOLLAND 2Q3

French hands) as an arsenal for his continental wars, and
since that date her industrial development has gone steadily
ahead. The most important Belgian products at the present
time are coal and iron and steel ; but she also produces
zinc, lead, glass and textiles in large quantities, and is one
of the main centres of the diamond industry. Being so
highly industrialised, she is naturally not self-sufficient in
the matter of food production. Over one-half of the land
is cultivated (18 per cent is forest), of which 40 per cent is
under cereal, and 40 per cent under forage crops ; but under
half a million are employed in agriculture, as against over
two million in industry and commerce. The main crops are
potatoes and sugar-beet, though some wheat and rye are
also grown : imports of wheat are very large, and there is
also some import of maize and barley. In general, Belgian
exports (mainly of manufactured goods, especially steel)
tend more or less to balance her imports ; Great Britain is
her best customer, and France the chief source of her im-
ports.1

Belgium, not altogether through her own fault, has had a
chequered and violent history. In the sixteenth century the
area of modern Belgium came, along with Holland, into
the possession of the Hapsburg Emperor Maximilian, and
so to his grandson, Philip II of Spain. The Belgian provinces
joined in the revolt against Philip ; but their alliance with
the United Provinces — modern Holland — was always un-
easy. They were Catholic, and unsympathetic to the Cal-
vinism of the Dutch ; and they eventually broke away, and
after the fall of Antwerp in 1585, returned to the yoke of
Spain, where they remained, much fought-over in Marl-
borough's wars, until in 1713 they were handed over to the

1 The Grand Duchy of Luxembourg, with its population of 300,000,
was before the war included in tht German Customs Union In 1919,
given the choice between entering the French or the Belgium customs
system, it chose the latter ; and Belgium and Luxembourg now form a
single customs area. Luxembourg is important industrially as a producer
of iron ore, of which it had in 1929 an output of seven and a half
million metric tons, and of steel, of which it produces from two to three
million tons a year. About a third of the population is engaged in
agriculture.

2Q4 THE COUNTRIES OF EUROPE

Austrian Haps burgs. Some measure of autonomy had been
secured for Belgium both under Spain and under Austria ;
but towards the end of the eighteenth century this was at-
tacked, and there were Belgian revolts against Austria at
the time of the French Revolution.

The immediate result of the Revolution was the " free-
ing " of Belgium, which from 1 795 onwards was made part
of France, and provided, not entirely to her satisfaction,
with French revolutionary institutions ; after the downfall
of Napoleon she was removed from France and put under
the King of Holland, from whom she successfully revolted
in 1830, choosing as King Leopold of Saxe-Coburg. The
success of the Belgian revolt was due largely to the friendly
attitude of France and England ; but the international status
of Belgium was not cleared up until 1839, when by the
Treaty of London the principal European Powers guar-
anteed the inviolability of her territory in time of war. This
Treaty was the " scrap of paper " torn up by Germany
in 1914. Since the European War, the principal. object of
Belgium has been to find other means of safeguarding her
territory, and her attitude towards international problems
and affairs has been governed by this one aim.

By the Versailles Treaty Belgium gained, as well as a
populous mandated portion of German East Africa, Ruanda-
Urundi, a small area on the German frontier consisting
of Malmedy, Eupen, and Moresnet, and containing about
64,000 people. She is not, however, entirely satisfied with
her territorial boundaries, particularly as regards the
Dutch frontier. She would very much like to possess
southern Limburg, and still more the whole of the south
bank of the Scheldt, for she regards the Dutch control
there as giving the Dutch port of Rotterdam an unfair
advantage over Antwerp. More important, however, is
Belgium's own internal problem of nationalities.

This cannot be called a problem of minorities, for the
Flemings at least equal the French Belgians in numbers,
though they are not nearly so influential. The French
ascendancy dates mainly from the French revolutionary

BELGIUM AND HOLLAND 295

occupation ; and during the nineteenth century French
was the dominant language, and the French-speaking
Belgians held all the important posts. The racial difference
is only in part a difference of religion ; both sides are
Catholic, but the Flemings tend to belong to the old or
conservative Catholic tradition. It is, however, partly a
class difference ; the Flemings are mainly working-class
and " small men." There was great unrest among the
Flemings before the war ; and during the war, when the
Belgian Government had moved to Havre, a section of the
Flemings under Dr. Borms (called " Activists ") planned
to establish a Flemish Belgium with German aid. This
movement was supposed to have died down after the war ;
but it revived, and in 1928 a bye-election returned Dr.
Borms, then in prison, with an enormous majority, and
rendered necessary the " flamandisation " of the University
of Ghent, and some further concessions. The situation,
however, is as yet unresolved ; the Flemish separatist party
(now called the " Front Party ") has 1 1 seats in the House
of Representatives, and 5 in the Senate.

Belgium is a monarchy, with universal voting since 1893,
Flemings having been admitted to the franchise in 1898.
Women vote in the communal elections, but for the House
of Representatives only if they are war-widows or lost sons
during the war. The Lower Chamber, the House of Repre-
sentativespis elected for four years under P.R., and voting
is compulsory ; of the Upper House or Senate, one-third
is elected from persons over forty, one-third chosen by the
provinces, while one-third is composed of distinguished
persons selected by the Senate. From 1884 until the end of
the war the Catholic Party was almost continually in the
ascendant ; but since then other parties have grown to
strength, and the present Government, which took office
in 1932, is a Liberal-Catholic coalition. The Belgian
Labour Party, which is one of the most moderate Labour
Parties in Europe, was revived in the 'eighties. Trade
Unionism is strong in Belgium ; the three divisions of the
working-class movement — Trade Unionism, Socialism,

296 THE COUNTRIES OF EUROPE

and Co-operation — are there more closely united than in
any other European country but Russia, and Belgium has
provided many officials for the various Internationals.

The great overseas possession of Belgium is the Belgian
Congo. Thi% after providing a world scandal of native
exploitation in the 'eighties, has been drastically reformed,
and is now as good as, if not better than, any European
tropical administration.

Holland. Holland is almost, though not quite, as
thickly populated as Belgium. Her population is just under
8 millions, and the density 625.5 Per square mile. But a
large part of Holland consists of water, and the greatest
density is in the provinces of North and South Holland,
which, with Zeeland, formed the core of the Dutch State
in its early days. The death-rate is low and the birth-rate
high, so that the population is rapidly increasing.

The area, and particularly the cultivable area, of Hol-
land, has varied at different dates, according to the en-
croachment of the sea and the Dutch defences against it.
In the Middle Ages, for example, there \vere great inun-
dations, some of which created the Zuider Zee, and greatly
reduced the total area. In modern times, however, there
has been much reclamation. The polder , or patch of land
reclaimed from the sea and then drained so as to make it
cultivable, is a characteristic feature of Dutch agriculture,
and the largest reclamation scheme in the world — that
which proposes to drain a great part of the Zuider Zee —
was begun in 1924, and has already advanced some dis-
tance. Much of Holland, however, is only protected from
inundation by dykes, which can still be cut as they were in
the sixteenth century, to check an invader. Holland still
relies less on fortresses, of which she has few, than on the
help of the sea to defend her.

Rather more than half the population of Holland live
in the country. The largest town is Amsterdam, with three-
quarters of a million inhabitants ; then come Rotterdam
and the Hague, with half a million each. 28 per cent of

BELGIUM AND HOLLAND 2Q7

the land is arable, and 40 per cent is grass and pasture.
Holland has very little forest area. Over half the farms
are freehold, and nearly all of them small or medium-
sized ; there are, however, some large estates in Holland,
Zeeland and Groningen. The production per cultivated
acre is remarkably high. As everyone knows, animal pro-
ducts, particularly cheese, butter and eggs, form the chief
item in Holland's agricultural production ; she does, how-
ever, grow some cereals, of which rye is the chief, and has
a large crop of sugar-beet and potatoes. (One-fourth of the
potato crop is used for industrial purposes.)

Holland was comparatively slow in taking to industry,
the lack of sufficient coal supplies being a handicap. She
has now, however, a fair-sized industry, employing in 1920
a million out of a total of sf million occupied persons. The
textile trades, a large part of whose product is exported,
are the most important ; tobacco is manufactured as well,
and Holland is also the chief centre of the diamond-cutting
industry. But, of course, the great strength of Holland lies,
as it has always lain, not in her native industries, but in her
commerce. The Dutch carrying trade is not now, as in the
seventeenth century, the great carrying trade of the world ;
but it is still very important. The Dutch mercantile marine
was estimated, in 1932, at 4 per cent of the world's total
tonnage. In particular, an enormous transit trade with
Germany -passes through Dutch ports — which fact very
seriously disorganised the Dutch economic system during
the European war. This carrying trade is the chief factor
in balancing Holland's imports and exports ; as regards
specific items, she imports wheat, coal and timber in large
quantities, and also a certain amount of cattle food such
as maize and linseed. She exports a certain quantity of
textiles ; but her main standby for exports is animal pro-
ducts of all sorts. (The trade in bulbs, though an interesting
item, is of small value in comparison.) The bulk of Dutch
trade is done with Germany, but Great Britain eats a large
quantity of her butter and cheese.

Holland, as a country, dates from the sixteenth century,

298 THE COUNTRIES OF EUROPE

when the fierce Calvinism of the maritime provinces, led,
for a time, by William the Silent of Orange, and secretly
supported by Elizabeth, held out against all the forces
which Spanish fanaticism could bring to bear. Indepen-
dence of Spain was finally achieved in 1609, and thereafter
Holland was a leading Power, in both Europe and the
world, for nearly a century. The costs of political strife on
the Continent, however, particularly with Louis XIV,
proved too heavy for this small country to sustain, even
after William Ill's accession to the English throne had
secured her English aid ; and the eighteenth century
proved a period of economic decline, aided by political
instability in the home government. Many of the Dutch
overseas possessions, particularly in the New World and in
Africa, were lost ; but she kept the great Malay territories
which she had conquered from Portugal in the preceding
century. The Dutch East Indies still form a tropical empire
many times the size of Holland.

The French Revolution overran Holland as it did Bel-
gium. The Scheldt was opened to navigation in 1792, and
from 1795-98 there was a Batavian Republic built on the
French model, though the battle of Camperdown (1797)
indicated that Holland might not be so easy to hold as
Belgium. At the end of the war William I was raised by the
Allies to the dignity of King of the Netherlands ; but he had
to acquiesce, with what grace he could, in the subsequent
revolt of Belgium. Since then, Holland has kept clear of
continental entanglements, and she remained neutral,
though not without considerable inconvenience, in the
European war.

The present constitution of Holland really dates from
1848 ; it was revised in 1917 so as to include universal
suffrage. The States-General consists of two Houses, of
which the Lower consists of a hundred members elected
en bloc every* four years by proportional representation, and
the Upper of fifty members elected by the provinces for six
years, half at a time. The eleven provinces have each an
assembly of their own, which meets twice annually, a

BELGIUM AND HOLLAND 299

permanent paid council of administration, and a com-
missioner appointed by the Crown. There are also com-
munal councils ; but the mayor, who is appointed by the
Crown, controls the communal police, and can, if he
chooses, suspend the sittings of the commune.

There are no racial minorities in Holland. There is
religious toleration ; but there are also religious difficulties.
The Dutch Reformed Church, which is Calvinist and
directly descended from those Reformers who made the
Dutch Republic, represents, to many people's minds, the
religion of the Dutch. Actually it is almost equalled in
numbers by the members of the Roman Catholic Com-
munion, and other Protestant Churches account for half
as many more. There are 115,000 Jews. All these creeds
receive subventions from the national budget according to
their importance ; but their existence confuses political and
economic groupings. The Dutch Trade Union movement,
for example, has long been divided between Christian
(i.e. Catholic) Trade Unions and others ; and the same can
be said, to a certain extent, of political parties. The present
Government, which has held office since 1929, is a coali-
tion of the Catholics with the Right.

§ 12. FRANCE

FRANCE, the traditional home of revolutionary move-
ments since 1789, now seems by contrast the most stably
organised of all the nations of Continental Europe. From
1789 to 1 87 1. France ran the entire gamut of revolutionary
activities, and passed under almost every conceivable kind
of government. Reorganised as a democratic State in
accordance with the principle des droits de Vhomme et da
citoyen in the years immediately after the revolution of 1789,
she passed over rapidly to Napoleon's military dictatorship,
itself an outstanding revolutionary force in its effects over
the entire Continent of Europe. Then came the Bourbon

30O THE COUNTRIES OF EUROPE

restoration of 1815, passing into a more extreme form in the
despotism of Charles X. This provoked in turn the revolu-
tion of 1830, and the experiment with bourgeois monarchy
under Louis Philippe. But the bourgeois monarch tried to be
a monarch as well as a bourgeois, and his reign ended with the
Radical Revolution of the Year of Revolutions, 1848. The
revolutionaries of 1848 were, however, sharply divided in
mind and temper. The attempt to turn the 1848 Revolution
into a Socialist revolution was crushed in blood, as the
Paris and Lyons Socialist risings of 1832 had been at an
earlier stage. The uncertainty of the Republican forces gave
Napoleon III his opportunity for the coup (Tttat of 1851 and
the establishment of the Second Empire. But Napoleon Ill's
Empire went down in ignominious defeat at the hands of
Prussia in 1870, and the Third Republic was proclaimed
while the Prussian armies were investing Paris. This, how-
ever, was not the end ; for the Paris population, given arms
in order to resist the Prussians and full of resentment at the
ignominious peace, rose and proclaimed the Commune,
and thus set up for its short life of a couple of months the
first Socialist Government in Europe. The suppression of
the Commune of 1871 by Thiers and his mixed following
of monarchists and bourgeois republicans was even bloodier
than that of the Socialist risings of the years 1832 and 1848 ;
and, when the monarchist majority accepted the Third
Republic in default of a possible candidate for the throne,
few supposed that France had settled down to a lasting
regime of republican democracy. Nevertheless, the Paris
Commune has been, up to the present time, the last French
Revolution, and there was less si#n in France than in any
other European country of a revolutionary temper on the
morrow of the Great War. Even to-day, while the French
Socialists form a powerful party and French Communism has
a considerable following, the bourgeois Republic seems more
stable in its structure than any other Continental State, and
Socialism seems less likely in France than in Great Britain.
France is the outstanding example among European
countries of a balanced economy. Among her 41 J million

FRANCE 3OI

people there is a great diversity of economic activity.
Large-scale industries of the most modern kind are to be
found within her borders, side by side with a very wide-
spread system of industrial production on a small scale.
Industry, large and small, is neatly balanced with agri-
culture, so as to make the French national economy as a
whole relatively self-sufficient — not mainly as a result of
artificial measures, but as the outcome of a fairly natural
process of growth. Of the occupied population about
50 per cent are engaged in industry and commerce and
about 40 per cent in agriculture. France is thus appreciably
less industrialised than the other great nations of Western
Europe, Great Britain and Germany. Indeed she is indus-
trialised only to about the same extent as Czechoslovakia
and the Scandinavian countries, though of course far more
than Italy or the countries of Eastern Europe. This balanced
character of her economy exerts a profound influence upon
her social and political life ; for it means that public
opinion in France is also neatly balanced between industrial
and agricultural claims. Moreover, the strength and per-
sistence of small-scale industry mean that France's indus-
trialists do not speak with the same voice to anything like the
same extent as the industrialists of Great Britain and
Germany. There is a divergence of interest and point of
view, not only between the agriculturists and industrialists,
but also between die representatives of large- and small-
scale industry. The Comite des Forges, the leading representa-
tive of large-scale industrialism in France, has by no means
the same attitude as the great mass of small industrial
producers scattered all over the country. Moreover, France
is a country far more of small towns, near neighbours to the
countryside, than of great industrial cities. Paris, with not
far short of 3 million inhabitants, is the only really great
city ; next to it come Marseilles, with no more than
650,000, and Lyons, with not much more than half
a million ; and then there is a considerable gap, the next
largest cities being Bordeaux, with a quarter of a million,
and Lille, with 200,000 inhabitants. Thus the urban

3O2 THE COUNTRIES OF EUROPE

population of France largely retains the characteristic
qualities of the small town, and actually as much as half the
total population of the country lives not in towns at all but
in the rural areas. There is, moreover, in all the towns of
France, both large and small, a very considerable rentier
class, living on small savings at a standard of expenditure
very low in relation to that of the British or American
middle classes ; and this large class of small capitalists
exerts a profound influence on the entire structure of the
French political and social system. French politics and
French economic policy are bound to reflect this diversity
in the population. It is out of the question for France either
in economics or in politics to pursue a policy which will
outrage the feelings either of the great mass of peasants or of
the large bodies of small town dwellers dependent mainly
upon small-scale industry and commerce or upon small
savings. The great industrialists may be successful in
pressing their claims beyond what their relative importance
in the national economy would justify ; but there is a point
beyond which no French Government can venture to
follow them. France is thus, in the modern sense, a far less
capitalistic State than either Germany or Great Britain ;
and her political system possesses a high degree of stability
based on the conservative attitude of the petite bourgeoisie
in both economic and social questions.

Of those who get their living by the land, the majority
own the land which they cultivate or belong at any rate to
a land-owning family. The Revolution of 1 789 established
the class of peasant owners far more firmly in France than
it is established in any other great European country.
Among those on the land the number of owners greatly
exceeds that of agricultural wage-workers, in the propor-
tion of rather more than 5 to 3. Among the agricultural
owners and also among the land workers there is a very
high proportion of women, partly as a result of the heavy
casualties sustained by France during the war, and also
partly as a result of the system of land holding and the
large measure of recognition accorded to women in the

FRANCE 303

economic though not in the political sphere. Small land
holdings are naturally the rule, and there are few big estates
left. Strip holdings, scattered over the area of the village
land, remain widespread ; and there has been no complete
consolidation such as occurred in Great Britain with the
disappearance of the peasantry. Agricultural co-operation
is strong, and encouraged by the State, which, in 1920,
co-ordinated the movement through the formation of a
national fund for agricultural credit. This fund is worked
through ninety regional agricultural banks and about
5,500 local agricultural banks. Cultivation reaches a high
standard, and both agricultural operations and village
and small town industries have been greatly helped in
recent years by the rapid development of rural electrifica-
tion. Agricultural progress has also been advanced by the
acquisition under the Versailles Treaty of the important
potash deposits of Alsace-Lorraine.

Until the coming of the world depression France was
short of labour for both agriculture and industry, and there
had been during the post-war years a considerable im-
portation of workers from abroad. Thus, until recently
there were in France over 800,000 Italians, half a million
Belgians, over 400,000 Spaniards, about 350,000 Poles,
140,000 Swiss, and about 90,000 Russians, to say nothing
of an appreciable number of labourers imported from
North Africa. The shortage of labour arose mainly from
the very low rate of increase of the French population. The
French birth-rate is one of the lowest in Europe after that
of Sweden — about 18 per thousand on the average of recent
years as against a death-rate averaging about 17. Such
increase as has taken place in the population of late years
is therefore mainly the product of immigration. Alsace-
Lorraine added about 1,700,000 in 1919 ; but even so the
population of France in 1921 was slightly lower, on
account of war casualties, than it had been before the
war, when it stood at about 39 millions. By 1926 it had
reached 40! millions, and by 1932 about 41 £ millions.
But there has probably been some fall since then, for the

304 THE COUNTRIES OF EUROPE

economic depression resulted in a certain amount of
repatriation of alien workers ; indeed, by dispensing with
some of her imported labour, France was able to get
through the earlier stages of the depression without any
substantial rise in unemployment, thus transferring the
burden of maintaining the displaced workers to their
countries oi origin.

The re-annexation of Alsace-Lorraine brought to France,
in addition to the potash deposits mentioned already, the
valuable iron deposits which had provided the basis for
a large section of the German steel industry, an appreciable
amount of coal, and also a considerable cotton-spinning
industry. Alsace-Lorraine added 2^ per cent to the terri-
tory and 4 per cent to the population of France, for it is
more densely populated than pre-war France taken as
a whole. But the re-annexation also brought with it a poli-
tical problem ; for the attempt to assimilate the government
of Alsace-Lorraine wholly to that of France involved oppo-
sition from a substantial proportion of the population, and
this has more than once given rise to serious troubles,
especially those of 1928 which led to the arrest and im-
prisonment of a number of autonomist leaders. Economic-
ally the annexation strengthens the position of large-scale
industrialism in France, for the iron and steel works and
coal mines taken over from Germany were organised on a
basis of large-scale capitalism. France, through the posses-
sion of Alsace-Lorraine, advanced to the position of one of
the most important European steel producers, and many
people predicted in 1919 that there would be a speedy
shift over to large-scale industrialism over the country as
a whole. But the French economic system, with its tendency
to concentrate on supplying local markets or on the pro-
duction of luxury goods for the world market, has proved
strongly resistant to change. French industry depends very
greatly on quality and artistic finish in the products which
it sells in world markets, and these are more easily secured
under a system of small-scale production than within a
more rationalised capitalist structure.

FRANCE 305

In agriculture France meets most of her own needs, but
has very little surplus of any important commodity for
export. Even in the case of wine, which most people think
of as predominantly a French export, the quantities im-
ported are actually ten times as great as those exported
from the French vineyards. Imported wine comes, however,
largely from Algeria, which forms virtually part of the
French productive system. The chief agricultural imports
are wheat and maize, and there is also some importation of
sugar. For though France grows both wheat and sugar-
beet on a large scale — indeed these form, together with
oats, her principal crops — she needs to import in most
years a considerable quantity of both commodities in order
to meet the needs of domestic consumption. In 1931 the
imports on which France spent most were first of all coal
and coke, secondly cereals, mainly wheat, and third, only
a little way behind cereals, wine, whereas her most im-
portant exports were chemical products, iron and steel, and
silk and cotton textiles, in that order. She was thus mainly
an exporter of manufactured goods, and an importer of
certain foodstuffs, and of one vital raw material, coal.

In industrial production she is handicapped by her
deficiency of coal, despite her accessions in Alsace-Lorraine
and her rights since the war over the output of the Saar
coalfield. This deficiency makes her important as a market
for British coal, and there has been in recent years sharp
rivalry between the British, German, Polish and Belgian
coal mines in meeting the French demand, complicated at
one time by the imposition of special duties on British coal
to offset the depreciation of the pound. But although
shortage of coal handicaps France industrially, especially
in the iron and steel trades, she has done a great deal to
make up for her shortage of mineral fuel by the develop-
ment of electricity based on water power. There has been
a rapid increase in the total output of electrical energy in
recent years, and nearly a third of the present output is
hydro-electric. Electricity supplies to an increasing extent
the source of power for the small industries remote from the

306 THE COUNTRIES OF EUROPE

great northern industrial area round Lille and the
Lorraine iron fields.

After chemicals and iron and steel, the two industries for
which the acquisition of Alsace-Lorraine has been most
important, France depends largely on her textile trades.
Her silk goods easily lead the way in the markets of the
world, though she is to an increasing extent in competition
in this field not only with the cheaper silk goods of Japan,
but also with rayon products made in Italy, Germany
and Great Britain, and there has been a very sharp fall in
her exports of silks during the past two or three years. In
the cotton trade, which is only less important than that of
silk, she is also largely engaged in quality production,
specialising in fancy cotton goods with marketable qualities
of artistic design. She also exports clothing on a very large
scale, again concentrating mainly upon quality products ;
but this trade has suffered even more seriously than any of
the others in consequence of the world depression, the
export of clothing falling in value from 1,662 million francs
in 1930 to 691 millions in 1931. Her production and export
of automobiles are also large, and next to them, and to the
high quality wines which she sends abroad, comes in her
list of exports the trade in soaps and perfumes. Thus the
French export trade depends to a very great extent on the
demand for luxury goods, and is therefore especially liable
to feel the effects of world depression. It is in these circum-
stances remarkable that France was actually longer in
feeling the consequences of the slump than any other leading
country. Certain of her most important exports did indeed
fall off sharply, creating a considerable amount of local
unemployment ; but France's dependence on the world
market is on the whole so much less than that of either
Germany or Great Britain that she was able to stand up to
the loss of a large part of these markets with relatively little
disturbance to her economic system, especially as she had
abundant resources of money abroad to meet all necessary
claims for the purchase of imports. Only as world depression
deepened in 1932 did unemployment in France assume

FRANCE 307

really large dimensions ; and even then the comparative
smallness of the scale of industry and the comparative
nearness of the French population to the land made the
amount of suffering involved appreciably less than it would
have been in similar circumstances in other industrial
countries. For Fuance, unlike Great Britain and Germany,
has no system of unemployment insurance, the relief of the
unemployed being left to local effort. This has undoubtedly
meant that the individual worker who falls out of a job and
is not able to go back to his family in the village has
suffered more seriously than the unemployed workers in
countries where insurance systems exist. But some counter-
poise to the advance of unemployment in France was made
by the expenditure of considerable sums by the State upon
the national programme of economic development laid
down in 1926, when, the reconstruction of the devastated
areas having been more or less completed, the French
Government embarked on a large plan of loan expenditure
especially in the field of electrical development for the
expansion of the national productive resources. France
has not been able in the long run to escape the consequences
of the world slump, particularly since growing budgetary
difficulties and the exhaustion of the available credits
have caused a slowing down in public expenditure on
works of development ; but even now her position is less
vulnerable than that of other countries because of the
strength of her financial situation — though not of her
public finance — and the comparatively balanced nature of
her national economy.

It was suggested earlier that this balanced national
economy was to a great extent natural, and not merely the
result of artificial measures ; but it has of course been
deliberately preserved by national policy. France is a
country with a high tariff on those classes of imports most
likely to compete with her domestic industries ; and she has
also, at the cost of keeping the price of wheat far above the
world level, imposed a stiff system of protection in the
interests of her agricultural producers. What is meant,

308 THE COUNTRIES OF EUROPE

then, by suggesting that the balanced economy which
exists in France is natural rather than artificial is not that it
would have been able to survive in the absence of a State
policy designed to support it, but only that State policy has
needed only to maintain an existing balance and not to
set up one which had been previously overthrown.

The French tariff system differs from those of other
countries in being based far more upon discrimination
between products according to their place of origin. The
post-war system of tariffs in France has been built up
largely not by Parliamentary enactment, but by separate
commercial treaties with different countries, made under a
general authority conferred upon the executive Govern-
ment. France negotiates with each country a separate trade
treaty laying down the terms on which its imports are to be
admitted into the French market; and this results in the
existence for many products of a number of distinct rates
of duty applying to goods consigned from different countries.
The French tariff system also embodies a schedule of general
rates of duty applicable in the absence of special treaty
arrangements ; but these general rates apply in practice
only to a fraction of the total imports. It is thus very
difficult to measure accurately the height of the French
tariff, or to compare it with those in force in other countries.
What can be done by way of general measurement will be
found set out in a later section of this book.

Politics and Finance. France since 1918 has had an
exceedingly chequered financial history. The war was
financed almost exclusively by means of loans without any
substantial increase in the level of taxation, which would
indeed have been difficult to achieve in view of the grave
disturbance to the national economy caused by the foreign
occupation of some of the most important industrial dis-
tricts, and by the calling up of a very high proportion of the
able-bodied workers for military service. After the war this
process of borrowing continued, and a large part of the
French debt to the United States was incurred after 1918.

PRANCE 309

Since then taxes have been raised to a substantially higher
level ; but each increase in the level of taxation has in-
volved acute political controversy, and there is still a very
marked reluctance on the part of French Governments to
incur the odium of increasing the taxes, and on the part of
the French taxpayers to meet the tax-gatherers' demands.
Tax evasion has been reduced appreciably by stiffening up
the methods of collection in recent years ; but it still goes
on to a substantial extent, especially in the case of the tax
on incomes, which is exceedingly unpopular with the
French tax-paying classes. Largely for this reason, the
French raise a high proportion of their total tax revenue in
indirect taxation. Thus in recent years, whereas more than
half the total tax revenue of Great Britain has been drawn
from direct taxation, or as much as 60 per cent if taxes on
inheritance are included, France has drawn until quite
recently only about one-fifth of her revenue from income
tax, and not much more than a third from all direct taxes,
including the tax on inheritance, as against 50 per cent
from the customs, excise, and business turnover taxes, and
a further 14 per cent from registration and stamp duties
and similar imposts. Despite the increase in taxation in
recent years, the French budget is still by no means bal-
anced. The Daladier Government has recently done what
it dares by way of raising taxes and increasing the stringency
of collection ; but even so it has been compelled to budget
for a substantial deficit in the current year, even after sus-
pending the Sinking Fund on the National Debt.

The French financial situation thus presents the paradox
of an inability of the Government to make both ends meet,
combined with a very high degree of national strength in
the financial sphere. The coffers of the Bank of France are
filled to overflowing with gold : and it is hard for the
depositors' money to earn a tolerable rate of interest.
Money is so plentiful in relation to the opportunities for
its use that it seems absurd to suggest that France is
unable 10 meet her debts to the United States. But the
idle resources of the Bank of France and the other

31O THE COUNTRIES OF EUROPE

banks belong not to the French Government, but to
the French public, and to some extent to foreign depositors ;
and no means has yet been found of extracting them for the
service of the State. For it must be remembered that, de-
spite this appearance of wealth, France taken as a whole re-
mains a poor country in comparison with either Great
Britain 01 the United States ; and the ability of the great
mass of her people to bear taxation is far lower than the
corresponding ability in these countries. In relation to the
average national income France is already highly taxed,
and it is not easy to tap the surplus wealth which does un-
doubtedly exist in the hands of a very limited class.

It is the more difficult to place French public finance on a
satisfactory footing because of the experiences through which
the very powerful class of small property owners has passed
since 1914. In the years immediately following the war the
French franc underwent a process of rapid depreciation,
never of course pushed to anything like the same extremes
as the depreciation of the German mark even before the
Ruhr occupation, but sufficient to reduce the gold value of
French money to less than one-fifth of what it had been
before the war, and its purchasing power to an even greater
extent. French wholesale prices stood in 1926 at more than
seven times the pre-war level, and even the cost of living
had risen to more than five times what it was in 1914. When
stabilisation of the franc was at last achieved by the Poin-
care Government in 1926-27, the new gold value given to it
was only one-fifth of the pre-war parity, so that in terms of
gold pre-war holders of monetary claims found the value of
their property scaled down by four-fifths. Even at the end of
1932 French wholesale prices were still more than four times
as high as before the war, and French retail prices more than
five times as high, the higher level of retail prices being
largely accounted for by the protection accorded to French
agriculture.

This confiscation of a large part of the pre-war savings
of the French public, including the large body of small
rentiers, has engendered an exceedingly strong suspicion in

FRANCE 311

France of any policy likely to lead to further depreciation
of the value of money. The French public has been prepared
to endorse measures of protection designed in the interests of
French industry and agriculture, even where these have re-
sulted in some rise in internal prices ; but there has been
acute suspicion of any attempt to bring about a concerted
rise in the general level of prices throughout the world, on
the ground that this might result in a further depreciation
in the value of French savings. This has caused the Bank
of France and successive French Governments to adopt for
the most part a policy of opposition to projects for relieving
the world from its present difficulties by any measures par-
taking of the nature of inflation, though they have been pre-
pared to collaborate in measures, such as those projected
at the Stresa Conference, for raising the prices of particular
products in the interests of the distressed agricultural
countries. For the adoption of the Stresa recommendations
for raising the price of wheat would only bring the world
price nearer to the price already ruling inside France, and
would thus not add to the cost of living of the French
people. This whole question of the raising of prices is dis-
cussed in a later section, and need not be further developed
here.

One marked effect of the experience of inflation during
the years between 1918 and 1926 has been to make the
French set a very high value on the stability of their cur-
rency.- Above all other countries they are the devotees of
the gold standard. This accounts for the avidity with which
they have accumulated in recent years an enormous reserve
of gold, even though the maintenance of this large reserve
as a non-earning asset involves them in considerable losses
in interest upon their capital. In economics as well as in
politics French fears customarily outweigh French hopes,
and France's currency policy is marked by an extreme
caution which stands in the way not only of her co-opera-
tion in any scheme of world reflation, but also of a resump-
tion of foreign lending as an outlet for the surplus supply of
capital. For the French, having been bitten once in Russia,

312 THE COUNTRIES OF EUROPE

are not at all inclined to risk their money in doubtful ven-
tures abroad in an unstable capitalist world. They prefer
to keep it at home, even if for the time being it earns them
next to nothing.

French fears, we have said, tend to outweigh French
hopes. To what an extent this sense of fear has dominated
French foreign policy since the war is analysed in the sec-
tion of this book dealing with the political problems of
Europe. That French fears seem to be largely justified by
the existing European situation is sufficiently obvious. The
only question is whether the policies which have emerged
from the sense of fear have been such as to remove the
causes of fear, and not to make them more real and urgent.
If France, despite her fears of a German militarist revival,
had in the years immediately after the war collaborated in
the restoration of Germany, and endeavoured to set the
staggering German Republic firmly on its feet, the imme-
diate outlook for Europe might have been far more hopeful
to-day than even the most inveterate optimist can pretend
that it is. But it is easy to understand the French attitude
and to see that many Frenchmen to-day are likely to regard
themselves as abundantly justified by the event. This vie\\
may be, and we think is, fundamentally wrong ; but that
does not prevent it from being in the circumstances a
natural attitude.

For the French, though they succeeded, with British help,
in keeping the Germans out of Paris in 1914, have not for-
gotten to what an extent German forethought in the strategy
of war had exceeded their own. They had planned all their
military operations in terms of a short offensive and vic-
torious war ; they were ill-equipped with munitions, and
had made no preparations for the carrying on of a prolonged
war of attrition. No wonder they lost confidence in them-
selves, and no wonder their fears of Germany are deeply
rooted after the experience of four years' occupation of a
large part of their territory. It is true that more than once
since the war the French have made a real attempt at col-
laboration in the rebuilding of Europe. After the disastrous

FRANCE 313

Ruhr struggle of 1923-24 — disastrous for France as well as
for Germany — the advent to power of the Herriot Govern-
ment in July 1924 did inaugurate a period of greatly im-
proved relations between France and Germany ; and even
Herriot's fall in April 1925 did not involve any substantial
departure from the foreign policy which he had instituted.
Briand carried on this policy under the subsequent Govern-
ments. When Poincare came back to power in 1926 he was
a different Poincare from the Prime Minister who had been
responsible for the Ruhr occupation ; for his return to form
a new Government of National Union reminiscent of the
Bloc National of the post-war years was due to the demand
for a strong hand in restoring the financial situation rather
than to any shift in foreign policy. Poincare's Government
of 1926 included Herriot and other Radicals, until their
support was withdrawn under the definite orders of the
Radical-Socialist Conference of 1928 ; and this Poincare
Government of National Union was able not only to sta-
bilise the franc but also to carry through the long-postponed
process of ratifying the American debt agreement. Only
after the withdrawal of the Radicals did the Governments
of Poincare's successors in 1929 and the following years
show signs of reverting, especially after Briand's retire-
ment and death, to the strongly anti-German policy of the
years before 1924. The Tardieu and Laval Governments of
1929-32 were definitely reactionary ; and when these
gave -place in 1932 to a new succession of Radical Govern-
ments dependent upon Socialist support, the return to a
more accommodating attitude in European politics came
too late. The Nazi movement in Germany had already
passed beyond control, and the hopes based on the simul-
taneous existence of pacific Governments in London and
Paris could no longer be fulfilled ; for the second British
Labour Government of 1929 had already fallen a victim to
the financial crisis of September 1931. In Great Britain in
1931, as in France six years earlier, finance had been the
undoing of a Government of the left. It remains to be seen
whether the combination of revived militarism in Germany

314 THE COUNTRIES OF EUROPE

and growing financial difficulties in France will be too much
for the Radical Government of M. Daladier in 1933.

Yet, though France may be in danger of a militarist re-
action, there seems to be little present chance of her nation-
alism taking the aggressive form associated with it in Ger-
many, or even Italy. The French, having recovered Alsace-
Lorraine, have no further ambitions of conquest : their
militarism, as far as it exists, is defensive and the product
of fear and not of the glorification of war. Above all, the
French want to be let alone. Regarding themselves, not un-
justifiably, as the most highly civilised people in Europe,
they want tranquillity to till their soil and develop their
social life in their own way. In economic matters they are
apt to be strong individualists, as is natural among a people
of peasant proprietors and small-scale industrial producers,
with a large middle class interested in the maintenance of
the status quo. But their individualism is tempered in social
matters by the high sense of family solidarity ; and the im-
portance of the family as a unit of French life and thought
cannot easily be exaggerated. Women in France have
shown so far little inclination to agitate for political rights ;
and this may be, at least in part, because their social rights
are already so important and far-reaching. French culture
is extraordinarily strong and persistent in its distinctive
qualities ; and the strongly established traditions of French
family life and of the French agrarian and industrial sys-
tems stand formidably in the way, not only of the victory of
Socialism, but also of the rise in France of any powerful
Fascist or anti-parliamentary movement. France is a Pro-
tectionist country ; but she uses her tariffs to forward a
domestic policy of social and economic laissez-faire in
marked contrast to the authoritarian government of the
ancien regime of Louis XIV.

SPAIN AND PORTUGAL 315

§ 13. SPAIN AND PORTUGAL

SPAIN, with an area of over 190,000 square miles, is the
third largest of all the States of Europe, being not very much
smaller than France and substantially larger than post-war
Germany. But in population she is still much behind the
other great States of Western Europe. For she has only be-
tween 23 and 24 million inhabitants as against over 40
millions in France and 67 millions in Germany. This thin-
ness of population is accounted for partly by the undevel-
oped character not only of Spanish industry, but also of the
methods of agricultural production. But these are closely
connected with the nature of the country itself. For Spain
consists largely of high upland areas suffering for the most
part from a serious deficiency of rainfall ; and the most
densely populated districts, which lie round the coast and
along the course of the principal«rivers, are shut off one from
another by mountain ranges which make communications
difficult and tend to isolate one region from another in
sentiment as well as in economic development. Railway
communications are bad over the greater part of the country,
and there are large tracts of land which cannot be cultivated
effectively until big sums of money have been spent on ir-
rigation and other methods of improvement. If this were
done, the country could support a far larger population
than it has to-day.

But hitherto both the forms of government and the
systems of land tenure have been exceedingly unfavourable
to economic improvement. Huge tracts of land were, until
the Revolution of 1 93 1 , and for the most part are still, in the
possession of great landowners, who feel small incentive
to provide for any improvement in their cultivation. The
masses of the peasantry are ignorant, living at a very low
standard of life, and entirely shut off from the means of
learning how to improve their agricultural methods ; and
successive Governments, though they have made from time
to time sporadic attempts at educational reform and at
capital expenditure on improving the use of the land, have

316 THE COUNTRIES OF EUROPE

until the coming of the Revolution of 1931 achieved prac-
tically nothing either to educate the peasant population, or
to help it improve its standard of life. Since 1931 the revolu-
tionary Governments, based on coalition between the
Socialists and the bourgeois Republican parties, have begun
seriously to introduce a general system of education and to
set on foot schemes of agricultural improvement. But there
has been no time as yet for these reforms to become effec-
tive ; for, although many new schools have been opened
since 1931, and the process of redistributing and improving
the land has in certain areas been set seriously on foot, it
will take time for any tangible improvements to result from
measures of this sort. The Agrarian Law which forms the
basis of the Republic's attempt to tackle the land prob-
lem was only passed in September 1932 ; and the pro-
cess of actual redistribution of the land is barely more than
begun to-day, and has not been applied at all in many
districts.

In the meantime the peasants in Spain as elsewhere have
suffered seriously from the effects of the world depression ;
for Spanish exports, which consist mainly of agricultural
products, have fallen heavily in price, and the instability of
the Spanish currency has added to the difficulties of the
agricultural population in purchasing imported industrial
goods. Under any circumstances Spain would be to-day
an exceedingly poor country ; but her poverty is the
greater and the difficulties of the new Republic are gravely
aggravated by the co-existence of the world crisis with the
attempt to set the new Republic firmly on its feet.

Spain, we have said, consists largely of upland country,
suffering from a severe deficiency of rainfall. Most of the
country consists of high plateaux, rising at certain points
to considerable mountain ranges. Madrid stands in the
centre of a great plateau, shut off from the north by the
Sierra da Guadarrama. The greater part of the low-lying and
more fertile area of the peninsula lies in the south of Por-
tugal ; Spain herself has fertile and low-lying land only in
the valley of the Guadalquivir from Linares to Seville and

SPAIN AND PORTUGAL 317

Sanlucar in the south and along the valley of the Ebro in
the north-east, apart from the coastline from Catalonia in
the north to Murcia in the south, and a very narrow strip
along the north coast and in Galicia in the extreme north-
west. Moreover, even a large tract of the more low-lying
part of the country is seriously lacking in rainfall. The
peninsula as a whole is divided between a humid area con-
sisting of Portugal, Galicia and a strip along the north, and
a much larger arid part, covering all central and practically
all southern Spain. In these circumstances the chief areas
of population, apart from Madrid, are in the south and
along the east coast, and there are few towns of any con-
siderable size in the central area, except Saragossa on the
Ebro, and Bilbao on the north coast.

Spain is thus a predominantly agricultural country, cul-
tivated for the most part at a very low standard of efficiency
and without any attempt, except in the fertile areas in the
south and east, to apply scientific methods of agricultural
production. Cereals are nevertheless produced on a con-
siderable scale, especially wheat and barley. But Spain
has no surplus of these commodities for export, and she
needs to import a large quantity of maize. Her agricul-
tural exports, on which she chiefly depends for purchasing
the industrial imports which she needs in considerable
quantities, are wine, olive oil and fruit ; but she also ex-
ports a considerable quantity of raw materials, especially
lead and copper, and certain high-grade iron ores. She
produces superphosphates, and could develop out of her
own resources the means of greatly improving her agricul-
tural standards by the application of chemical manures.
She has some iron and steel production of her own, and a
large production of cement ; while among other manu-
factured exports, cotton goods occupy the most important
place. But she needs to import most of her coal, and by far
the greater part of her machinery, motor-cars, electrical
goods and other products of the metal-working industries.
She is also a producer of raw silk ; but the silk manufac-
turing industry is at present undeveloped. On the whole

318 THE COUNTRIES OF EUROPE

Spain has had in recent years a small adverse balance of
trade ; but this has never reached really large dimensions,
and the import of capital in recent years has not been on a
large scale. A substantial part of her diversified mineral
resources are, however, exploited at present by foreign
companies, and this foreign ownership of the Spanish mines
stands in the way of the development of native industries,
which are further hampered by the absence of any adequate
supply of coal.

For some time to come Spain is certain to remain mainly
agricultural ; and the great task ahead of her Republican
Government is undoubtedly the improvement of the
methods of agricultural production, especially in the great
central areas which have hitherto been left undeveloped
in the hands of the large landowners. In the more fertile
parts of the country landed property is more divided, and
the standards of cultivation are considerably higher, especi-
ally in the southern areas, where oranges and lemons are
produced in large quantities, and vineyards and olive
groves are intensively developed.

The Spanish land system, as we have seen, has greatly
aggravated the natural disadvantages under which the
Spanish peasant is compelled to work. When the report of
1928 on the condition of Spanish agriculture was drawn up,
over 90 per cent of the land holdings were found to con-
sist of less than 10 hectares, whereas one grandee alone
had an estate of 95,000 hectares ; no less than 120,000 kilo-
metres of land belonged to a group of 100,000 owners,
while nearly i\ million middle-sized owners held between
them 60,000 kilometres. The great landlords who held the
vast estates for the most part paid very little attention to
their cultivation. The peasants, however, depended for
their living on the great landowners, and before the Revo-
lution some of them were giving their labour in return for
nothing more than their food, while many were working
at a wage not exceeding three pesetas a day. The large
landowners had put up, and to a great extent are still
putting up, a powerful resistance to any measures of

SPAIN AND PORTUGAL 319

agrarian reform ; and it was plain that only a courageous
handling of the land question could give the new Republic
any chance of settling down upon a firm basis. But for some
time after the Revolution it remained highly uncertain
whether the Government would be prepared to face the
very strong opposition which any large-scale agrarian
reforms were bound to provoke, and it was not until the
Government of Senor Zamora had been replaced by that
of Senor Azafia, in which the Socialists exercised a larger
influence, that any real beginning could be made. The fact
that during the past year the Government has endeavoured
at length seriously to tackle the land question is undoubtedly
one of the principal reasons for the intensive efforts which
were being made by the opposition during the early months
of 1933 to throw out the Socialists and secure instead a
Government of Republican concentration likely to be more
favourable to the claims of property.

These difficulties, as indeed many other of the difficulties
of Republican Spain, have a source far back in history. The
natural configuration of Spain, the river- valleys divided by
mountain ranges, and the high and separate plateaux,
have always made for separation rather than unity ; the
caliphate set up by the Moslem invasions very soon fell to
pieces, and when the Moslems began to be pressed back the
Christian kingdoms which rose to replace them were small
and separate. Only at the end of the fifteenth century did
the union of Castile and Aragon under Ferdinand and
Isabella succeed in creating a kingdom strong enough to
bring the whole of Spain under one rule ; and this, as is
well known, was the prelude to the most brilliant period
of Spanish history. Poverty, however, in spite of the Dis-
coveries and the treasures of the Spanish Main, was close
at hand ; the grandee, drawing a monetary tribute but
caring nothing for improving the yield of his own estates
or the lot of the peasants, dates back to the sixteenth
century ; and the development of manufactures, which
might have brought prosperity, was prevented by the refusal
of the grandee to soil his hands as well as by the religious

32O THE COUNTRIES OF EUROPE

fanaticism which drove into exile the industrious Jews and
Moriscos. Spain, in the seventeenth century, was one of the
poorest and worst-governed countries in Europe. Famine
was frequent, and the casual traveller could hardly get bed
or food. Eighteenth-century attempts at reform did little
to mend matters, and though the revolts of 1833, which
the Concert of Europe was unable to suppress, inaugurated
a rather more liberal regime, the heavy hand of the Spanish
Church and the constant dynastic quarrels kept the country
at a very low political level.

Before the Revolution of 1931 Spain had existed for eight
years under a system of military dictatorship, following
upon the Royalist coup of General Primo de Rivera in
1923. But even before this Spain, although she possessed in
form a constitutional Government, was in fact ruled for the
most part autocratically — where she was ruled at all.
Alfonso XIII from the moment when he reached his
majority and took control of affairs into his own hands
made plain his dislike of constitutionalism and his deter-
mination to base the government of the country chiefly
upon the Church and the Army. Politicians came and
went, and Conservative alternated with so-called Liberal
Governments ; for Spain, like other countries, possessed her
party system, and her politicians bore the appropriate party
labels. But in practice the parties were weak, ill-organised,
and divided into small fractions under the influence of rival
leaders, and their control over affairs was very narrowly
limited, not only by the royal power but also by fear of the
overriding authority of the Army and the Church. Soci-
alism and Syndicalism acquired a considerable hold on the
urban workers in the latter part of the nineteenth century,
especially in Catalonia ; and after 1900 they began to
spread in some of the rural areas as well, especially in the
relatively fertile south. Spanish Socialism has shown from
the outset strong tendencies towards Anarchism ; and
Syndicalism and Trade Unionism have been until lately
more Anarchist than Socialist in their attitude and policy.
This is both cause and consequence of the pronounced

SPAIN AND PORTUGAL 321

localism of the Spanish working-class movement, which
has made it powerful in holding up industry by sudden
strikes in particular areas, but relatively weak as a con-
structive force operating over the country as a whole.

The political history of Spain during the nineteenth
century is indeed largely the history of successive acts of
military aggression. When the Army and the Church have
been united they have had no difficulty in getting their
own way, whatever Constitution might be temporarily in
force. But in fact they have not been consistently united,
and the Army has appeared on a number of occasions as a
force apparently on the side of democracy. Again and again
in the century before Primo de Rivera's coup some Spanish
general had issued a pronunciamento, and taken power into
his own hands, sometimes for the purpose of overthrowing
a nominally liberal Constitution already in force, but also
on occasion for the purpose of establishing a more liberal
regime. But in practice, generals, whatever their original
political allegiance, commonly used their power, while it
lasted, for the establishment of some form of personal
autocracy; and the extreme instability of Spanish
political institutions is explained largely by the rise and
fall of a succession of ambitious generals. In the years
before Primo de Rivera's coup, there had been for some
time a lull in the succession of military pronunciamentos ; but
this did not mean that the Army had been inactive in
political affairs. Spain was in fact maintaining a very large
Army, and the officers of this Army had organised them-
selves into a series of military juntas which monopolised
lucrative positions, dictated conditions of pay to the civil
Government, and generally ordered the Government about
with a supreme disregard for the Constitution supposed to
be in force. The King sided with the Army, and used it, as
well as the Church, as an instrument for destroying the
Constitution, and establishing his own autocratic authority ;
and it was primarily to save the Crown from its unpopu-
larity in the country and to make the royal autocracy
everywhere effective and complete that Primo de Rivera,

LR

322 THE COUNTRIES OF EUROPE

then Captain-General of Barcelona, made the military
revolution of 1923.

From 1923 to 1929 Primo de Rivera continued to govern
the country. The structure of his Government was at first
purely military ; but in face of its growing unpopularity he
recognised before long the need for giving it a less exclu-
sively military appearance, and in 1925 he restored a
civilian Cabinet, which consisted of his own nominees and
remained entirely under his own control. In 1927 some
further steps were taken to give his administration a more
constitutional appearance, without restoring the sus-
pended constitutional guarantees or summoning any sort
of Parliament ; and towards the end of his dictatorship
Primo de Rivera experimented with an imitation Parlia-
ment not elected but nominated from above, and thus
totally ineffective as an expression of the real attitude of the
country. Primo de Rivera, despite his autocratic methods,
seems not to have desired to establish himself as a per-
manent dictator, but rather to re-introduce some less
authoritative form of government as soon as he felt that the
position of the Crown, Church and Army had been ade-
quately secured. But his small concessions to the principles
of Parliamentarism and civilian government, coupled with
his failure to tackle effectively any of the economic problems
besetting the country or to prevent a serious depreciation
of the Spanish currency, before long made his position in-
creasingly difficult. Even so, he was too liberal for the
King ; and, when his growing unpopularity became mani-
fest, the King in 1930 demanded his resignation, and re-
placed him, not by a constitutional Cabinet, but by another
military leader, General Berenguer.

Meanwhile, the growing discontent was assuming a more
and more revolutionary form. On the working-class side
there were many strikes, mostly sporadic and short-lived,
which were suppressed with growing difficulty. But the
potential revolutionary forces were still sharply divided
among themselves, not only because there was no basis of
agreement between Syndicalists and Socialists, Radicals and

SPAIN AND PORTUGAL 323

Agrarians, discontented elements among the Conservatives
and the other Parliamentary fractions, but also because,
while one section of the revolutionaries wished to create
a united Spanish Republic based on strong centralised
government, another section desired to split up the country
into a number of independent or at least autonomous
States, joined together if at all only by some loose bond of
federal union.

This demand for dismemberment came chiefly from the
advocates of Catalonian independence, for the Catalans,
speaking a language different from that of the greater part
of Spain, and possessing to some extent a culture and
outlook also distinct, have for a long time possessed a
strong nationalist movement of their own. The Catalan
Nationalists, who had their main strength among the
middle classes and the peasants, were in sharp opposition to
the working-class leaders of Barcelona, who desired the
creation of a unified Spanish Republic. But by the middle of

1930 the unpopularity of the dictatorship under General
Berenguer had become so extreme that an agreement for
joint action was reached between the Catalan Nationalists
and the other Radical and revolutionary groups, including
even some of the Conservatives. In face of this alliance it
became plain that the dictatorship could not last. But the
revolt which broke out at the aerodrome of Cuatri Ventos
in December 1930 was successfully repressed, and most of
the Republican leaders were placed under arrest. The
Government meanwhile promised to hold elections in
March 1931, with a view to placing the State once more
upon a semi-constitutional foundation. But the Liberal,
Socialist and Republican parties, knowing that under the
conditions existing in Spain the elections were likely to be
a farce and to result in the return of most of the Govern-
ment's nominees despite its unpopularity, announced that
they would boycott the elections even if they were held.

Under this threat, King Alfonso was driven in February

1931 to restore the constitutional guarantees, and the
Liberals were by this means persuaded to withdraw their

324 THE COUNTRIES OF EUROPE

ban. But their chief leader, Count Romanones, announced,
with the support of the Catalans, that he would ask for a
Constituent Assembly with power to draw up a new Consti-
tution. Upon this announcement the Government cancelled
the elections, and the Cabinet, unable to maintain itself any
longer, was compelled to resign. There followed on the
King's part a struggle to form a new Government capable of
maintaining the dictatorship ; and this was at last done
under — for a change — not a general but an admiral, by
name Aznar. But this Government had been less than two
months in office when at the municipal elections of April
1931 the Republicans won practically everywhere in the
towns an overwhelming victory, the immediate conse-
quence of which was the collapse of the dictatorship, and
the proclamation on April I4th of a Spanish Republic.
King Alfonso fled from the country, announcing at the
same time that he refused to abdicate or to give up his
lights ; a provisional Government was formed under Don
Alcala Zamora ; and a Constituent Cortes was promptly
summoned to meet.

The Revolution was practically bloodless, for everywhere
before it came the props of the dictatorship had fallen
away. The Army equally with the rest of the country had
withdrawn its countenance from the successive military
dictators, and was in a condition of pronounced unrest.
The Church, hitherto regarded as all-powerful in the
country districts, and as too strong for its leadership to be
effectively challenged over Spain as a whole, crumbled at
the instant of the proclamation of the Republic. The head
of the Spanish Church fled to Rome, whence he was
promptly ordered back by the Pope ; and the immense
load of unpopularity which Spanish Catholicism, with the
huge drain which it involved upon the very limited national
resources, had raised up against itself became manifest in
the pronouncedly anti-clerical character which the revolu-
tion took from the very start.

The new Cortes speedily got to work upon the drafting
of a Constitution. Within the Government, based on a

SPAIN AND PORTUGAL 325

coalition of many parties, from Socialists to dissident Con-
servatives, there was no agreement at all about the basis
on which the new State ought to rest. In these circum-
stances, instead of drawing up and putting forward a Con-
stitution of its own, the Government handed over the task
to a non-political committee of experts, which prepared a
draft scheme generally known as the AnUproyecto. When this
was received, it was handed over by the Government to the
Cortes without any recommendation ; and the Cortes
thereupon referred it to a committee representative of all
the revolutionary parties, which in turn drew up the
Proyecto, upon which the Constitution was ultimately based.
The Socialists were represented upon this committee, but
were in a decisive minority, so that the structure of the new
Spanish Republic was not that of a Socialist State, but
rather of a democratic bourgeois Republic like France.
Features were, however, borrowed from a number of other
Constitutions ; and the Spanish Constitution differs from
other bourgeois democratic instruments of government both
in the far greater stress that it lays on internationalism, and
in the more definite and fully worked out statement of
public rights and duties which it embodies. In framing these
clauses the Socialists did undoubtedly exert a very sub-
stantial influence ; but they did not secure any form of
government designed to make Spain definitely a Socialist
country. They accepted, in fact, the common Social Demo-
cratic view that Socialism should be left to evolve through
the working of the bourgeois parliamentary system. What
they did secure was that the new Constitution should be
based on an advanced form of parliamentary democracy.
Thus the new Spanish Cortes consists of only one Chamber
and is elected by universal suffrage, including both men
and women. Spain is thus the first Latin country to give
women the vote.

The new Constitution was approved in November 1931 ;
but before this difficulties had arisen between the various
elements forming the revolutionary Government. The un-
popularity of the wealthy Spanish religious orders led to an

326 THE COUNTRIES OF EUROPE

insistence by the Socialists, with the support of the more
Radical elements in the other parties, on the expulsion of
the Jesuits and the nationalisation of their property. The
approval of this measure by the Cortes in October 1931 led
to the resignation of the first revolutionary Government
and especially of its leader, Zamora, and of the chief Con-
servative supporter of the Revolution, Maura. The Govern-
ment was then re-formed under Azana, with the Socialists
in a somewhat stronger position, but still in a minority ; but
the continued solidarity of the revolutionary forces was
affirmed when the Cortes, immediately after the coming
into force of the new Constitution, elected Zamora as
President of the Republic. At the same time Azana
re-formed his Government as the first Cabinet working
under the new constitutional system.

Even when the Constitution had been adopted much
remained to be done in providing for the government of
the country. In November the Cortes had adjudged ex-
King Alfonso guilty of high treason and had declared him
an outlaw and confiscated the very large property belong-
ing to the Crown, which, together with the property taken
from the Jesuits, provided at least the nucleus of a supply
of land for distribution among the hard-pressed peasants.
But before the Government could go on seriously to the
task of agrarian reform it had to dispose of the question of
Catalonia ; for the Catalans had been, from the very
outbreak of the Revolution, pressing strongly for the recogni-
tion of their complete autonomy within the new Spanish
State, and threatened to proclaim their independence
unless their demands were met. This claim in its extreme
form was explicitly rejected by the Constitution, which
made Spain a unitary State, and conferred wide powers
on the Central Government for dealing with all those
matters which seemed to need uniform treatment over the
whole area. Thus not only foreign relations, including
commercial relations, military affairs and public finance,
but also general legislation on questions of labour, educa-
tion and social welfare, were placed under the authority of

SPAIN AND PORTUGAL 327

the Central Government. But in order to placate the
Gatalonian opposition it was also laid down in the Consti-
tution that the Cortes should proceed at once after its
adoption to draw up a series of statutes granting a wide
degree of autonomy to the individual provinces of the
Spanish Republic. These provinces were to have rights of
legislation concurrently with the Central Government, and
were to be empowered both to adopt additional laws to
meet their own needs and to take over by agreement the
administration of specified services from the central body.
It was, however, provided that the statutes embodying
provincial autonomy should be passed by the Cortes and
revocable by it, and should not be embodied in the Con-
stitution so as to become absolute and beyond the reach of
amendment. The Catalans, while the extreme National-
ists among them would have liked to go much further than
this, were driven to accept the compromise by the existence
in Catalonia itself of a strong body of opinion, especially
among the workers, hostile to any policy that would have
resulted in a weakening of the unified forces of the Spanish
Revolution.

Having dealt with the question of Catalonia, the Cortes
and the Government found themselves more free to tackle
the vital need for economic reform. The Agrarian Law of
September 1932 added further to the amount of land readily
available for distribution among the peasants, by expro-
priating without compensation the vast estates belonging
to the Spanish grandees, and also the landed property of
those monarchists who had been implicated in General
Sanjurgo's unsuccessful counter-revolutionary outbreak of
August. Apart from these exceptional cases, power was
assumed under the Agrarian Law to take over with com-
pensation unused or ill-cultivated lands, lands requiring
special measures of irrigation, land in the neighbourhood
of towns wherever it was not being cultivated by its
owners, and all estates over certain sizes — which were
left to be determined province by province at any figure
between a hundred and six hundred hectares in accordance

328 THE COUNTRIES OF EUROPE

with the local conditions and the use made of the land.
While compensation was to be paid, its amount was to be
strictly limited. Under the old regime the landowners had
made, for the purposes of taxation, returns in which they
declared the value of their property ; these were now
taken as the maximum values in fixing compensation
claims : a highly satisfactory arrangement from the stand-
point of the State, as the landowners were not likely to
have erred in over-estimating the real value of their
properties.

The land thus taken was to be available for distribution
among the needy peasants either individually or organised
in syndicate or societies. Peasant co-operation had, in the
period before the Revolution, grown up to a certain extent
under the auspices of the more radical section of the
Catholics as well as of the Socialists ; and the aim of the
Socialist Minister of Agriculture was to secure that as far
as possible the redistributed lands should pass into col-
lective rather than into individual control, as he hoped
that this method would be the more effective both in
raising the standards of cultivation and in improving the
political education of the peasantry. It is too soon yet to
say how far this aspiration will be fulfilled, for the process of
redistribution is still at an early stage, and no returns are
available showing on what basis the land has actually been
parcelled out.

At the same time a second Socialist Minister, de los Rios,
was actively reforming the Spanish educational system,
which had been extremely inefficient, especially at its
elementary stage, and almost entirely under the domination
of the Church. Something had indeed been done to pro-
mote higher education in Spain under the auspices of the
Committee for the Defence of Studies, originally estab-
lished in 1907 ; and some of the Spanish universities had a
high reputation, although their work had been seriously
interfered with under the dictatorship, because repeated
revolutionary movements among the students had caused
Primo de Rivera to spend most of his time alternately

SPAIN AND PORTUGAL 329

closing them and allowing them to be re-opened. But for
elementary education practically nothing had been done ;
and Spain had and has an extremely high percentage of
illiteracy for a European country. The Socialists, even before
the war, had been active in endeavouring to promote edu-
cational reform, largely under the inspiration of Ferrer, the
Anarchist leader, who was executed in the course of the
Barcelona revolt of 1909. Many of the Socialist, Syndicalist
and Anarchist bodies conducted active educational move-
ments of their own ; but these were of course quite unable
to touch the great mass of the people, and were, moreover,
subjected to constant persecution at the instigation of the
Church. Since 1931 the Government has been spending
large sums in the building of new schools in an endeavour
to combat Church influence by the establishment of a uni-
versal system of secular elementary education. But this too
is bound to take time on account both of the poverty of the
country and of the shortage of suitable teachers, which has
to be remedied by the establishment of special training
colleges and other institutions.

In these two fields Socialist influence in the Spanish
Government, backed to a large extent by the more extreme
groups among the Radicals, has succeeded in making a
sound beginning ; and steps have also been taken to equip
Spain with at least the rudiments of a code of labour
legislation and factory inspection. But all these measures
have aroused an increasing amount of opposition among the
bourgeois elements included in the republican majority in
the Spanish Cortes. The old monarchist parties have indeed
disappeared ; but the place of these parties, which were
swept completely away in the dibdde of 1931, has been
assumed by those bourgeois parties which represent primarily
the Spanish industrialists and the more conservative
elements in the middle class. These have found in Lerroux's
Radical Party a new rallying-point ; and for some time past
the followers of Lerroux, with the backing of the entire
Right, have been pressing strongly for the exclusion of the
Socialists from the Government, and the formation of a

330 THE COUNTRIES OF EUROPE

purely bourgeois coalition. The elections held at the end of
April 1933 for the small local authorities throughout rural
Spain resulted in the return of a large body of representa-
tives belonging to the opposition parties, though both
Socialists and Radicals now gained a foothold for the first
time in these backward areas ; and although these author-
ities do not represent the towns, which provided the main
driving force for the Revolution, the elections furnished an
immediate excuse for demands that the Government
should resign, and give place to a Cabinet more in line with
the alleged distribution of opinion in the country.

The Prime Minister, Azafta, met this demand with an
offer to compromise. He was prepared, he said, to limit
the further legislation to be introduced by the Government
to the carrying through of the measures already approved in
principle by the Cortes, above all the execution of the land
law, and of the measures of educational reform and social
legislation already accepted. In return for this concession
he asked the Opposition to abandon the tactics of Parlia-
mentary obstruction which they had been pursuing for some
time, and to allow the Government to complete its immediate
programme, with the implied promise that it would then
be prepared to hand over its powers to a new combination
based on the real distribution of political opinion — what-
ever that might prove to be. This offer was, however,
promptly rejected by the Opposition, which decided to
continue the tactics of obstruction in the hope of forcing the
Government's hand. In the summer of 1933, immediately
after the passing of the law directed against the Catholic
Church, Zamora, a devout Catholic, who was excom-
municated for signing the law, dismissed the Azana Govern-
ment, and endeavoured to replace it by a new Ministry,
including the bourgeois Opposition. But this attempt failed ;
and the President was forced to recall Azana, who formed a
new Government on practically the same lines as before.
The Socialists thus continue for the present in the Ministry,
but the outlook, as we write, is exceedingly uncertain ; for it
is quite impossible to say how long the present coalition

SPAIN AND PORTUGAL 331

will be able to maintain itself in power in face of the grow-
ing bourgeois agitation against its continuance.

This agitation does not come entirely from the Right.
For there is among the Spanish Socialists themselves a
substantial minority which holds that the cause of Socialism
is being prejudiced by the policy of compromise involved
in maintaining the coalition. At the last Socialist Congress
the governmental Socialists had no difficulty in defeating
this opposition, but it is undoubtedly gaining strength in
the party. The main body of Socialists recognised the need
for coalition in order to consolidate the Republic, and
to secure that its early legislative measures, including the
adoption of the Constitution and the handling of the two
great questions of the Church and the land, should be
carried through on the most advanced lines that were
possible. But many of them hold that, now the Constitution
is in force and the main lines of Church and land reform
have been laid down, it is more desirable for the Socialists
to pass into opposition than to compromise themselves by
continued adherence to a partly bourgeois Government.

One ground on which this is strongly argued is that
continuance in the coalition is seriously prejudicing the
propaganda of the Socialists among the workers, who are
being induced to follow the lead of the Anarchist-Syndical-
ists rather than the Socialist Party. The Anarchist-Syndical-
ists have from the first refused to recognise the new central-
ised Republic as satisfying even temporarily the demands
of the Revolution. They are opposed to centralised Govern-
ment altogether, and want a localised system of control
based on Workers' and Peasants' Syndicates and Councils
throughout the country. They, in opposition to the Socialist
Trade Unions, have been mainly responsible for the
repeated strikes which have broken out during the past
year ; and the Socialists, being the Government party, and
therefore responsible for the maintenance of order, have
necessarily incurred a considerable amount of unpopularity
in repressing political strike movements. The Socialist left
wing holds that if this state of affairs continues much longer

332 THE COUNTRIES OF EUROPE

a large proportion of the Spanish workers will drift away
from supporting the Socialist Party and the Socialist Trade
Unions and will join the Anarchist-Syndicalist forces, with
the consequence that the control of the revolution will pass
entirely into the hands of those bourgeois parties which
desire to make France rather than any Socialist system the
model for the new Spanish Republic.

For the Anarchist-Syndicalists, however effective they
may be as an opposition, seem unlikely to be able to take
control into their own hands. Their repudiation of central-
ised leadership and of strong government makes them
largely incapable of acting together, and causes them to
dissipate their strength upon a series of local movements
with little coherence and little chance of national success.
Moreover, the chief strength of the Anarchist-Syndicalists
is in Barcelona and the neighbouring towns and in some of
the country districts ; they have little strength in the other
industrial centres of Spain. This division in the Spanish
working-class forces has already made the consolidation of
the Socialist elements in the revolution far harder than it
would otherwise have been, and the argument of those who
wish the Socialists to secede from the Government is that
they will do better at this stage by becoming an organised
opposition, and thus trying to rally the main part of the
working-class forces behind them, than by aggravating
the divisions inside the ranks of the working-class movement.
The division between the Socialists and the Anarchist-
Syndicalists is reflected in the distribution of Trade Union
forces in Spain. The Socialists have behind them the
General Union of Workers led by Besteiro and Largo
Caballero ; and this body gained ground enormously in the
early months after the success of the revolution. From only
about a quarter of a million members in 1930 it rose to well
over a million in 1932. Meanwhile the rival Anarchist-
Syndicalist body, the National Confederation of Labour,
lost strength very greatly in consequence of its opposition
to the Socialists in the early stages of building up the new
Republic. More recently this tendency is said to have been

SPAIN AND PORTUGAL 333

reversed, and the National Confederation of Labour
has been profiting by the criticisms levelled at the Socialists
for their participation in the Government. But over Spain
as a whole the Socialists are the stronger of the two bodies.
It seems likely that, as soon as they feel assured that the
^foundations of land and labour reform and of anti-clerical
legislation have been well and truly laid, in opposition, they
will be only too glad to leave the Government and devote
themselves to the consolidation of the working class as a
political force. They are certain, however, to find great
difficulties in pursuing this policy ; for Anarchist-Syndical-
ism has taken deep roots in the Spanish working-class
movement and will not be easily defeated. There is in
Spain a strong historical tradition of hostility to centralised
government, and a strong tendency to split apart and take
action on provincial or regional lines ; for centralised
government is connected in people's minds with the cen-
tralising tendency of the old absolutism, and with the
domination of Castile over the other provinces. This
Anarchist-Syndicalist tendency makes, of course, against
the rise in Spain of any strong Communist party ; for the
Communists go further in the direction of centralised
control even than the Socialists. At present Anarchist-
Syndicalism appears as a force upon the extreme left ; but
in the event of any great accession of strength to the Social-
ists or of the possibility of their gaining full control over
Spanish political affairs, it is more than possible that some
elements of Anarchist-Syndicalism would appear, as they
seem to have done already in Portugal in the spring of
i933> as an influence on the side of Fascism against both
Communism and Social Democracy. There is, indeed, no
overt sign of this at present ; but it must not be forgotten
that Italian Fascism recruited some of its strength from the
Anarchist-Syndicalist forces which had previously regarded
themselves as the extreme left wing of the Italian working-
class movement, while extreme Syndicalism in France
under the leadership of Sorel has also flirted with the
opposite extreme of monarchist reaction, which has in

334 THE COUNTRIES OF EUROPE

France a strongly Fascist tendency, plainest in the Camelots
du Roi. In these circumstances the interest of the Spanish
working class seems clearly to lie in consolidation upon the
basis of the Socialist Party and the General Union of
Workers ; and this consideration is likely in the long run
to take precedence of the attempt to influence the course
of legislation by remaining inside a coalition Govern-
ment with the left-wing bourgeois parties. But it would be
unreasonable to cast at the Spanish Socialists, because of
their continued participation in the Government up to the
present time, charges similar to those which have been
cast at other Socialist parties for their willingness to enter
into coalition with bourgeois groups. For the Spaniards had,
on the morrow of the Revolution, to deal with a very differ-
ent situation, in face of the clear necessity in a country as
yet industrially undeveloped of consolidating the gains of
the Revolution by a frontal attack upon the land system
and upon the overweening powers of the Church.

Portugal. Portugal, that small western portion of the
Iberian peninsula, looks at first sight as though it should be
part of Spain, and, but for the accidents of history, it would
probably have been so. But in the disintegration of the
Moorish kingdoms already referred to, Portugal early
achieved independence, and, since the twelfth century,
with the exception of sixty years' subjugation by Spain, she
has maintained, albeit precariously, a separate existence.

Portugal combines a distinguished past history with a
highly undistinguished present. First in the fifteenth-century
field of exploration, she had at one time an immense
colonial empire, but her Eastern possessions have been lost
to the Dutch and the British ; her New World influence
practically disappeared with the nineteenth-century
secession of Brazil ; and all that are now left to her are
the African territories of Angola and Mozambique, which
enjoy the distinction of being the worst administered
African territories except Liberia. In Europe, Portugal,
since the Methuen Treaty of 1 703, has been practically a

SPAIN AND PORTUGAL 335

dependency of Great Britain ; Wellington's armies in the
Peninsula were based on and provisioned from Portugal,
and Portugal obediently joined the Allies in the European
War.

The occupations of the six and a half million Portuguese
— for these purposes Madeira and the Azores are included
with the mainland — are mainly agricultural. Eighty-five
per cent of the Portuguese live in the country, and the
only large towns are Lisbon with half a million and Oporto
with a quarter of a million inhabitants. The only manu-
facturing industry of any size is the textile trade, which
employs about 50,000 people; 37.4 per cent of the land
is used for pasture and cereal production, 28 per cent
is forest, 25 per cent waste, 5.2 per cent vineyard, and
6.2 per cent under fruit of other sorts. Wheat, maize and
potatoes are grown, but the standard of cultivation is very
low, the average yield for wheat, for example, being less
than one-half that of Italy, and lower than that of any
country in Europe (including Russia) except Greece. The
chief article of export is, of course, wine, though there is
also some export of fruit, corks, and fish (mainly sardines) .
As there is so little manufacture and a very low production
of minerals, coal and manufactures have *to be imported
in large quantities, mainly from Great Britain. There is
also a considerable import of cereals, and a heavy adverse
trade balance.

The -Portuguese peasant lives at a very low standard.
The death-rate is high, and the illiteracy rate one of the
highest in Europe. The Constitution (drawn up in 1911) is
republican and democratic, with universal franchise for
males over 21 ; but the government of Portugal is as
liable to upheavals as the city of Lisbon is to earthquakes.
The Portuguese Chamber is in a chronic condition of
suspension. The present Government was formed in July
1932 by a sort of national party known as the Estudo Novo,
whose programme is mainly support of the British alliance
and the initiation of a policy of electrification. So far,
however, nothing particular has been heard of the latter.

33$ THE COUNTRIES OF EUROPE

There are frequent strikes in Portugal, and a small Fascist
movement, which the Government has, at the time of
writing, just decided to suppress.

§ 14. ITALY

ITALY was the latest of the great countries of pre-war
Europe to achieve national unity and independence ; for
although the Italian national State was set up ten years
before the formal creation of the German Empire, Germany
had gone far towards unity under the Zollverein long
before the Empire was formally proclaimed. Italian national
unity, established in 1860 on the basis of the older kingdom
of Sardinia, was not completed until the Franco- Prussian
war of 1870 gave the Italians their chance of occupying
Rome and so providing their national State with its
traditional capital. Emerging thus late as an important
Power, Italy was throughout the latter part of the nine-
teenth century struggling to achieve a fuller recognition
from the other great nations of Western Europe. But she can
hardly be said, even up to 1914, to have realised anything
like complete equality of status with the three great western
Powers, Great Britain, Germany and France, to which she
was inferior in population as well as in economic develop-
ment.

The war to a great extent gave Italy her opportunity to
achieve the desired equality, though she was bitterly dis-
appointed with the territorial gains which accrued to her
from the Treaty of Versailles. For she had hoped, as a result
of her participation on the side of the Allies, to be able to
build up a great colonial empire corresponding to those of
the other leading Powers. Actually, she was unable to
establish her position on the coast of Asia Minor, where she
holds only Rhodes and the Dodecanese, the latter to the
continued acerbation of Greek national feeling. Her entire
colonial empire, which lies mainly in Africa, has a popu-
lation of only two millions, and offers relatively

ITALY 337

poor opportunities for economic development. Italy's
Tripoli adventure has been up to the present time an
expensive business, from which she has reaped little by way
of economic reward. But her colonial empire, relatively
poor though it is, counts for much in her eyes as a symbol of
national greatness and of imperial claims corresponding to
those of Great Britain and France.

Italy is, however, severely handicapped in her endeavour
to rank as a great Power side by side with the other leading
Powers of the world by the relative poverty of her indus-
trial resources. In an economic sense she is far less developed
than any other country with at all equivalent pretensions.
Much of her soil is poor ; for a large part of Italy is moun-
tainous and difficult to cultivate, and there are also con-
siderable marsh areas which require a high expenditure
of capital before they can be brought into effective use.
Moreover, in an industrial sense she is poor in the raw
materials required for the characteristic industries of
modern capitalism. She has hardly any coal, and only a
small supply even of lignite. Her resources in most of the
important metals are scanty, and accordingly she has to
import very large quantities not only of coal but also of
iron for the use of her industries. Such industrial develop-
ment as she has achieved has therefore been mainly in the
lighter industries. In the metal trades she has attained to a
large measure of success as a producer of motor-cars, which
she exports on a considerable scale. But she has to import
large quantities of machinery and finished metal goods as
well as of raw materials, and it is mainly upon the textile
trades that her position as an industrial exporter depends.
Among these the cotton trade at present occupies the lead-
ing position, having displaced silk in recent years from its
previous pre-eminence. Italy has of course to import raw
cotton for the use of her cotton industry ; but she has man-
aged nevertheless not only to supply her home require-
ments but also to win an important place in the world
market for cotton goods. In the silk trade she is of great
importance as an exporter, both of silk and of manufactured

338' THE COUNTRIES OF EUROPE

silk goods ; and, confronted with the competition of arti-
ficial silk in recent years, she has also begun to build up an
important rayon industry of her own. Her woollen trade,
though considerable, is based on small-scale enterprise,
and partly dependent on imported raw wool ; for her own
wool is deficient in quality. She supplies, however, in these
days almost the whole of her home market for woollen
goods, though she has not yet built up any very substan-
tial export trade. Among agricultural products she ex-
ports on a considerable scale fruit and vegetables, olive
oil and cheese. But, although she has made great efforts
in recent years to increase her own cereal production,
she is still under the necessity of importing wheat and
other cereals in order to meet the home demand. Maize,
as well as wheat, has to be imported to a considerable
extent.

The efforts to increase the area under cereals have met
with a substantial amount of success, partly at the expense
of other crops, but also in some degree by bringing unculti-
vated land into use ; and further progress is looked for from
the substantial drainage schemes now in progress in the
marshy areas with the object of bringing additional land
under cultivation. Moreover the Italians have been trying
hard to improve the quality of farming as well as the crop
area. The Fascist Government has been active in the field
of agricultural education, and a National Grain Commis-
sion has been specially entrusted with the supply of seeds
to the farmers and also with improving the supply of fer-
tilisers, of which the home production has advanced very
greatly during the past few years. Italy produces substan-
tially more foodstuffs now than she did a few years ago ;
but her production is still not very much above the pre-war
standard, for there had been a substantial falling off in the
years immediately after the war.

This intensive drive to increase agricultural production
is explained largely by the needs of a rapidly expanding
population. In recent years the population of Italy has been
increasing extraordinarily fast, and the surplus of births

the

popula-

ITALY

over deaths has been at the rate
year. This fecundity meets with
Fascist State ; for Italy is striving j
in industrial resources by inc
is basing her claim to count as
upon the virility of her people
strength. Italians are proud of the
with nearly 43 million people, is now
which had before the war considerably
tion.

But the rapid increase of the Italian people in recent
years is not due solely to growing fecundity. Before the war
there was a very large amount of emigration from Italy,
not only to the United States, but also to the Argentine
and other parts of South America, and to France. Between
1901 and 1914 over 8£ million Italians emigrated, and of
these nearly 5 millions went to America, and over 3^ mil-
lions to other parts of Europe or to the Mediterranean
littoral. After the war the rate of emigration was very
greatly decreased ; and during the past few years, in con-
sequence of the world depression, it has practically stopped,
so that the Italian population is increasing by die full
amount of the natural surplus of births over deaths. More-
over, there has been some repatriation of Italian labourers
from France since 1930. This rapid increase of population,
welcome though it is from a national point of view, obvi-
ously raises for the Italians serious economic problems.
The Italian density of population exceeds 340 per square
mile, although, as we have seen, a considerable part
of the country is unsuitable for cultivation, at least 30 per
cent of the total area being recognised as incapable of
economic development, at any rate without a heavy ex-
penditure of capital. Nevertheless, the Italian Government,
in its anxiety to increase the strength of the country, defin-
itely restricts emigration and encourages the highest pos-
sible birth-rate. This is recognised as imposing upon the
Government the necessity for taking measures for the
development of Italian industry as well as agriculture ;

34O THE COUNTRIES OF EUROPE

and under the Fascist regime there has been a consider-
£ble extension not only of the protective system designed to
foster economic self-sufficiency, but also of measures in-
tended to place the resources of the State at the disposal of
industry and agriculture.

For Italy is a gbor country, and suffers from a serious
deficiency of capital. The amount of domestic saving is
relatively small, and any rapid advance of industrialisation
demands an importation of capital from abroad. But for
this Italy is not well equipped to pay, especially as long as
the world depression lasts ; for it is difficult for her to
stimulate exports beyond the point necessary in order to
meet the increasing cost of imports which are urgently
needed. Nevertheless, despite increasing population and the
bad harvest of 1930, Italy has succeeded in face of the world
slump in greatly reducing her adverse balance of trade.
This was very considerable in 1928 and 1929, when capital
was being to some extent imported from abroad ; but it
has been cut down within manageable proportions in the
subsequent years, so that it has been possible for the lira
to be kept upon the gold standard.

In addition to encouraging the increased cultivation of
cereals, Italy has embarked under the Fascist regime on a
considerable scheme of afforestation. Previously the Italian
forests, which cover not far short of one-fifth of the land
area, had been seriously depleted without any attempt
being made to replace them ; but in the more mountainous
parts of the country afforestation is now proceeding apace,
again under the direct auspices of the Fascist State. It
cannot be denied that the Fascist Government, despite the
poverty of the national resources, has made very great
efforts for the economic development of the country, or
that economic progress has been far more substantial under
Fascism than it was under the Parliamentary regime.

But although one declared object of the Fascist system
on coming into power was the improvement of the standard
of life and the guarantee of a minimum standard of living
for the Italian workers, very little has yet been done to

ITALY 341

realise this object Italian industrial wages remain exceed-
ingly low in relation to the standards prevailing not merely
in Great Britain, but even in France or Belgium, and cheap
labour is still available for Italian industry because of the
still lower standard of life among the Italian peasantry.
The land, as in France, is in the north divided into very
small holdings, and while large estates still exist in many
parts of Italy, especially in the south, the standard of cul-
tivation remains low on the whole. There had been before
the advent of the Fascist regime a large development of
the Co-operative movement ; and this had taken several
different forms, including both the co-operation of small
individual peasant holders in the purchase of requisites
and the marketing of their products and in the collective
provision of finance, and also the co-operative farming of
large estates by groups of workers, many of whom had also
small holdings of their own on which they laboured when
their work was not required upon the co-operative farm.
The Fascist Government evicted many of the leaders of
this older Co-operative movement, which they then took
over and reorganised on Fascist lines, in the same way as
they took over the Trade Unions of the industrial workers.
Co-operation, recognised and encouraged by the Fascist
State, exists also in certain branches of industrial produc-
tion, notably building and road construction. But here too
the movement has passed out of the hands of the previous
leaders, and under the control of the Fascists.

The Fascist-controlled organisations, Co-operative and
Trade Union, offer the workers certain advantages. But
they are by no means effective instruments for the preser-
vation of wage standards. Strikes in Fascist Italy are not
allowed. Instead, wages are regulated when disputes arise
by State authority, and the Fascist Unions are under a
leadership amenable to Fascist discipline, and therefore
not likely to push matters to extremes. There exists un-
doubtedly among the Italian workers a large mass of dis-
content, which is inarticulate only because of the suppres-
sion of all independent working-class activity. Nor is

342 THE COUNTRIES OF EUROPE

Fascism likely to be able to raise wages in the near future ;
for the Italian industrial system works under grave com-
petitive disadvantages, and is able to establish its exports in
the world market only with the aid of low labour costs,
which depend essentially upon low rates of wages. The
maintenance of these exports is essential to the Italian
State because of its dependence on imported foodstuffs and
raw materials, and accordingly the exigencies of inter-
national competition press hard upon the Italian workers,
who are to some extent compelled to accept low wage
standards in order to force the pace of agricultural develop-
ment, and thus increase the food supply available for the
expanding population. For Fascism is far tenderer to the
agricultural than to the industrial sections of the people.
It found its main support in the days before its rise to power
among the lower middle-classes in the towns and among
the agricultural workers, and it is far more inclined to
direct its efforts to improving the position of agriculture
and of the agricultural population than to raising urban
wages. This is the case above all because, whereas improv-
ing conditions for the agricultural population involve an
expansion of output, the output of Italian industry, which
has to be sold to a considerable extent in the world market,
is more likely to expand under conditions of low wages than
if the industrial standard of living is permitted to rise.

Nevertheless, Fascism has done something to improve the
economic condition of the Italian people in the towns as
well as in the country. But it has done this rather by the
provision of social services than by the raising of industrial
wages. There is in Italy no general system of unemploy-
ment insurance ; but there has been under Fascism an
increasing development of various institutions, especially
the Instituzioni di Dopo Lavoro, for the promotion of welfare
services among the workers. These services have, however,
to be kept within bounds set by the need of the Fascist
State to live within its somewhat exiguous means, and a
large part of the available financial resources is being
directed rather to schemes of economic development than

ITALY 343

to the relief of the unemployed or the provision of social
services on the British model. What has been done in this
field of industrial development through the various institu-
tions which have been set up for the provision of finance for
Italian industry with the aid of the State is briefly discussed
in a later section of this book. Italian industrialists have
sometimes criticised these activities of the Fascist State as
involving a definitely socialistic policy ; and there is no
doubt that Fascism is fully prepared, in what it conceives
to be the interests of national economic expansion, to inter-
fere largely with the rights of private enterprise. But its
interference is always designed rather to provide help for
the private employer than to supersede his activities by
State action, and Mussolini was probably quite sincere
when, in reply to the criticisms of the Italian industrialists,
he disclaimed all socialistic intentions in the measures
which he had introduced for centralising under State con-
trol the provision of capital for Italian industry.

Italian Parliamentarism, which had to grow up in a back-
ward country with a peasant population including a large
number of illiterates and working at a very low standard
of life, was always a plant of exceedingly tender growth.
The Italian Constitution is still based on the Statute of
1848 which granted constitutional government within the
kingdom of Sardinia. Up to 1919 the Parliament was still
elected under the restricted franchise of 1882, and there
were in 1919 only 3 million voters out of a population
approaching 40 millions. Universal suffrage and propor-
tional representation, introduced in 1919, did little to give
Italian Parliamentarism firm roots in the life of the country.
Parties continued to be weak and unrepresentative ; and
with the growth of Fascism such strength as Parliamen-
tarism possessed easily melted away. The March on Rome
disposed finally of the bourgeois Parliamentary State which
the Italians had introduced in imitation of the more ad-
vanced countries of Western Europe. Such opposition to the
Fascist coup d'ttat as did exist came not from the bourgeois
Parliamentarians, or even from Socialists, wedded to the

344 THE COUNTRIES OF EUROPE

Parliamentary system, but from a working class which
thought far more readily in Syndicalist and Anarchist than
in Social Democratic terms.

Accordingly, having crushed the working-class move-
ment, Mussolini found few obstacles to the building up of
the new Fascist State with the support of the Italian upper
and middle classes. There was widespread discontent with
the working of Parliamentarism and a readiness among
these classes to accept an alternative form of political or-
ganisation without any feelings of regret at the disap-
pearance of Parliamentary democracy. The growth of
Fascism and the changes which it has introduced in the
structure and working of the Italian political system are
discussed in a later section. Here it is only necessary to
emphasise the point that the victory of Fascism in Italy
came far more easily and was likely to encounter far less
effective challenge than the Nazi coup d'ttat which brought
the German Republic to an end. Parliamentary institutions
were doubtless weak in Germany as well as in Italy ; but
they were far stronger even in the short-lived Weimar
Republic than they had ever become among the Italian
people, and for this reason Mussolini's successful main-
tenance of power and crushing out of all effective opposition
over a period of twelve years is no indication that the
German Nazis will be equally successful in impressing their
own peculiar form of dictatorship lastingly upon the
German people.

§ 15. GREAT BRITAIN

AMONG the States of Europe, Great Britain stands
third in population but only twelfth in area. Highly
industrialised except in the northern half of Scotland, she
has a dense population. Only two countries in Europe —
Belgium and Holland— have their people thicker on the
ground, while Italy and Germany come next after Great
Britain in terms of density of population. Her total popula-
tion of 45 millions, or, with Northern Ireland, rather over

GREAT BRITAIN 345

46 millions, is well below Germany's 63 millions, and far
below the 160 millions of the Soviet Union. But Great
Britain is well ahead in population of either France or
Italy, which come next on the list ; and in terms of wealth
per head she has a long lead over any other European
country. Any attempt to estimate national wealth neces-
sarily involves a large amount of uncertainty ; but one
recent calculation, made by Professor J. W. Angell in his
work on The Recovery of Germany, puts British national
income in 1924 at 435 dollars a head, as against 231 dollars
for Germany in 1928, 223 dollars for Belgium in 1926,
218 dollars for France in 1927, and 140 dollars for Italy in
J925' Ignoring the differences of date, and taking the
income for Great Britain as 100, this would give for Ger-
many 53, for Belgium 51, for France 50, and for Italy 32.
Professor Angell's comparative figure for the United States
works out at 150. Thus on the basis of these figures, which
are probably accurate enough for our present purpose,
national wealth per head in Germany, France and Belgium
has been in recent years about half that in Great Britain,
and national wealth per head in Italy about one third.

This high level of national wealth, in comparison with the
other countries of Europe, has of course been achieved by
means of an intensive process of industrialisation extending
over more than two centuries. Great Britain is easily the
most highly industrialised country in Europe, not even
excluding Belgium. Of her total occupied population seven
work in industrial occupations for every one who works in
agriculture, whereas for Belgium, which comes next, the
proportions are six and a half to two, and for Switzerland
and Holland about six to two and a half. Germany,
despite the high degree of industrialisation which she has
reached, has only two persons in industrial occupations for
every one in agriculture, and in France the proportion
is five to four.

With this high degree of industrialisation goes naturally
a very high degree of dependence on imported foodstuffs.
It has been estimated that, on the average of the post-war

346 THE COUNTRIES OF EUROPE

years up to the beginning of the world depression, Great
Britain was importing from abroad over 60 per cent of her
total food supply in terms of values as against less than
40 per cent produced at home. Since the world depression
the proportion of imports has undoubtedly become greater
in volume, though not in relative value. Of the imports
from abroad 39 per cent, or almost as much as is produced
at home, has been drawn in recent years from foreign
countries, and under 22 per cent from countries within the
Empire. This dependence on imported foodstuffs is of
course very much greater for some commodities than
for others. During the post-war period up to the world
slump Great Britain was producing at home only about
15 per cent of her wheat, about 44 per cent of her meat,
rather less than half her poultry, eggs and dairy produce,
about 70 per cent of her vegetables, and about 60 per cent
of her fish. Moreover, on the average of the pre-slump
years, Great Britain was importing fruit to a value of about
£54,000,000 a year as against about £8,500,000 produced
at home ; for the most widely consumed fruits are mainly
imported products. In the case of sugar only 6 per cent of
the raw material used up in domestic consumption was
produced at home ; and even this was secured only with the
aid of a large subsidy to the growers of sugar-beet. There
was also a considerable importation of margarine, and of
course the entire supplies of tea, coffee and raw cocoa were
imported from abroad.

Great Britain is not only very highly industrialised, but
also highly specialised to certain particular groups of
industries. She depends to a tremendous extent on her
exports of a comparatively narrow range of goods. Food-
stuffs in a raw state she practically does not export at all,
and her export trade in manufactured foodstuffs is rela-
tively unimportant. Among raw materials, coal is the only
really important export ; and the great bulk of her export
trade is done in manufactured goods. Among these, even in
1929, the trade in cotton goods, despite the great post-war
decrease in exports to the Far East, still stood easily first,

GREAT BRITAIN 347

accounting for £135,000,000 out of total exports of
£729,000,000. Next in order came iron and steel, with
£68,000,000, followed by machinery, £54,000,000, woollen
goods, £53,000,000, and coal, £49,000,000. These were
easily the leading groups ; but other textiles and clothing
taken together accounted for over £52,000,000, chemicals
for £27,000,000, and other manufactures of metal, includ-
ing electrical goods, for over £40,000,000. There was thus
a very high degree of concentration upon the textile and
metal industries, with coal standing third and chemicals
fourth in the list of exports. These figures, based on exports,
do not of course correspond to the relative importance of
the various trades in the total productive economy of the
country. The textile trades export a far higher proportion of
their total product than the others — especially the cotton
industry, which has in the past exported over four-fifths of
its total output. Exported coal is only a small fraction of the
total production ; but coal enters largely into the costs of
producing exported manufactures, especially iron and
steel. In all, it has been estimated that in 1929, of the
total number of workers engaged in manufacturing pro-
cesses in Great Britain, as distinct from transport, distribu-
tion and other services, 38$ per cent were engaged in
producing for export, whereas in 1930 and subsequently
this proportion fell below one-third, or to substantially less
than one quarter of the total occupied population, even
after an estimate has been made of the number of workers
in distribution and transport working for the export trades.
Even one-third or one quarter of the total manufactur-
ing or of the total occupied population is, however, an
exceedingly high proportion to be employed in producing
for export ; and it is clear on the basis of these figures that
Great Britain depends to an enormous extent for the main-
tenance of her present industrial system, as well as for
feeding her population, on finding markets for a large
quantity of exports overseas. Up to the crisis she had,
under her Free Trade system, sought these markets im-
partially over the whole world, though she has enjoyed

348 THE COUNTRIES OF EUROPE

since the beginning of the twentieth century a substantial
amount of tariff preference both in the self-governing
Dominions and in certain of her colonies and protectorates.
In 1913 Great Britain sold 37 per cent of her exports within
the Empire, and 63 per cent in foreign countries. In 1929
there had been a substantial shifting of the balance in
favour of Empire countries, and in that year 44^ per cent
of British exports were sold within the Empire as against
55^ Per cent i*1 foreign countries. This change was, how-
ever, due not to an increase in the volume of Empire trade,
but to a severe decline in the volume of trade with foreign
countries. In the case of imports, 25 per cent were derived
in 1913 from Empire and 75 per cent from foreign sources,
whereas, in 1929, 27 per cent came from within the Empire
and 73 per cent from abroad. There was thus compara-
tively little shifting in the sources of British imports in com-
parison with the pre-war period. Great Britain still con-
tinued to depend to an overwhelming extent on imports of
both foodstuffs and raw materials from foreign countries ;
and, despite the decline in her exports to foreign countries,
these still absorbed in the aggregate a substantially larger
proportion of her total exports than the Empire.

It is important, however, to bring out not only the relative
dependence of the British economic system on Empire and
foreign trade respectively, but also the closeness of its con-
nections with Europe. Thus in 1929 Great Britain received
nearly 40 per cent of her total imports from European
countries and sold them 29 per cent of her exports, whereas
all America together accounted for less than 29 per cent of
imports and not much more than 16 per cent of exports.
Among European countries Great Britain's largest trade
was with Germany, which took 5 per cent of her exports
and supplied 6 per cent of her imports. Denmark supplied
5 per cent of imports, but took only i\ per cent of exports.
For France both figures were round about 4 \ per cent, with
a slight surplus on the import side. Next in importance
came Holland and Belgium, each with 4 per cent of imports
and 3 per cent of exports. No other single European

GREAT BRITAIN 349

country except Italy took more than 2 per cent of British
exports, and only the U.S.S.R. supplied as much as

2 per cent of British imports. These figures, it should be
observed, take no account of the Irish Free State, which
supplied 4 per cent of British imports and took 5 per cent of
exports. The United States, on the other hand, supplied
i6| per cent of total imports, but took only 6J per cent of
exports in return ; while the Argentine, which came next
in importance, supplied 7^ per cent, and took 4 per cent.
Of other countries India was by far the most important
market of all for British exports, taking xof per cent of the
total, whereas less than 4^ per cent of British imports came
from India. Australia took 7^ per cent and supplied
4 per cent ; Canada took rather under 5 per cent and
supplied about 4 per cent, while South Africa took 4^ per
cent and supplied 4 per cent, and New Zealand took

3 per cent and supplied rather over 3^ per cent.

Empire Trade. These figures cover enough countries to
give a fair idea of the distribution of British exports im-
mediately before the world slump. They show that, despite
the rise in the relative importance of exports to Empire
countries, Europe was still a market of the most vital im-
portance to British industry, and that any attempt to make
the Empire self-supporting on the lines of Empire Free
Trade would be bound to involve the most drastic redistri-
bution of industries ; for it is inconceivable that for a very
long time to come Empire markets for the types of goods
which Great Britain is at present equipped to supply could
expand to anything like the extent required to replace the
European market. For these reasons, though it may be
possible for Great Britain, while other countries are busily
engaged in raising their tariffs and placing obstacles in the
way of imports, to arrive at preferential arrangements with
countries within the Empire and to gain on balance tem-
porarily as a result of these arrangements, it is clearly very
much to her interest to do all she can to get the European
markets re-opened to her manufactures. This is in the long

350 THE COUNTRIES OF EUROPE

run a far more important consideration from the standpoint
of her industries than any benefits which they could possibly
derive from an extension of Imperial preference. Moreover,
certain of the Empire countries, and above all Canada and
Australia, are fully determined upon the development of
their own industries ; and the discussions at Ottawa in
1932 very plainly showed that the Canadian industrialists
especially were by no means prepared to tolerate any lower-
ing of tariff barriers which would be likely to allow British
goods to come in on terms damaging to their own position
in the Canadian market. They were prepared to give
Empire preference only by raising still higher against
foreign countries the already high protective duties estab-
lished in the interests of Canadian industry ; so that the
British exporter could at the most only look forward to the
prospect of displacing a certain proportion of the imports
into Canada from foreign countries, especially the United
States, and not to securing the major part of the Canadian
market either now or in the future. The same considerations
apply with slightly less force to Australia, only because the
Australian tariff had already before the Ottawa negotiations
been raised to such heights that, quite apart from the
question of Imperial preference, there was a wide
recognition in Australia of the need for some lowering of
barriers in the interests of the consumers.

The Ottawa agreements must therefore be regarded far
less as the first step towards the setting up of a self-contained
Empire than as temporary arrangements forced on Great
Britain by the very high tariffs and other restrictions in the
way of trade which have been established in Europe as a
consequence of the world slump. This is not to say that
Empire preference, once established in Great Britain, can
easily be removed. For, even if it could be shown to be
clearly contrary to British economic interests to maintain
it, there would be considerable political difficulties in the
way of its removal now that it has once been established.
But, though Imperial preference may remain for some time,
it is most unlikely that public opinion in Great Britain will

GREAT BRITAIN 35!

tolerate any considerable extension of it unless the existing
tariff situation in Europe becomes even more prohibitive
than it is now, or Europe draws together in some sort of
tariff union to the exclusion of Great Britain. That, indeed,
might force upon Great Britain a further attempt to develop
the Empire market by an extension of Imperial preferences
and mutual trading arrangements ; but it would be an
attempt to save something from the wreck of British foreign
trade, and by no means a satisfactory contribution to the
re-establishment of British or of world prosperity. It is far
more to Great Britain's interest as a trading country to
work for a lowering of tariff and similar barriers in Europe
than to enter into any agreements with Empire countries
that might prejudice her position in the European market.

Moreover, it is highly doubtful whether the policy of the
Empire countries, which showed at Ottawa their extreme
reluctance to grant concessions at all corresponding to those
which they expected Great Britain to grant to their own
exports, would justify Great Britain on economic grounds in
granting them additional exclusive advantages. A great
attempt was made by the British Government to represent
the Ottawa agreements as a resounding victory for the
cause of Imperial economic unity ; but everyone knew
that in fact these agreements had shown conclusively
the extreme difficulties in the way of securing any con-
siderable, expansion of British exports within the Empire.
Such relative expansion as has taken place of late seems in
fact to be due more to the depreciation in the external
value of sterling in comparison with gold than to the tariff
concessions made by the Empire countries at Ottawa ; and
this remains true despite the " anti-dumping " duties
imposed in Canada.

British Tariff Policy. It is easy to appreciate the
motives which led Great Britain in the mid-nineteenth
century to adopt Free Trade as the basis of her commercial
policy. She had then over a wide range of industries a great
advantage over all other countries in the efficiency of

352 THE COUNTRIES OF EUROPE

production. She needed no protection for her own industries
in the home market ; for save in a few cases such as silk,
these industries were not in the least afraid of any foreign
competition they were likely to encounter. Great Britain
let the silk trade go without regret because there were
plenty of other trades in which she saw abundant prospects
of expansion. She needed, moreover, even at that time,
considerable imports of raw materials for the use of her
industries ; and it was clearly an uneconomic policy to
impose dudes on the importation of these materials. In the
case of foodstuffs, over which the main battle was fought,
there was a case for Protection ; for the British agricultural
interest was still numerous and politically powerful, and
there was a political as well as an economic case for en-
deavouring to keep a substantial proportion of the popu-
lation at work on the land. But in the great Free Trade
agitation of the 'thirties and 'forties these arguments
of the agriculturists were completely overborne by the
manufacturers, who wanted cheap food just as much as
they wanted cheap material, in order to keep down the
costs of industrial production — for was not cheap food
for the workers just as much as cheap material for the
factories a raw material of manufacturing industry ?
Accordingly, Bright and Cobden and the Anti-Corn Law
League carried the day with the support of most of the
workers, who saw in Free Trade the prospect both of
increased industrial employment and of a lower cost of
living. In 1846, when the Corn Laws were repealed, the
case for Free Trade in Great Britain was overwhelm-
ingly strong ; and for a long time afterwards the vast
majority of the people in Great Britain saw no reason
for changing their minds about the wisdom of the step which
had been taken.

But as the nineteenth century advanced and new nations
entered the race of competitive manufacturing production
the situation ceased to be as simple as it had been in 1846.
There was almost no revival at first of the demand for
agricultural protection ; but with the development of

GREAT BRITAIN 353

industry on the Continent and especially in Germany,
the demand for the protection of manufacturing industry
was resumed. Still for a long time the " fair trade " cause
made little headway, and it was not until it was reinforced
by the sentimental as well as the economic appeal of the
new Imperialism that it became formidable. Joseph Cham-
berlain in the years after 1 903 made Tariff Reform a reality
in British politics ; and, though his crusade failed and
was largely responsible for the overwhelming victory of
the Liberals in 1905—6, he did succeed in the long run in
committing the Conservative Party to the cause of Pro-
tection, and thus prepared the way for the new British
tariff policy of 1931 and the following years.

Nevertheless up to 1914 Great Britain did not look at all
likely to adopt Protection in the near future ; and even after
the war, although there had been some departure from the
rigidity of the Free Trade system, the defeat of the Con-
servatives in 1923 showed that the main bulk of British
opinion was still Free Trade in sentiment. By this time,
indeed, the arguments in favour of a Protectionist system
had become at any rate more plausible, if not really
stronger ; for there had been a marked decline in British
exports, and German competition, submerged for a time
after the war, was again becoming an important factor in
world trade. Moreover, the rise in the level of tariffs all
over the world and especially in Europe and the United
States was giving point to the argument that, whereas Great
Britain could afford to maintain a system of Free Trade
while the rest of the world kept its tariffs at a moderate
level, Free Trade was becoming an unworkable system as
tariffs elsewhere became more and more prohibitive.
The cry for imperial economic unity was strongly revived,
and the Tariff Reformers stood now on the one leg of arguing
that Great Britain must aim at building up a self-sufficient
Empire, and now on the other that until Great Britain
made a loud Protectionist noise at the rest of the world the
policy of lowering world tariffs would stand no chance of
success. These two arguments were of course in reality

MR

354 THE COUNTRIES OF EUROPE

contradictory ; but both of them made their contribu-
tion to the conversion of a growing number of the manu-
facturing and trading classes to the Protectionist cause.
Even so, the opportunity to introduce Protection on
any considerable scale did not arise until after the world
slump and the economic crisis of 1931 ; and when a full-
blooded tariff was finally introduced it was necessary for
those who introduced it to begin by pretending that it was
merely an emergency measure designed to redress the
balance of trade, and only when they had got it through
by these means to admit that it was meant as a permanent
departure in policy.

Even now it is clear that the British attitude remains
highly uncertain ; for while some Ministers go about
singing hymns in praise of the beauties of the tariff system,
and demanding further measures for the establishment of
imperial economic unity, others still stress mainly the
intention to use the new British tariff as an instrument of
commercial bargaining with other nations. Readers must
take their choice which Ministers to believe, and must
make up their own minds whether Great Britain is in
fact heading for a permanent regime of high Protection, or
sincere in her willingness to lower her own tariffs as part of
a general movement toward lower tariffs in Europe and
over the world as a whole.

As we have seen, the new British tariff of 1931-32 was
defended largely as an indispensable measure for restoring
the balance of trade. There had been, even before the
beginning of the world slump, a considerable increase in
the adverse balance of British merchandise trade (imports
and exports) as compared with the years before the war,
and also a decline in the amount of British capital avail-
able for investment overseas. Thus in 1913, according
to the estimates of the Board of Trade, the adverse balance
in respect of merchandise and bullion was £158,000,000,
whereas between 1924 and 1929 it was always as much
as £350,000,000, and nearer £400,000,000 in both 1925
and 1927. 1926, the year of the coal dispute and the General

GREAT BRITAIN 355

Strike, showed an adverse balance of £475,000,000 ; but
this was of course quite abnormal.

To set against this adverse balance there were large
credit items, including the net revenue derived from British
shipping, the income from overseas investment and from
financial services performed on behalf of foreigners on the
London money market, and certain minor items. After
account has been taken of these other sources of income,
the Board of Trade figures show for 1913 an approximate
credit balance available for overseas investment of over
£180,000,000. This figure was never reached in any post-
war year. In 1924-25 the available surpluses were
£86,000,000 and £54,000,000. After the abnormal year,
1926, in which the credit balance sank to only £9,000,000,
there was a rapid improvement to £114,000,000 in 1927
and £137,000,000 in 1928. The year 1929 was already to
some extent affected by the world depression, and the
balance was reduced to £103,000,000 — all these figures
being of course, in relation to the level of prices, greatly
below the surplus available in 1913. On the advent of the
world slump, despite the heavy fall in the prices of the
leading British imports, the position became very much
worse. Revenue from overseas investment and from
shipping services was sharply reduced, and there was also
a fall in receipts from financial services. On the other hand,
the adverse balance of merchandise trade increased because
British exports fell off very sharply indeed. For 1930
as a whole, the credit balance was reduced to only
£23,000,000, and in 1931, even after the export of
£35,000,000 of gold has been included on the credit side,
there is a net adverse balance of £75,000,000, due prin-
cipally to a further sharp decline in all classes of invisible
exports, and to a further fall in exports of merchandise.

It has therefore to be admitted that the economic situa-
tion of Great Britain in 1931 was sufficiently serious to call
for measures of readjustment, though the financial crisis of
September 1 93 1 was directly due, not to the adverse balance
of current payments but to a large-scale withdrawal of

356 THE COUNTRIES OF EUROPE

capital sums from Great Britain on account of an inter-
national loss of confidence in the pound. Some people argue
that, when Great Britain had gone off the gold standard,
the balance of payments could safely be left to right itself,
because the effect of the depreciation of the pound sterling
would necessarily be to make imports more expensive
and exports cheaper until the balance had been auto-
matically righted. But in the first place this view depends
for its soundness on the willingness of the British financial
authorities to allow the pound to fall in external value
without any attempt to control it ; and secondly it
assumes that there is so strong a self-acting tendency for
the volume of payments to balance that the free movement
of the exchanges will speedily bring about an equilibrium
by reducing imports and expanding exports. In fact, neither
of these things is necessarily true. The pound, after the
departure from gold, was not left free to move ; and in the
existing state of world confidence the value placed upon it
in terms of foreign currencies depends far less on the current
payments which need to be made between countries on
account of visible and invisible exports than on fluctuations
in business confidence affecting the movement of capital
sums from one country to another. The depreciation of
sterling did undoubtedly stimulate British exports, in the
sense that it prevented them from falling as far or as fast as
they would have fallen if the pound had been maintained
at its previous gold value. But there was little falling off in
the volume of imports until protective tariffs reinforced the
effects of exchange depreciation. For to go on buying the
same quantity of imports as before did not cause the
pound to depreciate further in face of the lack of confidence
felt by comparison in the financial situation in other
countries, and of the preference of their nationals for moving
their money to London in spite of the unfixed exchanges.
This movement of money prevented the pound from
depreciating so as to achieve a balance corresponding
to the current balance of visible and invisible imports and
exports.

GREAT BRITAIN 357

This situation in practice considerably diminished the
internal pressure to reduce the British standard of life.
Those who held that British wages were too high in relation
to wages in other countries believed that the enhanced cost
of imports would speedily cause a rise in prices, and thus
indirectly bring about a fall in the working-class standard
of living, and a redistribution of the real national income.
But this did not happen to any appreciable extent in the
case of the employed workers ; and there was accordingly
a case, in view of the continued adverse balance of pay-
ments, for endeavouring to reduce imports by artificial
means. This was the case put up by the advocates of
the tariff when it was first introduced as an emergency
measure in the winter of 1931. For the National Govern-
ment began, not with a general tariff on a permanent
basis such as it has enacted since, but with special measures
nominally directed against " abnormal importations."
The effect of these measures, combined with the depre-
ciation of the pound sterling, was seen in the figures
for the balance of trade and the balance of payments
in 1932. The adverse balance of commodity trade (exclud-
ing gold bullion movements) fell from £408,000,000 in
1931 to £289,000,000 in 1932 ; and the adverse balance of
payments, including the invisible items, but still ex-
cluding imports and exports of bullion, was reduced from
£104,000,000 to £59,000,000. It is possible to argue that
on this ground the British tariff has justified itself as an
emergency measure made inevitable by the world slump
and by the restrictive policy adopted by other countries ;
but it is quite impossible to support on the basis of this
argument any permanent change by Great Britain to a
protective system. Nor can such special measures as the
Wheat Quota — more properly to be called a subsidy —
introduced in the interests of English wheat producers, or
the similar measures now being brought in under the guise
of marketing schemes, logically be defended in one and
the same breath as steps rendered necessary by the world
slump and the abnormal condition of the trade balance and

358 THE COUNTRIES OF EUROPE

as permanent measures designed to establish British
economic prosperity upon a secure foundation.

In saying this, it is not suggested that Great Britain will
or should revert to a Free Trade system in any complete
sense, but only that the arguments for a tariff in the present
emergency are not necessarily arguments for a permanent
tariff when the emergency has passed away. In that matter
the future of British policy must depend largely on what
happens in other countries, and especially on the extent
to which the European countries draw together either
unitedly or in distinct groups into customs unions or mutual
tariff arrangements. Such developments in Europe might
force on Great Britain the maintenance of some sort of
Protectionist policy, operated perhaps not by means of
tariffs, but rather by means of some system of Import
Boards and licenses or quotas. But this, like the continu-
ance of the present system of Empire preference, must be
regarded, in view of the special dependence of Great Britain
on world markets and particularly on the markets of
Europe, rather as a step forced upon her by circumstances
beyond her control than as in itself a desirable policy for
British capitalism. There is doubtless a case for the regula-
tion of external trade by the State as against the unregulated
system of Free Trade ; but this is fundamentally a case for a
Socialist system of mutual exchange and barter based on
international agreement and not for a protective system
designed to aid one country against another in a competi-
tive scramble for markets.

Parties and Politics. We have so far been dealing
entirely with the economic situation in Great Britain, as it
is affected by her dependence on external trade. We have
now to turn to her internal political situation. Before the
war Great Britain was ruled alternately by two great
political parties both of which went back, though their form
had been substantially changed in the meantime, to the
eighteenth century. Whigs and Tories, and their successors,
Liberals and Conservatives, alternately controlled the

GREAT BRITAIN 359

government of Great Britain during the whole period of
her development as a modern capitalist power up to 1914.
Between these two great parties, after their transformation
by the Reform Act of 1832, which brought the industrial
middle class to a position of supreme political influence,
no fundamental division ever arose. However they might
differ on secondary issues they were agreed concerning the
basis on which social institutions ought to rest, and con-
cerning the form of such vital underlying institutions as
those of property and class and the structure of the political
system required for sustaining these economic realities.
Up to the 'forties the Tories were mainly Protectionist,
while the Whigs had more tendencies towards Free Trade ;
but it was a Tory Prime Minister who repealed the Corn
Laws, and the subsequent distribution of party allegiances
showed that there was no fundamental division between the
two. In 1867 the urban artisans were given the vote ; but,
though on the whole the Whigs had been the party with a
greater inclination towards the extension of the franchise,
it was a Tory Government that passed the Reform Act of
1867, and in the following years both parties in equal
measure adapted their policies and methods to meet the
claims of the newly enfranchised class. In the spate of
social reform legislation between 1867 anc^ the late
'seventies it is impossible to distinguish any clear difference
of policy between the measures passed by Whigs and
Tories, or, as it is now more appropriate to call them,
Liberals and Conservatives. It is true that in the course of
the great depression the reforming zeal of both parties died
out as it became both harder to find money for reforms and
easier to discount the claims of the working-class voters.
But the Liberals, largely because of their close contacts
with Nonconformity and industry, and their lesser degree
of entanglement with the higher privileged classes, were
the more successful in attaching to themselves the working-
class voters, and especially those who belonged to the Trade
Unions and Co-operative Societies. Labour began to
emerge to political importance as a satellite of the Liberal

360 THE COUNTRIES OF EUROPE

Party ; and even when, in 1900, the Labour Party declared
its independence, it continued in practice to operate as an
ally of the Liberals, and remained right up to 1914 far too
weak to provide even the nucleus of a Government of its
own, and far too closely allied to Liberalism to offer it
any effective national challenge.

The war, however, was fatal to the position of the great
Liberal Party ; and, as we shall see in a later section, the
break-up of Liberalism pitchforked the Labour Party into
a position of primary political importance. But it needs to be
emphasised that, though Liberalism as a party broke up into
a number of quarrelling groups, Liberalism in a non-party
sense remained the political creed of a very high proportion
of the British people, not only among the lower middle
classes — the upper middle classes went over largely to
Conservatism — but also among the black-coated workers
and even among the more highly paid manual workers.
The Labour vote, after the disruption of Liberalism,
included an exceedingly high proportion of electors who
were far more Liberal than Socialist.

Through the period during which the two great political
parties alternately governed Great Britain, there was for
the most part fundamental unity in matters of foreign policy
as well as in home affairs. In the eighteenth century the
dominant factor in British external politics had been the
rivalry between Great Britain and France. This disappeared
with the fall of Napoleon in 1815, and there was no reason
for renewing it when the danger of French domination in
Europe had vanished, especially as the development of
French industrialism followed so different a course from
that of Great Britain as to make the two countries mainly
non-competitive in world trade. After 1815 Great Britain
shaped her foreign policy so as to avoid as far as possible
entanglements in the affairs of Europe. She withheld
her effective support from the Holy Alliance and from
the European reaction, and as far as possible kept her hands
free for developing her economic opportunities over the
world as a whole. For a long time no situation developed

GREAT BRITAIN 361

in Europe of a sort likely to induce her to modify this
policy ; for it was not until the rise of Germany in the latter
part of the century that any other Power threatened either
to make a bid for European domination or to compete
really seriously with British exports in the world market.
The rise of Germany as a world Power and as an industrial
country coincided in time with the advent of Economic
Imperialism, based largely on the development of the heavy
industries ; and Great Britain, which had come into posses-
sion almost by accident of by far the largest colonial Empire
in the world, felt herself challenged by the rise of Germany
in a political as well as an economic sense. For the Germans
naturally wanted, for both economic and political reasons,
to build up an Empire of their own, and to secure adequate
markets and assured supplies of raw materials in the less
developed countries. This rivalry, which prepared the way
for the World War, led to a re-entry of Great Britain into
European entanglements, culminating in the Entente
Cordiale with France in 1903-4, and the Triple Entente
with France and Russia in 1907.

But, having helped to bring about the defeat of Germany
in the World War, Great Britain had for the moment no
more to fear from her ; and accordingly her attitude to the
Germans rapidly changed, more especially as, in the post-
war situation of Europe, a military hegemony of France
seemed for a time foreshadowed by the system of alliances
which the French were proceeding to build up with the new
States of post-war Europe. Accordingly, in the post-war
treatment of Germany, Great Britain usually took the side
of leniency, though she was not prepared to push her atti-
tude to the point of provoking a quarrel with France.
Meanwhile the French, by no means so sure that the
German menace was over and done with, missed the oppor-
tunity of helping in the successful establishment of the new
German Republic, and must bear a large share of the
blame for provoking the German militarist reaction in 1933.

In this post-war situation it was impossible for Great
Britain, though she tried tentatively to keep out of the

362 THE COUNTRIES OF EUROPE

affairs of Europe, to avoid commitments. She was a member
of the League and thereby committed in general terms to the
maintenance of the settlement reached at Versailles and in
the other Treaties of Peace. She carefully avoided enter-
ing into any further commitments for the preservation of the
status quo in Eastern Europe, and refused all invitations to
become a party to an " Eastern Locarno." But she was
led by her recognition of the need for the re-establishment
of economic prosperity in Europe, and above all for the
rehabilitation of Germany, to sign the Locarno Treaty,
which aimed at guaranteeing the permanence of the peace
settlement in the West. Moreover, her rulers shared with
those of the other European capitalist States an intense
hostility to the new Socialist system established in Russia.
Great Britain played her part in the fomenting of civil war
in Russia in the years immediately after the Russian
Revolution ; and, although subsequently her attitude
towards Russia alternated with changes of Government,
for the most part she could be reckoned as a member of the
consortium of capitalist nations designed to resist the spread
of Communist ideas.

Ireland. The external political situation of Great
Britain in the years after the war was greatly complicated
by difficulties within the British Empire. The century-old
Irish demand for Home Rule led during the war to the
Irish Rebellion of 1916 ; and though this movement was
successfully crushed it became impossible after the war
for Great Britain to resist any longer the demand for Irish
self-government. After an abortive attempt to hold down
the Irish by military force Great Britain recognised the
inevitable, and in 1921 consented to the establishment of
the Irish Free State as a self-governing member of the
British Commonwealth of Nations. Ratified in the Irish
agreement of 1922, the Constitution of the Irish Free State
gave Ireland practically complete autonomy, though
causes of dispute remained in the Oath of Allegiance still
exacted from the Irish Parliament, and in the provision for

GREAT BRITAIN 363

the payment of annuities to Great Britain in respect of
money supplied in the past for the improvement of the
position of the Irish farmers. The right of secession from the
Empire was denied to the Irish Free State ; and in 1932
there was a bitter quarrel between the two countries over
the refusal of de Valera's Government to keep up payments
of the annuities in face of the severe agricultural depression.
Great Britain retaliated by imposing heavy tariff duties on
imports from Ireland ; and the Irish in their turn declared
their intention of resisting British dictation to the last, and
set to work under de Valera's influence to turn their
country into a self-supporting economic unit based on the
principle of economic nationalism.

As the Irish Free State had been accustomed to export,
mainly to Great Britain, almost 45 per cent of the products
of her agricultural industries, especially livestock, the
barring out of a large proportion of her goods from the
British market resulted in great economic distress; and the
fall in the purchasing power of the farmers also reacted to
increase the amount of urban unemployment. Moreover,
the Irish Free State, though a large exporter of agricultural
produce, is by no means self-sufficient even in respect of
food. The Irish farmers grow potatoes and produce large
quantities of turnips, mangolds and hay for the feeding of
stock; but they produce hardly any wheat and not a very
large quantity of any cereal except oats. The total value of
the crops averages less than one-third of the value of the
output of livestock ; so that if Ireland loses her export
trade she loses with it the power to buy necessary foodstuffs
as well as imported manufactures.

As we write, no solution has yet been found of the dispute
between Great Britain and the Irish Free State, and the
economic future of the country remains in these circum-
stances highly uncertain. Irish Labour, largely on national-
ist grounds, has so far given its support to de Valera's
policy ; but the Irish workers as well as the farmers are
becoming restive under economic adversity, and are making
demands for help from the State which the Government

364 THE COUNTRIES OF EUROPE

finds it difficult to meet out of its diminished resources.
Clearly Ireland is not economically strong enough to
stand alone without involving herself, at any rate for some
time to come, in a serious fall in the standard of living
of the people. The mutual trade between Great Britain and
the Irish Free State is undoubtedly of economic advantage
to both countries ; and economic nationalism in Ireland
has its roots in political passions rather than in any real
economic needs. It is to be hoped therefore that the present
dispute will be settled, though the attitude of the British
Government has so far been one of extreme intransigence,
not unprovoked by the fanatical fervour of de Valera's
nationalist principles.

India. The second great imperial problem which has
troubled Great Britain since the war is that of India. But
this falls outside the scope of the present volume ; for it
would be impossible to deal adequately with the relations
between Great Britain and India without considering
other aspects of the Eastern question. It suffices to say that
the rise of Indian Nationalism and the still unsolved prob-
lems which a new Indian Constitution presents have raised
acute issues for the British economic system as well as
for the British Empire as a political unit. For India is, as we
have seen, the largest market for British exports, and above
all for cotton goods. During the war there was a consider-
able advance of cotton production in India itself ; and since
1918 this advance has continued, and there has also been
a considerable import into India of cheap cotton goods
produced in Japan. The Indian manufacturers want pro-
tection for their own industry against both British and
Japanese imports ; and Great Britain has been compelled
to concede the principle of tariff autonomy to the Indian
Government, which of course she still finally controls, and
actually to permit in response to strong pressure from the
Indian manufacturers the imposition of protective duties on
British goods. Under the Ottawa agreements the Indian
Government agreed to give preference to British imports^

GREAT BRITAIN 365

and the British manufacturer thus enjoys a more favour-
able position in the Indian market than his Japanese rival ;
but the protection accorded to the home manufacturer
remains substantial, and there has been strong objection in
India to the granting of any preference at all.

Moreover, India, like China, uses the boycott as one of
her most powerful political weapons, and there has been
from time to time a definite boycott of Lancashire products
by the Indian importers, even apart from Gandhi's cam-
paign in favour of the use of Indian cloth produced upon
the handloom. Great Britain can obviously ill afford any
further contraction in the Indian market. A large part of
the trade in cheap cotton goods is already lost, and is most
unlikely ever to be recovered ; but there remains a suffi-
ciently large volume of exports to India to exercise an
important influence on the political policy of Great Britain
in dealing with Indian Nationalist claims. The Diehards
in Great Britain wish so to crush the Indian Nationalist
movement as to keep the Indian market open to British
goods by force ; but the majority of British politicians and
the exporters interested in the Indian trade strongly doubt
the practicability of this course, and therefore favour more
conciliatory methods. It remains to be seen whether the
Round Table Conferences and the further discussions now
in progress for the elaboration of a new Indian Constitu-
tion will result in a working compromise. They may do so ;
for the Indians neither possess at present the coherent power
required for open rebellion, nor agree in desiring an abso-
lute and immediate withdrawal of the British. The Indians
want self-government ; but they are prepared to com-
promise if Great Britain will meet them half-way, and
Indian opinion is so divided, especially over the differences
between Mohammedans and Hindus, as to make at least
a temporary compromise more likely than an open rup-
ture, unless Great Britain becomes involved in a new
European war. Moreover, the position of the Indian
princes, who have no desire for democratic institutions
to be installed in their territories under the aegis of the

366 THE COUNTRIES OF EUROPE

Indian Nationalist movement, strengthens Great Britain in
resisting the claims of the more intransigent Indian
Nationalists. Nor can it be forgotten that Indian Nation-
alism is torn asunder by conflicting class interests as well as
by racial and religious differences. The Indian Nationalist
cotton employers have no desire to unloose among their
exceedingly ill-paid workers forces too strong to be con-
trolled ; and this is a further factor making on the side of at
least a temporary compromise.

Imperialism and Investment. With the Imperial prob-
lem as a whole this book does not set out to deal ; and the
case of India has been mentioned only because of its pro-
found effect upon the internal economic situation in Great
Britain. The wider problem of Imperial economic rela-
tionships has been dealt with earlier in this section and
will recur in the section devoted to European economic
problems, where it arises in connection with the project of
a European Economic Union, and the difficult situation of
Great Britain, which desires to maintain and develop
economic connections with both Europe and the Empire.
It should, however, be added here that, while the British
Empire is by far the oldest of the great colonial Empires of
the European Powers, Great Britain has been by no means
behindhand in adding to the territory under her political
control in recent times. During the last thirty years of the
nineteenth century, the British Empire grew in size by over
4f million square miles, with an estimated population of
88 millions. One-third of the total area of the Empire and
one-quarter of its total population were thus acquired
during these thirty years alone. This process was continued
in the twentieth century, until in 1914 the Empire had an
area of i ij million square miles and an estimated popula-
tion of 417 millions, of whom 315 millions were in British
India, and less than 60 millions were white. The war added
further large territories to the Empire under the guise of
mandated areas ; and in 1933, including these post-war
acquisitions, the Empire has a population of more than

GREAT BRITAIN 367

450 millions and a total territory of well over 13,000,000
square miles. It is thus far larger in both extent and popula-
tion than any of the other colonial Empires, though the
French showed tremendous vigour during the thirty years
before the outbreak of war in adding to their territories,
especially in Africa and Indo-China, and they too acquired
after 1918 mandates over a considerable part of the
pre-war German Empire.

This growth of Imperialism in Great Britain, even more
than in other imperialist countries, has gone side by side
with an enormous expansion in the volume of British over-
seas investment. Overseas investment was indeed no new
thing in the last quarter of the nineteenth century. It began
on a significant scale immediately after the Napoleonic
Wars ; and it has been estimated that by 1875 the total
value of British capital invested overseas amounted to
about £1,200,000,000. By 1914 this had increased to well
over £4,000,000,000, and Great Britain was thus by far
the greatest creditor nation, her total overseas investment
having been approximately doubled between 1900 and
1914. The French, who came next, had foreign invest-
ments valued in all at about £1,800,000,000 ; and the
Germans, who had started much later than the French to
invest abroad, had already about £1,250,000,000. The
United States was on balance still a debtor country, im-
porting capital for the enormously rapid expansion of her
own economic system.

Of these foreign holdings of capital, from which Great
Britain draws an annual tribute which enables her to meet
the cost of a substantial part of her merchandise imports,
nearly half was in 1914 invested inside the British Empire.
Quite half was in America, including about one-fifth of the
total in the United States, and the remainder in Canada
and Latin America. Investments in Europe were relatively
tiny, amounting to little more than £200,000,000 in all.
On the other hand, France had more than sixty per cent
of her total investments in European countries, and Ger-
many had also invested far more heavily in Central and

368 THE COUNTRIES OF EUROPE

Eastern Europe than elsewhere. There was thus no very
great competition in the field of overseas investment
between Great Britain and the other leading Continental
countries ; and this situation has been largely maintained
since the war, in that Great Britain has disposed of the
reduced sums available for investment mainly within the
Empire and in Latin America, and to a less extent in the
Far East, and has not made any considerable long-term
loans to Europe. Her debtors in Europe are for the most
part short-term debtors, whose obligations arose either out
of commercial transactions or from loans by the British
banks to the Continental banks, especially those of Ger-
many. As an investor of capital overseas, Great Britain is
therefore dependent far more on the prosperity of the
Empire and of Latin America than on Europe ; and as the
countries in which she has invested most of her resources are
primarily agricultural producers the burden of their debts
to Great Britain has been enormously enhanced by the
fall in agricultural prices.

There has been, however, in respect of fixed-interest
bearing obligations remarkably little default despite the
long continuance of the depression. There would certainly
have been much more had Great Britain remained upon the
gold standard ; for the effect of the depreciation of sterling
was to relieve to some extent the burden upon the debtors,
because most of the loans had been made in terms of ster-
ling, and not of gold or of the currencies of the debtor
countries. This of course meant that Great Britain, in allow-
ing sterling to depreciate, forwent some part of her claims
upon her external debtors ; but it is probable that she
gained more than she lost by doing this, for if default had
once started on any serious scale it would have been very
difficult to check. It is, however, doubtful how much
longer, if the world depression continues, agricultural
countries in extreme difficulties will be prepared to go on
paying even the present reduced tributes to their creditors
in Great Britain ; and the large dependence of Great
Britain on her income from overseas investment gives her

GREAT BRITAIN 369

a very strong interest in the restoration of the prosperity
of the agricultural parts of the world. This interest far
more than offsets the advantage which she at present gains
from the cheap rates at which she is able to purchase many
of her imports, though this has of course to be taken into
account as a factor tending to give her substantial relief,
and largely explaining the reduction in her adverse bal-
ance of commodity trade.

§ 16. THE U.S.S.R.

THE UNION OF SOCIALIST SOVIET REpuBLicsisby
far the largest country in Europe, even if its European terri-
tories only are taken into account. The whole area of the
Soviet territories is 8£ million square miles, more than twice
the size of the whole of Europe, including European Russia,
and considerably larger than the whole of North America.
This — its immense size — is the first factor which must be
taken into account in any consideration of modern Russia.
Though Russia lost more land by the war than any other
combataht, all her losses taken together only amounted to
3 per cent of the total.

Within this vast area live 162 million people — rather more
than live in North America, but far fewer than live in the
rest of Europe. The density of population in Russia is only
1 8 per square mile, less than that of any European country
except Iceland ; but this figure is misleading if it is taken
to mean that the population of Russia is spread over the
country in that ratio. European Russia is more thickly
populated than Asiatic Russia ; there are large tracts of the
latter where practically nobody lives. In European Russia,
the great cities, Moscow and Leningrad in particular, are
more crowded than any other city in the West ; and even in
the countryside the Russians live clustered in villages, often
with miles of unoccupied country dividing one village from
the next. Thus life in many parts of Russia is not nearly as
isolated as it would seem to be from these figures ; and the

37O THE COUNTRIES OF EUROPE

age-old migratory habits of the Russian, agriculturalist
as well as pastoral worker, reduce this isolation still further.

This population is divided into many races, speaking an
infinity of languages. Over seventy per cent of the popu-
lation are Slavs of one type or another, speaking Great Rus-
sian or tongues resembling it. As under the Tsars Great
Russian was the only official language, the only language
recognised for publications or taught in the schools, it used
to be assumed that practically all the inhabitants of Russia
except the vocal minorities were Russians. This the Revo-
lution has shown to be untrue. Of other Indo-European
races in Russia the most important are the Germans, of
whom there is a large colony on the Volga, and the Ar-
menians in the south, though members of many other
nations are to be found there. East of the Volga, and
stretching far into Central Asia, are the great groups of
mixed Turkish and Tartar peoples, with various types of
Mongols to the north of them. Then there are the Georgians
in the south, a group of peoples akin to the Finns in the
north-west, and smaller race and language units, some of
great obscurity, stretching away along the frozen terri-
tories into Northern Siberia. It is calculated that in the
Institute of the Northern Peoples at Leningrad teaching
is given in no less than fifty languages. Finally there are the
Jews, heavily persecuted by Tsardom, of whom there are
about five millions. Under the Tsars, the Jews were forced
to live in an enclave or pale which stretched from Poland
into Great Russia ; but since the Revolution they have
been allowed to move about freely, and in particular large
agricultural colonies of Jews have been settled in the
Crimea.

The official religion of the Soviet State is atheism. Before
the Revolution the majority of the population belonged to
the Greek Orthodox Church, with a small Roman Catholic
element, particularly in the west, a group of Lutherans in
the north, a large group of Moslems, and a sprinkling of
Buddhists. Since 1931, the discouragement of religion has
been less strong, and adherents of all these five creeds, and

THE U.S.S.R. 371

of any others, are allowed to practise them, though the
numbers are naturally not known.

Russia is thus full of minorities. But the vigorous encour-
agement given to non-Russian cultures, and the right of
secession granted to the constitutent Republics by the Con-
stitution of 1923, has rendered the minority problem in
Russia something very different from the same problem,
say, in Roumania. It would not be true to say there is no
separatist feeling at all ; it can be found in the Ukraine and
Georgia, and perhaps elsewhere ; but it is neither strong
nor widely diffused.

Russia is predominantly an agricultural country, over
80 per cent of the population making its living off the land.
But not by any means all of Russia is cultivated or cultiv-
able. About two-fifths of Russia's whole area — two thousand
million acres — is forest, of which a quarter is in European
Russia ; and north of the forest, in the extreme Arctic
regions, is tundra where not even forest will grow. The
cultivated area of Russia is nearly 350 million acres,1 in-
cluding the " black earth " belt, and to this must be added,
for purposes of food production, the millions of acres of
pasturage in the southern steppes, Central Asia, and
Siberia. Much of this grassland, particularly in Asia, is,
as it has always been, dependent upon fluctuating rainfall,
so that estimates of the extent of Russian pasture land
would bear little relation to the facts. Of the agricultural
land nearly three-quarters is under grain, wheat and rye
being the principal crops. Only about a tenth is used for
" industrial " crops, of which sunflower, flax, cotton and
sugar beet, in the order named, are the most important.
The number of livestock is enormous, but has fallen seri-
ously during the past few years.

Of other commodities, the production of timber, oil,
hides and fish are the most important. The output of coal
and other minerals, though growing, is still small as com-
pared with that of industrial countries. Under twenty
million Russians are employed in factory work ; and since
1 Including pasture in " mixed " farms.

372 THE COUNTRIES OF EUROPE

the Five-Year Plan began, attention has been concentrated
on heavy rather than on light industry. A certain amount
of non-agricultural production is still carried on, as it used
to be carried on, by " artels " of villagers ; but very much
less than formerly. The external trade of Russia, owing to
political obstacles, is still not great ; the main exports
are agricultural products and the commodities mentioned
at the beginning of this paragraph. The main import is
machinery of all types.

It is idle to try and estimate the productive possibilities
of Russia, for they are only just being discovered to-day.
The mineral wealth of the Urals, for example, has barely
been tapped. In some cases, such as that of timber, the
approximate extent of the resources is known ; but for lack
of transport they cannot be utilised. Transport in Russia
is bad, partly because of the enormous distances and the
poverty of the country. Railways can only, for these reasons,
very slowly be made to pay ; and it should be noticed that
though the absence of gradients over the enormous plain
simplifies in one sense the task of railway engineers in
Russia, they have other difficulties to contend with. For
instance, much of the bed of the Trans-Siberian Railway
had to be blasted out of permanently frozen soil. Western
Russia is comparatively well supplied with railways ; but
in the east large areas are totally without railway commu-
nication.

There is a great deal of navigable waterway, useful for
internal communication, but less so for external trade,
since the long rivers mostly flow either into the landlocked
Caspian, or into seas that are icebound for months in the
year. Even the rivers themselves are often partly icebound.
The endeavour to gain access to a warm water port has
occupied a great deal of the energies of Russian statesmen
during the past hundred and fifty years, and accounts
partly for the anxiety felt about Vladivostok. Roads are
also bad ; there is little stone or even gravel available for
road-building, and whereas in winter when the snow is
frozen a good deal of sledge travelling is possible, in

THE U.S.S.R. 373

autumn and spring many of the roads are quite impassable,
and in summer full of dust and holes. Some parts of Russia
have scarcely got beyond the stage of cameltracks. Aerial
transport is beginning, but the traffic is as yet infinitesimal.

It follows that one cannot speak of Russia as self-support-
ing. It is potentially self-supporting, but only if there is
sufficient transport available to carry supplies over a
wide area. If the crop is good, the black-earth belt has a
surplus to send to the northern parts which cannot feed
themselves ; but only if transport is available. Similarly,
the resources of timber, minerals, cotton, etc., can only be
made available if there is capital provided for their develop-
ment and transport. Until that is done, Russia will be bound
to remain at a low standard of life, and liable to recurrent
local or general shortages.

One of her greatest assets, however, is her man-power,
increasing every year at the rate of two and a half millions,
particularly since the Soviet system of child care has so
much reduced the rate of infantile mortality.1 This man-
power may not be at the highest grade of skill ; but it is
adaptable, mobile and numerous. The great ease with which
all rulers of Russia have raised enormous armies — the
conscripted soldiers at the time of the fall of the Tsar were
said to number fourteen millions — is an illustration.

The salient feature of modern Russia is that it is Com-
munist. To this we shall return in the description of its
political institutions ; but we must note that there are
certain features of Russian tradition which have facilitated
the transition to Communism, hard though it may have
been in other respects. " The dictatorship of the prole-
tariat " came easily to a people habituated since the
fifteenth century to autocratic government ; nor did the
idea that government should concern itself in every depart-
ment of life seem at all strange to the descendants of those

1 In 1910 the infantile mortality rate for European Russia was 28.5
per cent ; it had declined by 1927 to 18.4 per cent, and was consid-
erably lower in the large towns.

374 THE COUNTRIES OF EUROPE

who had known Peter the Great and Catherine II. On the
other hand, the extraordinary gift of the ordinary Russian
for communal co-operation has made the Soviet system a
natural growth ; and the absence of anything like a trading
and manufacturing bourgeoisie and its substitution by an
" intelligentsia " of writers and State officials who were
peculiarly open to the influence of ideas removed at any
rate one of the difficulties which confronts every Socialist
Party in Western Europe.

Tsarist Russia. Civilisation, in some parts of Russia,
is very old indeed. Kiev was a flourishing city in the ninth
century before it was christianised ; Nijni-Novgorod was
settled by Scandinavians in the tenth century and became
a great trading centre ; and these were only two of many
cities. (The ancient caravan ports of Central Asia, such as
Bokhara and Samarkand, were at this date part of Asia,
not of " Europe.") But this city civilisation was washed
under by the Tartar invasions of the thirteenth century,
and the modern history of Russia really begins with the
establishment in the fifteenth century of a fighting dynasty
in Moscow. Ivan III and Ivan IV (the " Terrible ") of that
dynasty drove back the Tartars, added large parts of
southern and northern Russia to the Russian Empire and
began, through expeditions of Cossacks, the settlement of
Siberia. But the system of the Russian Tsars was completely
autocratic ; after the reduction by Ivan IV of cities such
as Pskov and Nijni there was no local autonomy left. There
were no representative institutions ; the Duma was an
advisory body only ; and there was no check on the power
of the Tsar except the ancient " privileges " of the nobles.
Russia's history thereafter, until the Revolution, has two
main interests, the spread of the Russian Empire, and the
various attempts at Westernisation. Peter the Great con-
quered the Crimea, and the Swedish possessions on the
Baltic, and built St. Petersburg (Leningrad) as a port for
the west ; Catherine II seized Russian Poland, and made
of Russia a recognised European Power ; the settlement of

THE U.S.S.R. 375

1815 added Finland and Bessarabia ; during the nineteenth
century the incorporation of Siberia proceeded rapidly ;
while between 1864 and 1879 great areas of Central Asia
were removed from tribal rule and placed under the Tsar.
The conquest of Asiatic Russia was complete by the end of
the century, and the Trans-Siberian Railway begun in
1900 ; but an attempt to seize Manchuria failed and led to
the Russo-Japanese War — the first serious check to Russian
expansion. It is not always realised, however, that the wide
growth of the Russian Empire is of comparatively recent
date ; Odessa, for example, the great Black Sea port, was
only built in 1 794.

This vast empire has been the subject of periodic attempts
at Westernisation, of which the Soviet industrial policy is
only the latest of a series. The first was made by Ivan IV in
the sixteenth century when the British Muscovy Company
had opened up trading relations. Foreign workers were
brought in, a beginning made of education, and an attempt
made to reform the alphabet, the coinage, and the Eastern
habits of the population. But these reforms did not go deep ;
the greatest change which the sixteenth century brought to
Russia was the introduction, in 1597, of a serfdom which
came much nearer to slavery than the medieval serfdom
of the West.

Much more important was the reign of Peter the Great
(1685-1725), who set about deliberately to transform
Russia into a Western State. Factories and shipbuilding
yards were set up, a system of education introduced, and
many other reforms, some very much against the grain of
Russian habits, enforced by the personal efforts of the Tsar.
It should be observed that Peter's reforms, like those of
Catherine II after him, were made practically single-
handed. What one man could do, he did, not without
violent cruelty at times ; but he had hardly any collabor-
ators, and had to wage an unceasing war not merely against
corruption and inefficiency, but against definite opposition
to the basis of his ideas. " Slavophilism," that school of
thought which absolutely denies the value of Western

376 THE COUNTRIES OF EUROPE

civilisation to Russia, then first made its appearance. It was
powerful in the nineteenth century, and the Social Revolu-
tionary Party was largely under its influence ; but it appears
to have died down since the Revolution. The recent conflict
between Stalin and Trotsky had nothing to do with
Slavophilism, but was a dispute about revolutionary tactics.

In spite of these efforts, Russia before 1850 was still an
extraordinarily backward country, living largely by barter.
The few industrial establishments which existed were
either State factories or " estate " factories run by the great
nobles, and staffed, in either case, partly by foreign labour
and partly by serfs. This low-grade serf labour was commonly
housed and fed, after a fashion, entirely by the factory
which employed it. The factory kitchen, the factory club,
and the factory housing estate are not new ideas in modern
Russia, though their administration is new. But in the latter
part of the century considerable efforts were made. The
serfs were freed in the 'sixties ; and many new developments,
of which the most important is Count Witte's immense
railway building programme, were set on foot.

All this development, however, had to take place with
the aid of foreign capital. Russia was always extremely poor,
and could not possibly finance her own works. The external
debt became enormous ; and in order to pay the interest,
the Russian Government had to export quantities of grain —
quantities which had to be increased when in the last
quarter of the century the competition of grain from the
New World caused a break in prices. (Cf. the events of the
years 1930-32.) This export had to be subtracted from
the low standard of life of the Russian peasant, already
burdened with emancipation dues and unable, under the
communal control of the mir, or village group, to improve
or increase production. The economic situation of the
Russian peasant at the end of the nineteenth century was
very bad indeed. The condition of the town worker was not
much better, and he was forbidden to combine.

The failure of the Russo-Japanese War caused a collapse.
Strikes broke out in the large towns, and there were

THE U.S.S.R. 377

agrarian riots in many parts of the country. In St. Peters-
burg and other large towns the strikes turned quickly into
revolutionary movements, and for a while the Soviet, i.e.
the Council of Workers' and Soldiers' Deputies, held the
power in St. Petersburg. The Tsar and his advisers appeared
to yield, and promised reforms. A Duma, which contained
a large membership drawn from the Kadets (-Con-
stitutional-Democrats) and from the various Socialist
Parties, was hastily called together ; but when once the
danger was over its views were consistently flouted. The
revolutionary aspect of the movement was put down ;
Stolypin, the Prime Minister, carried out repression with a
vigorous hand ; and those Socialists who were not jailed
or sent to Siberia for the most part fled abroad.

Such was the situation when the European war broke
out : and the war, by straining beyond breaking point the
inefficient and wasteful Tsarist system, finally brought about
its downfall. Millions of men were put under arms, of
whom only about a third were at any time anywhere near
the enemy ; and transport broke down so hopelessly that
many of them could not be fed, clothed or armed. Before
the end of 1916 there was a clamour for bread and peace.
In March 1917, a general strike, led by the Soviet of
Workers' and Soldiers' Deputies, broke out in Petrograd,
and the Tsar's Goverment promptly fell. It was succeeded
by a Provisional Government of moderate views, which in
May became, by the inclusion of representatives from the
Soviets, a Coalition Government under Kerenskv.

The Russian Revolution. The centre of power lay, how-
ever, not in the Provisional or the Coalition Government,
but in the Soviets which existed or were rapidly formed all
over Russia. These however, though preached to by Lenin
and other members of the Bolshevik section of the Social
Democratic Party, who returned from exile in April, had
as yet no definite policy, though they had a Conference and
a Central Executive. (A Congress of Peasant Soviets was
held at the beginning of June, and elected an Executive

378 THE COUNTRIES OF EUROPE

which co-operated with the Executive of the town workers.)
The hope of all Russian workers was for peace and bread ;
but they did not know how to get it.

The unfortunate Kerensky Government was forced by the
Allies in June to undertake an offensive which was a com-
plete and disastrous failure, the troops deserting wholesale.
In July a strike wave in Petrograd was put down, and gave
the Government the opportunity to take reprisals against
the Bolsheviks ; though it did not dare to suppress them
completely for fear of their influence among the working
classes. All through the summer Bolshevik ideas were
growing among the Soviet delegates all over the country, a
fact which made it possible in the autumn for the Bolsheviks
to raise the cry " All Power to the Soviets."

Early in September, while interminable discussions about
the policy and methods of summoning a Constituent
Assembly were going on, Admiral Kornilov attempted a
counter-revolution. This was defeated, almost before it had
begun, by the spontaneous efforts of bodies of workers. The
result was the formation of the Red Guard. Prices were
rising fast, and there were agrarian raids on the great
estates in many parts of Russia. In October Lenin recom-
mended the Bolshevik Party to put themselves at the head
of an insurrection. They were doubtful ; but within a fort-
night revolution came. The Winter Palace fell ; Kerensky
fled ; and within ten days, almost without fighting, the
revolution was established. Foreign journalists, bred on a
tradition of barricades and fierce street fighting, could not
really believe that a revolution had taken place. There
was not enough blood.

The Bolshevik Party took control of the Revolution
because it had secured control of the Red Guard and the
Petrograd Soviet (of which Trotsky was the chairman),
because it was the party which had opposed the hated
offensive, and had been persecuted by the discredited
Coalition Government, but most of all because it was the
only party which had a clear and definite policy. It could
not count on the co-operation of other Socialists ; tKe

THE U.S.S.R. 379

Mensheviks, the other fraction of the old Social Democratic
Party, were definitely hostile ; and of the big Social Revolu-
tionary Party, the right wing was hostile, and the left only
came over by degrees. But it could count on the town
workers, amongst whom Bolshevik ideas had been spreading
rapidly, and on the fighting forces, to whom it had promised
peace. Through the soldiers, mostly peasant-born, and
drifting back in masses to the villages, it could to a certain
extent influence the peasants, i.e. the mass of the Russian
people ; but the general attitude of the peasants was doubt-
ful. At the end of November, a Congress of Peasant Soviets
split, the left half going with the Bolsheviks.

The support of half the peasantry was no good. Accord-
ingly, Lenin, chairman of the Council of People's Com-
missars (the executive body set up by the Revolution)
promulgated on November 8th the famous decree which
nationalised all the land of Russia, thus keeping the
Socialist framework, but gave it to the peasants to hold.
Thus, at one stroke, the support of the bulk of the peasants
was assured during all the troubles to come.

These troubles were not long in making their appearance.
Immediately upon assuming power, the Bolsheviks issued
to all the combatants a suggestion for a general armistice.
When that was rejected, they began to negotiate for
peace with the German and Austrian Governments. At
first the negotiations appeared to be conducted in good
faith ; but gradually, it became clear that the Germans, at
any rate, intended to treat Russia as a beaten enemy. A
renewal of hostilities resulted in the dictated treaty of Brest-
Litovsk (March 1918), by which Russia gave up all the
border provinces including the Ukraine, and recognised
Turkish claims in the Caucasian area. Meanwhile, the
opponents of the Revolution were not slow either in taking
to arms or in claiming outside support. Kornilov in January
raised a White Army in the Don area — his place was later
taken by Denikin. In April the British sent an expedition
to Murmansk and Archangel ; the Japanese invaded the
Far Eastern frontier ; the Bandit Petliura began operations

380 THE COUNTRIES OF EUROPE

from Galicia ; and the Czechoslovak regiments in Siberia
and on the Volga were encouraged by the Allies in the dis-
putes which arose between them and the new Russian State.
These subsidised attempts at counter-revolution took no
heed of the conclusion of European peace ; Wrangel in the
Crimea, Yudenich in Estonia, and Kolchak in Siberia
(most brutal of all the White Generals) must be added to the
list ; in the south the would-be independent republics of
Armenia, Georgia and Azerbaijan were hastily recognised
by the European Powers ; and the final effort, made after
most of the other attempts had failed, was the Polish invasion
of 1920. From 1918 to the beginning of 1921 the Russian
Government was fighting half a dozen civil wars and in-
vasions at once.

The writings of Winston Churchill, who cannot be sup-
posed to be over-sympathetic to the Communist cause,
throw sufficient light upon the political impossibility of these
White groups, their hopeless lack of unity and their political
incapacity, as is evidenced by Kolchak's violent treatment
of Siberian peasants and Denikin's promise to give back
seventy-five per cent of the land to its former owners.
Taken severally, not one of them had a chance of success ;
and gradually they were all defeated, the Poles not without
a counter-offensive which all but captured Warsaw. But
the price paid was naturally heavy. The first need was an
army to defend the Revolution, which Trotsky organised
with great success. But the Red Army, and the town workers
who had made the Revolution, had to be fed, and fed in a
country which economically had collapsed a year before,
and to which the European Powers had applied a blockade
similar to that employed against the Central Empires in the
last years of the war. The only, and the obvious, thing to do
was to ration out strictly the supplies, seeing, as far as
possible, that those whose services were essential to the
defence of the Revolution were first considered. The
policy of" War Communism," as enforced between 1918
and 1921, is essentially no more than the policy of rationing
and State control which most of the European belligerent

THE U.S.S.R. 381

had adopted before the end of the war, raised to the nth.
The Bolsheviks were not in nearly so much of a hurry to
socialise everything as is sometimes supposed ; their first
economic controlling body, Vesyenka, was set up in Decem-
ber 1917 ; but corn and merchant shipping, those vital
points, were not nationalised until the following February,
and foreign trade not until June. Various parts of industry
were nationalised from time to time ; but the general
decree nationalising the whole of industry was not passed
until July 1918, and then partly in order to combat sabot-
age and inefficiency.

For the enthusiasts of the Revolution, assuming that the
old regime had gone, and a new system of workers5 control
was to be instantly inaugurated, had in many cases rushed
to seize the factories and put them under the control of
" factory committees " whose revolutionary zeal consider-
ably outran their organising capacity. Further, such middle-
class technicians as had existed in pre-revolutionary Russia
had almost all taken sides against the Revolution, and had
either fled the country, or, where they remained, were less
inclined to work the new system than to promote its speedy
collapse — in which they were cordially encouraged by the
outside world. Russia, in the summer of 1918, was full of
enthusiastic but incompetent revolutionaries, spies and
counter-revolutionary agents of all kinds, as well as many
who honestly believed that the Revolution was a hopeless
failure. Against these the stern measures of centralised
factory control and the reprisals which are associated with
the word Cheka were put into force. The " Red Terror "
did not seriously begin until September 1918 ; it preserved
the Revolution by putting to death or banishing or other-
wise getting rid of its principal wreckers, but at the price,
inevitable under the circumstances, of losing a large
proportion of native organisational skill. The Russian
worker had to set about learning his industry from the
beginning, unhelped.

After 1 920-2 1 , however, the external situation eased. The
blockade was lifted ; treaties were made with the Baltic

382 THE COUNTRIES OF EUROPE

States (1921)3 with Turkey (1921) after the three southern
border States had been absorbed into the Soviet system,
with Poland (1921), and with Germany (1922). Further-
more, the States which did not make formal treaties began
to admit the existence of Russia as an economic neighbour.
The Anglo-Soviet Trade Agreement was signed in March
1921 and lasted until its suspension in April 1933, when
negotiations for its renewal were broken off, and Anglo-
Russian trade was temporarily suspended by Great Britain
as a reprisal against the trial and imprisonment of two
British engineers by the Soviet. The embargo ended, and
negotiations for a new agreement were resumed in July. At
the same time negotiations for American trade credits in
Russia were opened in London in connection with the
World Economic Conference. Other countries which have
recognised Russia, either fully or for trade purposes, include
Germany, Austria, Italy, Hungary, France, Japan, the
Scandinavian States, Turkey, Persia and Afghanistan.

The establishment of peaceful, if uneasy, relations with
the world made it possible for the system of War Com-
munism to be abandoned, as indeed was desirable, for a
system of control so stringent in intention could not have
been continued. The grain requisitions which were made
of the peasantry in order to keep the Red Army and the city
workers alive were beginning to be bitterly resented, par-
ticularly as the collapse of industrial production meant that
the peasant could not be provided with manufactures in
exchange for his grain. The chaos of the currency added to
the confusion. Lenin's New Economic Policy, therefore,
launched in 1921, gave a temporary licence to private
traders, thereby enabling the peasant to sell his products
for what he could get ; and a beginning was made of
stabilising the currency. (The gold chervonetz was first issued
in 1922.) For a time this considerably eased the situation.
But the peasant, stimulated by the high prices which he
received immediately from the hungry towns, increased
his production sharply ; and as industrial productivity —
which requires capital — could not rise so fast, the result

THE U.S.S.R. 383

was a sharp increase in the price of manufactured goods to
the peasants — the " scissors crisis " of 1923-24. This was
temporarily met by various measures ; but the root diffi-
culty remained. In January, 1924, Lenin died, of paralysis
following attempted assassination ; and his ideas had to be
carried out by his successors.

The root difficulty is simply the poverty of Russia. An
abundant supply of manufactured goods, which is necessary
to raise the standard of life, cannot be produced unless
there is plenty of capital and a surplus of food wherewith
the workers to be employed in industry can be supported.
This surplus must be supplied by the peasant ; but under
systems of individualist production he has been for the
most part unwilling to do so, because the price of industrial
goods (owing to the shortage of production) has been too
high to make it worth his while. The position in regard to
capital supply is broadly similar. Russia cannot make a
substantial advance without the expenditure of large sums
on " fixed capital " — railways, manufacturing plant, elec-
tnfication, and so on. The normal way in which a poor
country finances its development is by borrowing abroad ;
but Russia has been unable to borrow, mainly because of
the strong external prejudice, which showed itself, for
instance, in a demand that the Soviet Government should
make itself responsible for the enormous burden of Tsarist
debt before any fresh money could be lent. In order to
obtain the necessary capital resources, therefore, the Soviet
Government, unable to borrov\ abroad, has had to " save "
die necessary money out of the very slender resources of its
citizens in order to buy the foreigners5 goods. This in-
volves the export of foodstuffs as well as oil and timber to
pay for them, which again, as in the later years of the
nineteenth century, falls upon the peasant.

The Five- Year Plan. In 1928 the Five-Year Plan was
begun, which in essence means the adoption of the first of
these alternatives. A Western industrial system was to be
created, in the main out of Russia's own resources, with the

384 THE COUNTRIES OF EUROPE

aid of such short-term foreign credits as could, be secured.
An exhaustive survey of the possibilities had been in hand
throughout the preceding year, and a plan was drawn up
which laid down the ground which each industry was
supposed to cover during the five ensuing years. Naturally,
the main stress of the first Five- Year Plan was laid upon the
heavy industries, the foundation of an industrial nation.
At the same time a drive in the direction of increased pro-
duction, and particularly socialised production, was to be
given in agriculture. The motive for this was partly political.
The original granting of the land to the peasants had always
been recognised as a temporary measure ; the Communists,
and Lenin as much as any, were entirely opposed to the
establishment of a society of peasant proprietors in Russia,
such as the French Revolution had created in France. At
first they hoped, by the setting up of large State farms as
examples, to bring the peasantry over to belief in socialised
methods ; but this hope was disappointed, and the New
Economic Policy had definitely made the peasants less
socialistic and intensified the difference between the richer
peasants (kulaki) and the poorer (ceredniaki and bedniaki}.
Accordingly, the Five- Year Plan for agriculture not merely
envisaged a great extension of farming on a collective basis,
but further aimed at a drive towards equality in the villages
by discriminating, and encouraging the villagers to discrim-
inate, heavily between the kulaki and their poorer neighbours
— in fact, by treating the kulak as a criminal.

It may be stated at once that, as far as industry was
concerned, the Five- Year Plan succeeded on the whole far
more than any observer thought it would. While in some
cases the estimated total has not been reached, and while
there have been mistakes and the quality of production is
still far below the standard of advanced Western nations,
nevertheless the measure of achievement has been astonish-
ing. (A Second Five-Year Plan, with greater attention paid
to transport and to the lighter industries, was launched at
the end of 1932.) With regard to agriculture, the Plaa has
been less successful. The attempt to socialise the villages,

THE U.S.S.R. 385

which began at the end of 1929, was too sudden and too
vehement, and had to be modified in the spring of 1930,
but not before a sort of " stay-in strike " on the part of
many peasants had resulted in a lowering of production and
a catastrophic slaughter of livestock. At the same time, the
collapse of world agricultural prices meant that a much
higher export of foodstuffs was necessary to purchase the
same quantity of machinery. Many of the State farms or
grain factories proved wasteful and impossible to manage ;
and though the " collective " farm seems more in keeping
with the traditional habits of the peasant, Russian agri-
culture suffered a serious setback in 1930-33, and it is
too soon to say whether a quick recovery is likely.

Meantime, external relations were proceeding none too
happily. Trade agreements, as has been said, had been
concluded with a number of countries, and a sort of grudg-
ing recognition of Russia thereby accorded ; but it was a
recognition of the fact, proved in 1919 and 1920, that the
Soviet system could not be overthrown by invasion and was
unlikely to be overturned at home, and in no sense implied
any cordiality, or even any general acceptance of the
regime. " Incidents," such as the British Arcos raid of
1926, kept on occurring, produced partly by plain hos-
tility to Russia and partly by resentment at the activities
of the Third International. Russia's refusal to ask for
admission to the League of Nations seemed to the Euro-
pean Powers impertinent, and though Russian plenipo-
tentiaries have been seen at various international con-
ferences, such as the 1927 Disarmament Conference and
the World Economic Conference of. the same year, their
speeches, based upon an entirely different conception of
society, have more than once dismayed and annoyed their
fellow-diplomats.

Russian revolutionary propaganda abroad has very much
diminished since the early days. At first it was assumed by
the Communists that the Revolution in Russia could only
succeed as part of a world- wide revolution in which Russia

NR

386 THE COUNTRIES OF EUROPE

would merely lead the way ; and the revolutionary out-
breaks which immediately followed the, war seemed mo-
mentarily to confirm that view. Accordingly, the Third
International (see p. 683) devoted a great deal of
energy tb endeavouring to promote revolution in other
countries Gradually it became apparent that these
measures were not bringing world revolution any nearer,
and were, on the other hand, tending to lessen the possi-
bility of the peaceful trading relations which Russia so
much needed ; and during the period of the New Economic
Policy, though the language of the Third International
continued as violent* as ever, its activities were actually
considerably curtailed. This position aroused the fears of
Trotsky, Zinoviev, and other Communists, who held to the
original view, and maintained, moreover, that the attempt
to carry the Revolution through in Russia alone could only
be done by bribing the peasant, by making him, in fact,
a bourgeois proprietor ; and they pointed to the growth of
the kulak under 'the N.E.P. as an illustration. After a Jong
struggle within the Communist Party, the adherents of
Trotsky were beaten by the adherents of Stalin, its present
secretary, and Trotsky was expelled in 1927. Immediately
afterwarHs followed the Five- Year Plan, the great attempt
to make Russia self-sufficient, and the drive against the
kulaki, designed partly to guard against the dangers which
Trotsky had pointed out.

Russia, during the last few years, has been definitely set
towards self-sufficiency and peaceful relations with other
Powers ; hence a generally conciliatory attitude towards
such countries as Japan and Poland. But this does not mean
that the Russians ha\«e ceased to fear war. They feel that the
capitalist Powers have not abated, only ceased to give rein
to their hostility, that any moment another concerted
attack upon Russia may be made ; and this feeling is in-
creased by the fact that the majority of their European
contacts are made with diplomats who still live in the
atmosphere of international war. Such incidents as the trial,
in April 1933, of the British engineers in Moscow, and the

THE U.S.S.R. 387

attitude taken up by the British Press and politicians, with
its calm assumption that the prisoners were completely in-
nocent and would certainly not receive a fair trial, do
nothing to abate it.

Hence every now and then a wave of war panic overcomes
the Government, strengthening the Red Army and the
revolutionary defences ; hence, also, the .removal of the
heavy industry and the munition plants to long distances
from the frontiers ; and hence the proposal, made from time
to time, that the actual capital itself should be shifted from
Moscow to somewhere in the Urals. Russia still is, and feels
herself to bej a beleaguered State ; and the present shortage
of foods tufis intensifies this belief. The period of War Com-
munism has not been left very far behind.

The Soviet Constitution. The U.S.S.R. is a federal
republic, made up of seven sovereign republics, the Russian
Socialist Federal Soviet Republic (which is much the
largest of the members), the White Russian, Ukrainian and
Transcaucasian Republics, and the Republics of Turkmen-
istan, Uzbekistan and Tajikistan. Some of these include in
their territories " autonomous republics," such as the
German Volga Republic, the Far Eastern Republic and
the Tartar Republic in the R.S.F.S.R., and the Republics
of Georgia, Armenia and Azerbaijan in Transcaucasia.
There are also " autonomous regions " with rather less
autonomy. Under the constitution of 1923, the seven
republics are sovereign, except where powers have been
assigned to the Union ; but the assigned powers are so wide
and so numerous, including, for example., foreign trade and
foreign relations, defence, the direction of national eco-
nomic policy and internal trade, taxation and labour
legislation, as to give the main controlling direction to the
All-Union Government, though there is a great deal of
republican autonomy in such matters as public health. In
1932 the question of the 'demolition of redundant churches
was made an affair of the central government.

Civil rights, including the franchise, are enjoyed, broadly

388 TfcE COUNTRIES OF EUROPE

speaking, by all persons of either sex over 18 years of age
who earn their own living. The classes debarred from civil
rights consist of persons employing hired labour for profit
(this includes kulaki), or living on unearned income ;
monks and priests, imbeciles, and former agents of the
Tsarist regime ; but special cases may be considered, and
exceptions made, by provincial election commissions. It
is commonly estimated that about 8 millions of the popula-
tion fall into one or other of these classes. Deprivation of
civil rights means, in effect, much more than disfranchise-
ment ; it also involves loss of Trade Union membership,
ration card, and ether essentials. It commonly follows
conviction for any serious offence ; and punishments in
Russia (except for counter-revolutionary activities) are so
light as compared with those of other countries that the
loss of civil rights is often felt more heavily than the actual
penalty.

The Governmental machine is in form a pyramid, based
on the Soviet system and built up by delegation from below.
The lowest rank is that of the small town and rural Soviets,
including Soviets representative of large factories. (The
rural population is considerably more lightly represented
than the town workers.) Delegates from these bodies come
together to form the rayon or district Soviets. Above these is
the Oblast or provincial Congress of Soviets. This Congress
elects an Executive of 45 1 persons, which meets three or
four times in the year, and with the Council of Nationalities
(representative of all the republics and autonomous dis-
tricts) chooses a Presidium of 27. The Presidium, together
with the Council of People's Commissars, a body consisting
of the heads of the principal State departments and so
resembling in composition the British Cabinet, makes up the
governing body of Russia. In the early days, when Lenin
was its chairman, the Council of Commissars was the most
important body ; but under the new constitution it was
subordinated in important respects to the Presidium.
Under the Council of Commissars is the " Council of
Labour and Defence," in effect its Economic Committee,

THE U.S.S.R. 389

which decides upon the plans for industry and finance
submitted to it by the State Planning Department
(Gosplan), and below again are many Commissions and
Committees for dealing with one or other part of the State
activities ; but these are so numerous and also change their
name and function so often that it would be impossible to
attempt to describe them here.

Such is the constitutional machinery of the Soviet
Republic. But a mere description of the machinery is
worthless and misleading unless it takes account of two
factors of primary importance — the Communist Party and
the immense network of tiny groups which may com-
pendiously be called " the collectives."1

The Communist Party is the body which in Russia
exercises the dictatorship of the proletariat ; but it does
this, not by virtue of any special place under the constitu-
tion, but by virtue of its past history and its present mem-
bership. During the Revolution, as has been stated, the
Communists were the only party with a policy ; it was thiis
necessary, in order to carry the Revolution through, to put
Communists in all the positions of strategic importance, and
to see that they there carried out the orders of the Party.
This position, substantially, still remains. Of the nearly two
million members of the Communist Party in Russia, not
all, of course, are in positions of importance, and high posi-
tions, further, are occupied by Russians who are not Party
members ; but the really key places are still held by Com-
munists, and their instructions as to policy and behaviour
are given them by the Congress of the Communist Party,
or, between Congresses, by its Politburo of nine mem-
bers, whose secretary is Stalin. It follows that the debates
which really influence the direction of Russian policy
are those conducted at the Congresses of the JCommunist
Party.

But the Communist Party is more than this ; it is a dedi-
cated Order, to which men and women are only admitted
after a searching examination and a period of probation
1 Not the same as the collective farms.

39O THE COUNTRIES OF EUROPE

while their conduct is under close scrutiny by their future
fellow-members, and from which they may be expelled if
they fail to come up to standard. (During one of the biggest
" purges," that which took place in the summer of 1930,
130,000 persons* were so expelled.) As far as is humanly
possible, the Communist Party does its best to see that both
in intellectual understanding and in personal character,
its members are fitted for their task of being pivots of the
new system. Generally speaking, a member of the Com-
munist Party must be prepared to put himself at the service
of the State ; he must be ready to do overtime work and to
undertake all sorts of additional activities at the behest of
his Party call. The standard of personal service and of
personal conduct is high and strictly enforced. Until
recently, though this restriction has since been relaxed, the
upper limit of salary for a Communist was low. Further-
more, he must obey decisions of the Party on theory and
policy when they have been made. Until they have there is
enormous latitude of discussion (vide all the reports of
Communist Party Congresses) ; but when an idea or
policy has been definitely rejected, no Communist can
continue to hold it.

The Communist Party is thus the driving and directing
force of new Russia. Even where Communists are not in
direct control, there is Communist influence, as in the
famous " Red Triangle," to be found in all^ factories,
whereby a representative of the Communist Party sits
with a representative of the factory committee and with
the manager to determine factory policy. But it should not
be assumed that the only Communists in Russia are the
members of the Communist Party. In the first place, there
are all the Russians under twenty-four (for whom, it is
true, there are Communist youth organisations available) ;
in the second place, there is always a large number
qualifying for membership ; and thirdly, and most im-
portant, there is a vast mass of people who, while heartily
agreeing with the Communist policy, either do not want or
think they would be unable to pass the stiff tests demanded

THE U.S.S.R. 391

of entrants. Some of the most vocal Communist supporters
are not Party members.

Against this discipline and centralised control of the
Communist Party, however, there has to be set an enor-
mous amount of almost spontaneous grouping for self-
government and criticism, which alone could make the
system workable by human beings. The first impression of
many visitors to Russia is not of an iron discipline but of an
endless clatter of tongues, all discussing, making suggestions,
pouring out criticisms of the working of particular parts of
the system, and even modifying it, to an extent which would
and does horrify an English government official, in order
to make it suit local or special conditions. In the adminis-
tration of justice, for example, there is no country in which
the Mikado's practice of making the punishment fit the
crime is more earnestly followed. Russian laws, except
where they are held to concern the safety of the State, are
not laws so much as general guiding principles ; their
detailed administration in practice is left, not, as in Eng-
land, to the official of some ministry or other, but to a
" collective," i.e. a local committee, of a factory, for
example, of tenants of a group of flats, of parents of children
in a school, even of prisoners in a prison. Where there is
a Russian, there appears to be a " collective " ; it even
seems difficult to remove a drunk man from the middle of
the highway without an impromptu committee arising to
discuss it.

Further, complaints and criticisms are vigorously en-
couraged by the central authorities. The newspapers are
full of them ; and there is even a body, called the Workers'
and Peasants' Inspectorate, whose sole duty it is to receive
and investigate complaints, which is independent of any
government department, and which may descend at any
moment in order to see whether a charge, particularly a
charge of inefficiency, corruption, or bureaucracy is well-
founded. Of course, this system is open to abuse ; where
complaints are encouraged there is room for petty spite to
find vent ; and there is undoubtedly too much complaining

3Q2 THE COUNTRIES OF EUROPE

in Russia at the present time, and too much nagging at
people in responsible posts. Charges of corruption and
sabotage are very easily made. The underlying belief is that
where consciousness of collaboration in a great and im-
portant work is strong enough petty spite will disappear ;
and undoubtedly the sense of common purpose, in the towns
at any rate, is enormously strong, though the strain of the
building of a new society on a low food ration is liable to
produce explosions of hysteria and bad temper which do
harm. In the meantime, however, the institution is a
valuable safety-valve for discontent.

At this point mention must be made of the State Political
Department (G.P.U.) Set up in 1922, this body is the direct
descendant of the Ctieka. It is the only police force which
operates throughout Russia, the others being simply local
forces ; it is also entrusted with the work of defence against
counter-revolution from within the State, the Red Army
being mainly for external defence. As such, it is respon-
sible for the great State prosecutions for sabotage, espion-
age, etc. ; it has also very wide powers of secret action ;
and it has a large staff, both uniformed and un-uniformed,
the latter being employed, often unknown to their fellows,
in ordinary employment. It is not an institution which
sounds pleasant to English ears, though Continental coun-
tries are more accustomed to the use of secret police ; it
should, however, be mentioned that it performs many
other functions which are more positively social. For in-
stance, the entire organisation for the reclamation of the
" homeless children " — a splendid piece of imaginative
work — was initiated and carried out by the G.P.U.

Even a description of the working of her political insti-
tutions does not, however, adequately describe Russia to-
day ; the complete social changes involved in the abolition
of private property, the institution of State planning and
the exaltation of the productive worker over the recipient
of unearned increment go so deep that only a book would
suffice to expound them. The visitor to Russia is continu-
ally receiving shocks, continually being reminded that he

THE U.S.S.R. 393

is in a topsy-turvy country, a country where the ideals
which are accepted over the whole of the rest of Europe
and America are simply rejected, and a new set of ideals is
in force. Russia may not be a Socialist country, and her
present rulers would certainly admit that she is not ;
but her face is set towards Socialism, and that involves a
re-orientation of the whole of life and a denial of the values
upon which capitalist civilisation is based.

Furthermore, this drive towards Socialism is based upon
the conscious and passionate co-operation of millions of
Russian citizens. Citizenship, in Russia, means far more
than the passive casting of a vote at intervals ; it
involves a continuous participation in the task of build-
ing up, as rapidly as may be, the Socialist State of
the future. Opinions differ as to the extent to which a
knowledge and understanding of the aims of the Soviet
State is diffused among its citizens ; but, leaving on one
side the minority who are treated as social enemies (and
who will continue to be so treated as long as Russia feels
heiself a beleaguered city) there is no doubt that wide and
deep among her citizens, and particularly among the young
persons and the children, this " State-consciousness " is
alive and active. Russia alone, of all States in the world
to-day, has succeeded in re-creating some of the spirit
which was to be found among the citizens of ancient
Athens ; and the contrast between this spirit, and the dull
and dead apathy, alternating with moods of blind and vio-
lent revolt, which is to be found among the populations of
Central and Eastern Europe — who live, for the most part,
actually at a higher standard than the majority of Russians
— has struck observers who cannot be accused of any
sympathy with Communism.

The fight against illiteracy, and the cjamour of the
Russian proletariat for education, which makes it almost
impossible to buy a book or a newspaper in spite of the
tremendous increase in the production of both since the
Revolution, is only one aspect of this enthusiasm. So also
is the enlistment of millions of Russian women, on equal

394 THE COUNTRIES OF EUROPE

terms with men, in productive industry and government
service, although the social effects and implications of the
sex equality introduced by the Revolution go far beyond a
mere drive for increased production. The treatment of
children, on the other hand, must be admitted to be far
more Socialist than productive in intention. The Soviet
laws relating to child-life and labour are, in intention, the
most generous in the world ; and one great aim of Soviet
policy is to secure that the new industrial State of Russia
shall not be built, as the European industrial system was
built, at the expense of the growing generation. Whether
the resources of the Union will be consistently adequate to
maintain the high initial standard of child-care and educa-
tion which has been set, depends of course in the last resort
upon the economic progress of the Union as a whole ; of
the effort and intention, however, there is no doubt.

PART III: ECONOMIC
CONDITIONS IN EUROPE

1. The Economic Situation After the War

2. The World Slump

3. The Situation of European Agriculture

4. The Debtor Countries of Europe

5. The European Monetary Problem

6. Proposals for Raising the Price-Level

7. Proposals for Restoring the Gold Standard

8. The Slump in European Industry

9. The Great Industrial Countries

10. The Strangling of European Trade

11. Wages in Europe

§ i. THE ECONOMIC SITUATION
AFTER THE WAR

1 N T H E minds of many people who lived through the war
as civilians in Great Britain or the United States the years
between 1914 and 1918 are connected above all with mem-
ories of an unwonted economic plenty. For during the war,
though an immense part of the man power in all the bellig-
erent countries was away fighting and a large fraction of
those who remained were producing not commodities for the
satisfaction of normal human needs but munitions of war
to be shot away or trodden into mud on one or another of
the long fighting fronts, on the whole in both Great Britain
and the United States the populations that were left behind
lived better than they had ever lived before. Prices were

396 ECONOMIC CONDITIONS IN EUROPE

high, and rose higher ; but earnings rose too, and there was
no unemployment to depress the standard of living. Of
some things there was indeed a shortage ; and in Great
Britain rationing schemes had to be introduced and be-
came more severe during the last period of the war in con-
sequence of the intensified submarine campaign and the
scarcity of tonnage. But, when all allowance has been made
for rationing and the limitations imposed by it on the con-
sumer's range of choice, the fact remains that in both Great
Britain and America the years of war were from the stand-
point of the ordinary consumer years of prosperity — years
to which men look back with wonder now that they have
experienced the pinch of peace.

While this is true to a great extent of the civil populations
of Great Britain and the United States, it is certainly not
true of the populations of most of the belligerent countries
of Continental Europe. Russians, Germans, Belgians, Poles,
Austrians, Serbs and Hungarians have certainly no cause
to look back on the experience of the years of war with any
sense of economic regret. In Russia the comparatively un-
developed and highly inefficient organisation of industry
and transport broke down completely under the strain of
warfare. Town dwellers suffered acutely ; and the peasants
were largely cut off from supplies of industrial goods, while
the market even for their produce became more and more
disorganised as the war advanced, and larger and larger
masses of men were enrolled in military service. Germany,
experiencing the rigid blockade of her frontiers, went
shorter and shorter even of the elementary needs of life as
the struggle continued ; and the disastrous reactions on the
physical welfare of the German people have by no means
yet been overcome. Belgium under German occupation
went through the same experience of acute shortage and
under-nourishment ; and the same fate befell the territories
further east which were under the occupation of the Central
Powers. In the actual theatres of war production became
impossible, and the means of living of millions of people
were ruthlessly destroyed. In Great Britain or the United

THE ECONOMIC SITUATION AFTER THE WAR 397

States one can sometimes hear men only half in jest asking
for another war as a means of curing unemployment,
stopping wage reductions, and ushering in a new period of
economic prosperity. But over the greater part of Europe
men cherish no such illusions. If they are in a mood to go
to war again, it is not because they think of the last war
as an automatic dispenser of economic prosperity.

Continental Europe, taken as a whole, emerged from the
war far less productive than it had been in 1914. There had
been indeed in all the belligerent countries a great develop-
ment of those industries which minister directly to the
needs of war ; but this development had been forced arti-
ficially and was dependent upon military demand, so that
much of the productive plant which had been built between
1914 and 1918 was not readily adaptable to meeting the
needs of communities endeavouring to " return to normal
conditions." Such stimulation as the war had applied to
particular industries was far more than offset by the general
deterioration of the industrial machine and by the dispro-
portion between producing capacity in different branches
of industry. Moreover, the land had suffered, not only in
the devastated areas, but also to some extent elsewhere, as
a result of the shortage of men and of manures. There had
been in many areas much slaughtering of beasts, and over
large parts of Europe the old agrarian systems were mani-
festly breaking down ; while in the new States that were
being set up on the ruins of the pre-war Russian and Austro-
Hungarian Empires, the basic questions of land ownership
and the rights of cultivation were still unsettled, and secure
conditions for the productive use of the land were still to
seek.

Immediately after the conclusion of hostilities, many
people thought that the broken-down economy of Conti-
nental Europe stood in such obvious need of wholesale
rebuilding as to ensure for years to come a large sustained
demand for the products which the more fortunate coun-
tries were able to supply, and a complete immunity from
unemployment while the necessary work of reconstruction

ECONOMIC CONDITIONS IN EUROPE

was being carried through. These hopes, however, speedily
faded away. There was indeed the short-lived hectic post-
war boom of 1919 and the first half of 1920, during which
prices soared far above the highest points which they had
reached during the years of war, and huge fortunes were
made by businesses which were able to supply both the
capital goods and the consumers' goods that were most
urgently required both by the stricken nations for the
rebuilding: of their shattered resources, and by the new
States for the construction of the necessary equipment for
national economic life. The post-war boom, however, was
even at its height never a boom in the sense in which a
boom implies a real accession of prosperity. It was a boom
in prices and not in production. Huge fortunes were made
not by selling large quantities of goods but rather by
charging fantastically high prices for an exceedingly short
supply. The illusory prosperity of 1919 and 1920 was based
on scarcity, and not on plenty, and its collapse was in-
evitable as soon as men began to realise that in face of the
real scarcity there existed in the nations which stood most
urgently in need of supplies no real and present capacity
to pay.

During this short-lived boom output in relation to the
number of men employed remained at a very low level ;
there was a scarcity of up-to-date plant adapted to meeting
the needs of the post-war world, and neither employers nor
workers were in a mood to give really efficient service. The
employer, finding money come easy as prices rose — for in
those days only the veriest fool could avoid making high
profits — was under no compulsion to exert himself in
cutting down the costs of production or in making his
methods more efficient. If, as was often the case, he had
worked at high pressure during the war, he wanted a rest,
and he took the easy conditions of money-making as they
came without much thought for the future, even where he
did not plunge into orgies of financial speculation based on
the unreal expectation of a continuance of demand at
steadily rising prices. The workman, for his part, had also

THE ECONOMIC SITUATION AFTER THE WAR 399

been at a strain either in the workshops or in the trenches
during the years of war ; and he too was inclined to take
things easy as long as the boom lasted. Trade Unions were
powerful then, and there was in most industries little fear
of the sack to keep men up to the mark. The idea that
everything would come right on the morrow of the war had
been dinned into the ears of all classes in all the belligerent
nations, and in the Allied countries it was difficult to
destroy quickly the expectations which patriotic statesmen
had aroused in the course of war propaganda.

In the defeated countries the situation was in this respect
very different. There too the peoples had been led to
expect an epoch of abounding prosperity after the war ;
but this expectation had been based on the assurance of
victory, and in Germany and Austria men, facing the
knowledge of defeat, sank deeper and deeper into despair
as the news came through of more and more onerous terms
being imposed by the victorious Allies. Moreover, in these
countries the physical vigour of the workers as well as
their morale had been seriously impaired by the long
struggle, and the industrial equipment had been much more
seriously damaged than that of the victorious Powers. Low
production was in their case inevitable, quite apart from the
psychological causes which tended to bring it about in the
victorious countries.

In the latter part of 1920 the illusory post-war boom
definitely broke. Prices in terms of gold fell with unparal-
leled sharpness, so that in all the countries which either
remained upon or were intent on returning to the gold
standard a rapid and destructive process of deflation set in.
This deflation, wherever it occurred, intensified the diffi-
culties of the economically weaker countries, and led in
their case to a precisely contrary tendency. In the new
States of Europe, in Germany, and before long in France
and Italy as well, the machinery of government could be
kept at work only by printing the money required to meet
the immediate expenses of the State ; and the inflationary
process thus begun speedily communicated itself to the

400 ECONOMIC CONDITIONS IN EUROPE

operations of industry, causing a wave of speculative activity
in both internal and international business dealings. Thus
prices in different countries pursued an erratic and dis-
similar course, as some followed the path of deflation on
their way back to the gold standard, while others hovered
between attempts at stabilising their currencies at varying
levels of exchange, and renewed plunges into inflation as
their difficulties began again to accumulate.

Post- War Recovery. From die standpoint of Europe
as a whole the period since the war can be divided roughly
into four distinct phases. There comes first the short-lived
and deceptive boom of 1919 and 1920, during which
something was done to meet the most urgent needs of
reconstruction, but done without much attempt to count
the cost, or to place the economic systems of the European
States on a sound or permanent footing. The second phase
extends from the collapse of the boom in 1920 to about
1923. These were years of depression, unemployment,
unrest and falling standards of life, accompanied, as we
have seen, in most of the countries of Continental Europe by
great instability of the currency and great uncertainty as to
the economic future. But from 1924 onwards Europe was
recovering in an economic sense ; production was increasing
fast, and one currency after another was being at least
provisionally stabilised, although there were still to be
many set-backs, and in some cases currencies were stabil-
ised only to be upset and re-stabilised several times over.
Trade as well as production was increasing as the States of
Europe began to settle down within their new frontiers, and
to build up the new relationships based on the changed
political divisions of the post-war world. This period of real
reconstruction, as contrasted with the unreal reconstruction
of 1919 and 1920, lasted at least in appearance until thi
coming in 1929 of the great slump under which Europe is,
still prostrate.

Some measure of the situation which existed in Europe
on the eve of the period of recovery between 1924 and 1929

THE ECONOMIC SITUATION AFTER THE WAR 40!

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4O2 ECONOMIC CONDITIONS IN EUROPE

can be secured by looking at the figures published by the
League of Nations showing roughly the movements in
the production of raw materials and foodstuffs and in the
volume of international trade for the leading Continental
groups of the world. These figures cannot of course pretend
to any high degree of accuracy ; but they do sufficiently
indicate general tendencies and bring out the contrast
between the consequences of the war in different parts of
the world.

In the above diagram the first thing to be noticed is the
sharp contrast up to 1923 between the development of pro-
duction and trade in Europe and in the rest of the world. In
the world as a whole production was in 1923 about 6 percent
greater than it had been in 1913, whereas population had
risen by about 5 per cent. In other words, there had been no
significant change in the world's output of foodstuffs and
raw materials taken together per head of population. It
will, however, be seen that, whereas the output of raw
materials per head of population had risen for the world
as a whole, that of foodstuffs had to a small extent
declined.

These figures for the world as a whole give, however, a
very misleading impression of the real situation. Whereas
some parts of the world had very greatly increased their
output of both foodstuffs and raw materials, in other areas
there had been a sharp decline. In Europe as a whole,
including the U.S.S.R., production of foodstuffs and raw
materials was 16 per cent less in 1923 than it had been in
1913, although population had slightly increased. European
international trade had fallen off scarcely less than the
volume of production. But even these figures for Europe as
a whole do not adequately show what had happened ; for
whereas in Western and Southern Europe the decline in
production was only about 4 per cent, in Eastern and
Central Europe, excluding the U.S.S.R., it was no less than
22 per cent, and in the U.S.S.R. even greater than this,
whereas population had risen in Europe as a whole, exclud-
ing the U.S.S.R., by 4 per cent.

THE ECONOMIC SITUATION AFTER THE WAR 403

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404 ECONOMIC CONDITIONS IN EUROPE

These figures serve to reveal the very real poverty of the
European countries, and especially of Eastern and Central
Europe, in the years immediately after the war ; and this
fundamental fact of poverty is seen still more clearly when
the figures for Europe are contrasted with those for other
Continents. Thus in North America production had risen
by 29 per cent and population by 19 per cent, while in
Central America, as against a rise of only 7 per cent in
population, production was actually up by 64 per cent on
the pre-war figures. Even Asia showed a rise of i o per cent
in production as against 5 per cent in population.

It is unfortunately not possible to give any corresponding
figures showing what had happened between 1913 and 1923
to the output of manufactured goods ; but there is good
reason to suppose that the course of manufacturing pro-
duction had been over this period much the same as that of
the production of foodstuffs and raw materials ; for although
there has been in recent years a considerable economy in the
quantity of materials needed to produce a given output of
finished commodities, it is practically certain that the
greater part of this economy was achieved after 1923. It
can therefore be taken as at any rate a fair approximation
to the truth that in Europe as a whole the standard of
wealth had fallen by at least 15 per cent in the decade
which ended in 1923, and that in Eastern and Central
Europe the fall in the standard of wealth was probably as
much as 25 per cent — a truly desperate situation in view of
the pre-war poverty of most of the countries concerned.

At the same time the figures given above show that
after 1923 a rapid recovery did set in ; and this is made
even clearer by the table on p. 403 which carries on the
record on a somewhat different basis past the coming of the
slump in 1929.

On the basis of these further figures it will be seen that\
between 1925 and 1929 the production of foodstuffs and
raw materials rose in the world as a whole by about 12
per cent, whereas in Europe the rise was no less than 18
per cent. Taking foodstuffs alone, world production rose

THE ECONOMIC SITUATION AFTER THE WAR 405

between these years by 6 per cent, and European production
by 1 2 per cent, while for raw materials the rise was in both
cases very much greater, amounting in the world as a whole
to 2 1 per cent, and in Europe to no less than 30 per cent.
It is a significant fact that during these years, despite all
that was said about the tremendous wave of prosperity in
the United States, the actual rise of production was con-
siderably slower in North America than in Europe, so that
as against the rise of 18 per cent in total production in
Europe, North America showed a rise of only 6 per cent.
This discrepancy was partly due to the bad harvests in
America in 1929 ; but even if we take the figures for raw
materials alone, the advance in the United States between
1925 and 1929 was only 15 per cent, or half the advance
recorded in Europe for the same period. Even in 1928,
despite the large harvests in the New World, the production
of foodstuffs in North America was only 8 per cent greater
than in 1925. It is thus clear that in the years immediately
before the world slump Europe had not only regained and
surpassed as a whole the pre-war standard of production,
but was also advancing at a substantially faster rate than the
rest of the world, though in comparison with the pre-war
situation the advance in production in Europe was still
very much less than the advance in the world as a whole.
On this point no figures are available as a basis for direct
comparison between 1913 and 1929, but a comparison can
be made between 1913 and 1928. On this basis, in the world
as a whole population ha(J risen by 10 per cent, and pro-
duction by 25 per cent, made up of a rise of 16 per cent in
the output of foodstuffs and of 40 per cent in that of raw
materials. For Europe, excluding the U.S.S.R., the increase
of population was 6 per cent and that of production 1 1
per cent, or, including the U.S.S.R., 8 per cent in popula-
tion and 10 per cent in production. On the other hand, in
North America population had risen by 26 per cent, and
production by 35 per cent. In Asia, the corresponding
figures are 7 per cent and 24 per cent, and in South America
43 per cent and 56 per cent. Europe in fact had made up

406 ECONOMIC CONDITIONS IN EUROPE

1924 25 26 27 28 29 30 31 32 1924 25 26 27 26 29 30 31 32

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THE RISE AND FALL OF EUROPEAN

Official Production Indices of the various

Germany
France
Gt. Britain
U.S.S.R.
Belgium

1924 1925 1926 1927 1928 1929 1930 1931 1932

69 80 81 101 100 100 90 74 6f\

86 85 99 87 100 109 1 10 98 76

95 — — 101 100 106 98 89 88

30 50 70 82 100 124 156 189 200

77 75 86 94 100 100 90 79 68

THE ECONOMIC SITUATION AFTER THE WAR 407
1924 25 26 27 26 29 30 31 J2 1924 25 26 27 28 2 80 31 32

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INDUSTRIAL PRODUCTION, 1924-1932

Countries (Production in 1928 = 100)

1924 1925 1926 1927 1928 1929 1930 1931 i

Czechoslovakia 74 79 77 9<> ">o i»4 9* 8l 59

Poland — 73 7' 88 IO° I0° 8a 69 54

U.S.A. 86 94 97 96 IO° IO7 87 73 58

12 Industrial Countries — 87 88 95 100 108 93 80 — .

408 ECONOMIC CONDITIONS IN EUROPE

some of the leeway of the war and immediate post-war
years ; but the total economic advance in Europe was
considerably less than in most other parts of the world.

This conclusion is also borne out by the League of Nations
figures showing the percentage distribution of world trade
by Continental groups. Before the war, Europe, including
Russia, did nearly 59 per cent of total world trade, whereas
in 1928-29 this proportion had fallen to 52 per cent, mainly
as a result of the relative expansion of American and
Asiatic foreign trade.

But while in comparison with pre-war conditions Europe
still lagged behind the rest of the world the considerableness
of her economic achievement between 1924 and 1929 needs
to be recognised. For this period it is possible to corroborate
the League of Nations figures relating to the production of
foodstuffs and raw materials from other sources ; for from
about 1 924 most of the leading industrial countries began
to publish statistics designed to measure the general
fluctuations of industrial production. Some of the figures set
out in the above diagram show how rapidly production in
industry had risen between 1 924 and 1 929. Even if we leave
out of account the abnormal increase in industrial produc-
tion in the U.S.S.R. under the stimulus of the Five- Year
Plan, it will be seen that each of the leading capitalist
countries for which figures are available largely increased
its output of industrial goods during these years. The
increase was smallest in Great Britain, which continued to
suffer from serious unemployment through the decay of the
great pre-war exporting industries, especially textiles,
coal and metals — a situation aggravated by the deflationary
policy pursued by successive Governments and by the Bank
of England, in connection with the return to the gold
standard at the pre-war basis of parity between the pound
sterling and the United States dollar. But even in Great
Britain industrial production rose by 12 per cent between^
1924 and 1929 ; while in Germany, under the influence of
the great influx of foreign capital in the five years following
the Dawes Plan of 1924, the increase actually amounted to

THE ECONOMIC SITUATION AFTER THE WAR 409

nearly 48 per cent, accompanied by a still greater expansion
in the volume and value of German industrial exports.

Agriculture and Industry. It is beyond doubt that
during these years there was not only a sharp increase in
total European production, but also a really considerable
advance in industrial efficiency. The years between 1924
and 1929 were in Europe as a whole a time of great activity
in the constructional trades, and the heavy industries
especially were largely re-equipped on a basis of increasing
mechanisation which greatly increased the output per
worker employed. This process was going on all over the
world, and was probably proceeding at a substantially more
rapid rate in the United States than in Europe, despite the
larger advance during the period in total European pro-
duction. For in the United States an unemployment
problem, concealed by the absence of any statistics or any
system of unemployment relief, was already coming into
existence even during the period of the greatest apparent
economic prosperity. Nor was the development of mechan-
isation and of the rationalisation of economic processes
confined to the manufacturing and extractive industries.
It was going on with at least equal speed in agriculture in
the countries of the New World, where farming was being
carried on with a rapidly increasing use of mechanical
appliances and economy in the employment of labour.
This, however, was not the case over the greater part of
Europe. For in most of the European countries and especi-
ally in the new States, there had arisen after the war from
the peasants and land-workers an irresistible demand for
the division of the land ; and this had led in one country
after another to the passing of new land laws under
which a great many of the large estates were broken up into
small peasant holdings.

This process of breaking up the great estates, whatever
may be thought of its social consequences, undoubtedly
reacted for the time adversely on agricultural production ;
for peasant cultivation is in a technical sense usually very

4-IO ECONOMIC CONDITIONS IN EUROPE

backward, and there was little opportunity on the new
peasant holdings for the adoption of those labour-saving
devices which were rapidly increasing the productivity of
agriculture in the New World. In most of the States of
Central and Eastern Europe there was a decline in the
average production per acre, accompanied by a larger use
of labour on the land — in other words by an increase in the
real though not necessarily in the money costs of agricultural
production. This decrease in agricultural productivity over
a large part of Europe, occurring simultaneously with a
great rise in productivity in the New World, made con-
ditions inevitably difficult for the small peasant farmer ;
and the position was further aggravated by the burden of
debt by which many of the European peasant populations
were weighed down. This burden was heaviest where the
terms on which the peasants got the land involved the pay-
ment of large sums in compensation to the former owners,
as in Tsarist Russia ; but even apart from this the peasants
were mostly burdened with debts incurred at a time when
capital was scarce and commanded an abnormally high
rate of interest, and on a basis of agricultural prices which
could no longer be sustained under competitive inter-
national conditions in face of the growing productivity of the
large-scale agriculture of the New World. These conditions,
as we shall see, led to the adoption in one country after
another, in the hope of enabling the peasants to go on
paying their debt charges without facing absolute starva-
tion, of measures of high agricultural Protection designed
to keep up the domestic price of agricultural produce even
in face of the sharp fall in the world prices of the leading
agricultural goods. But of course no merely domestic
measures of Protection could help those peasants who were
compelled to look to foreign markets to absorb a consider-
able proportion of their supplies. Indeed, the growth of
agricultural Protectionism in Europe steadily worsened the
position of the peasants in the food-exporting countries,
and led, not only to desperate financial measures designed
to save these countries from complete economic collapse,

THE ECONOMIC SITUATION AFTER THE WAR 4! I

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412 ECONOMIC CONDITIONS IN EUROPE

but also to dictatorships of increasing severity directed
against the hunger movements and economic unrest among
the impoverished peasants.

The extent to which agricultural prices were already
falling in the years before the coming of the world slump
can be shown by selecting from the available British statis-
tics a few outstanding instances. Thus, if we compare
prices in 1924 with prices in 1929 we find that Canadian
wheat (Number 2, North Manitoba) had fallen from 73*.
a quarter in December 1924 to 55^. 6d. in December 1929.
English wheat, meanwhile, had fallen from I2J. zd. to
9^. 6d. a hundredweight, English barley from 14?. $d. to
Ss. &/., and English oats from 95. 6d. to 7*. Meanwhile, the
price of maize landed in England had fallen from 48^. a
quarter to $is. Danish butter was down from 244?. 6d. a
hundredweight to i8oj., and Danish bacon from 113^. to
105^. In the case of meat, however, the fall was in general
far less severe than in that of cereals. English beef had
fallen only from 6-2J. per 8 Ibs. to 5-7^., and Argentine
chilled beef had actually risen slightly in price. But English
mutton was down from 8«8j. per 8 Ibs. to 7^., and New
Zealand frozen mutton from 5-8^. to 4-8*. In cheese there
had been relatively little decline ; in the case of Canadian
Cheddar from iooj. per cwt. to gjs. But wool prices (English
Southdown) had fallen tremendously — from y. id. per Ib.
at the end of 1924 to u. nd. at the end of 1929.

In the meantime there had been a sharp increase in the
stocks of such agricultural commodities as are capable of
being stored. On ist August 1926 the stock of wheat in the
world was estimated at under 6J million metric tons ; by
August 1929 it had risen to over 15 million metric tons, and
these figures in both cases under-estimate the accumulation,
as they include only stocks in four countries — Canada, the
United States, the Argentine and Australia.

There had been a similar sharp fall in the years between
1924 and 1929 in the prices of many of the leading raw
materials. Thus American middling cotton had fallen from
13-6 pence per Ib. at the end of 1924 to 9-4 pence at the end

THE ECONOMIC SITUATION AFTER THE WAR 413

of 1929 ; and Egyptian cotton even more sensationally
from nearly 30 pence to 14-2 pence. Italian silk was down
from 2&r. a Ib. in 1924 to i&»gs. at the end of 1929, and
Livonian flax from £121 a ton to £58. Cleveland pig iron
fell from 81 -55. a ton to 72*55., and Welsh Admiralty Steam
coal from 27?. to a little over 2OJ. Durham coal descended
from 22J. to i6.r. 9^., and Sheffield house coal from 27?. to
2u. a ton. Portland cement was down from 60^. gd. a ton
to 47^. Certain of the lesser metals showed an even more
considerable fall. Tin fell from £267 a ton in 1924 and over
£300 a ton in 1926 to £178 at the end of 1929 ; and lead,
from £45 in 1924 to £23 in 1929. Copper, on the other hand,
owing to strong combination among the producers, was
actually a fraction higher — £68 as against £67 — in 1929
than in 1924.

There had been no corresponding fall in the prices of
finished industrial goods, though these too had shown in
certain cases a downward tendency. In the case of cotton
goods there had been a very sharp fall indeed. The price
of cotton yarn, for example (32 twist), fell from 24-5 pence
at the end of 1924 to 13-9 pence at the end of 1929 ; and
cotton cloth (39 inch shirtings) fell from i8j. a piece to 135.
Everywhere, manufactured goods had become much
dearer than before the war in relation to both foodstuffs and
raw materials, as the accompanying table very plainly
shows.

In face of this situation there was developing during the
years of advancing prosperity which immediately preceded
the world slump a serious disequilibrium between the prices
of manufactured commodities and those of foodstuffs and
raw materials, as well as a further discrepancy between
the factory prices of finished goods and the prices of the
same goods passing into the hands of the consumer by way
of retail trade. It is a familiar fact that in periods of falling
prices the wholesale prices of commodities usually fall faster
than the retail prices which measure the main elements in
the cost of living, and that there also tends to be a lag
between the fall in the prices of manufactured goods at

414

ECONOMIC CONDITIONS IN EUROPE

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THE ECONOMIC SITUATION AFTER THE WAR 415

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416 ECONOMIC CONDITIONS IN EUROPE

wholesale, and those of raw materials, which are the first
to feel the full effects of adverse trade conditions. But in the
present case to these familiar phenomena of a falling price-
level there was added a wholly abnormal fall in the relative
purchasing power of the agricultural section of almost
every community in the world, owing to the exceptional
severity of the fall in the prices of primary foodstuffs as well
as agricultural raw materials. The important point is not
that the agricultural populations of the world suffered most
as a consequence of the world slump of 1929 and the
following years, but that the disproportion between their
purchasing power and that of the industrial population
had already begun to make itself manifest during the pre-
ceding years of apparent industrial prosperity.

In some quarters this fall in the relative prices of farm
goods has been attributed to agricultural over-production,
and the enormous increase in the cultivation of wheat in
Canada has been cited as an outstanding example of this
tendency. But, as we have seen earlier, the production of
foodstuffs in the world as a whole was actually advancing
at a considerably less rapid rate than that of raw materials
destined for use in industry. Some of these raw materials
are of course of agricultural origin, so that the prosperity
of the agriculturists depends on the demand for industrial
raw materials as well as on the demand for foodstuffs. But
even when this is taken into account there is certainly no
evidence that the output of agricultural commodities was
expanding faster than the output of raw materials not
derived from the cultivation of the land. The explanation
of the decline cannot therefore be found in an expansion of
agricultural output beyond the general average of the
expansion of output of primary commodities of all kinds.

It is, however, suggested that as the world's standard of
living rises the relative demand for foodstuffs tends to
contract, as people spend a smaller proportion of their
incomes on the elementary needs of life, and have a larger
amount left to spend on more diversified classes of goods
and services largely derived from industrial production.

THE ECONOMIC SITUATION AFTER THE WAR 417

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418 ECONOMIC CONDITIONS IN EUROPE

Undoubtedly this is to some extent true. To the extent to
which the world's standard of living rises a smaller propor-
tion of total income in the more advanced countries will be
spent on commodities of all sorts, and a larger proportion
on various forms of personal service ; and of the income
which is spent on commodities a smaller proportion again
will be devoted to elementary mass consumption and a
larger proportion to more diversified products, largely those
of the lighter industries. There will also be within the range
of the consumption of agricultural products a diversion of
expenditure from the cheaper foodstuffs to the more diver-
sified and costly products of specialist agriculture. There
is, for example, ample evidence to show that in the more
advanced industrial countries the demand for bread has
not kept pace with the rise in population, while the demand
for fruit, vegetables, milk and other specialist agricultural
products was tending to expand at an increasing rate up
to the coming of the world slump. But it is impossible to
generalise on the basis of the experience of a few of the
most advanced and wealthy industrial countries. For there
are far more countries in the world, including many in
Europe, in which a rise in the standard of living would
still have mainly the effect of increasing the demand for
elementary foodstuffs. Even in the case of wheat there is
a contrast between those West European countries which
tend to eat less wheaten bread as their standard of living
rises and the poorer countries of Eastern and Southern
Europe, which tend to eat more.

Nevertheless the accumulation of vast stocks of wheat
and certain other primary foodstuffs and the artificial re-
strictions which had to be imposed on the supply of meat
in order to prevent the glutting of the market do appear to
show a tendency towards relative over-production of the
more standardised types of foods tuffs. In one sense it\is
undoubtedly true that this tendency existed. Indeed,
the mere accumulation of stocks and artificial restrictions
upon the killing of beasts for food sufficiently demonstrated
its presence. But these phenomena demonstrated the

THE ECONOMIC SITUATION AFTER THE WAR 419

existence of over-production only in a purely market sense,
that is to say in relation to the amounts that could actually
be sold at prices at which the holders were prepared to dis-
pose of them. When we ask why the market was thus
limited we are driven back again on the absence of adequate
purchasing power in those countries in which the rise in
the standard of life might still be expected to cause an
increase in the demand for standard foodstuffs. The peoples
of these countries were so impoverished that they could
not afford to buy more, and by buying more to offset the
declining tendency of demand per head of population in
the more advanced countries. But why did their demand
fail to expand ? Largely because the inflated burden of debt
at the declining level of general prices caused a curtailment
in the purchasing power both of the agriculturists and of
the industrial workers in the poorer countries. Thus, when
once the demand for elementary foodstuffs failed to expand
at an adequate rate in the advanced countries which had
a sufficiency of purchasing power, the fall in prices caused
by this failure reacted upon the position of the less wealthy
countries, and so decreased their purchasing power as to
exaggerate the falling tendency of prices and make their
situation worse.

In face of these conditions the economic situation of the
world was essentially unstable, even before the coming of
the world slump in 1929. Nor was the worsening position
of the agriculturists the only prominent cause of disequi-
librium in the world's economic affairs. As we have seen
during the period from 1924 to 1929 production in Europe
was expanding substantially faster than production in the
United States, despite the boom conditions prevailing on
Wall Street and in the real estate market, and the wide-
spread " prosperity psychology " among the American
people. The American level of money wages was expand-
ing but slowly, while prices were being held steady by the
monetary policy of the Federal Reserve System. At the
$ame time the farmers' purchasing power was falling off
sharply ; and the number of workers employed in both

42O ECONOMIC CONDITIONS IN EUROPE

industry and agriculture was declining as a result of
economies in the methods of production. It is certain that
the pay roll of American agriculture was substantially
lower in 1929 than it had been some years before, and
hardly less certain that the total sum distributed in indus-
trial wages was quite failing to keep pace with the increase
in productive capacity. The enormous speculative gains
made in the United States boom by the purchase and re-
sale of securities and real estate were based not on any
corresponding expansion in the output of industrial goods,
much less in the available market for them, but on a false
anticipation of the future course of American prosperity,
which ignored the real limitation of the market for mass-
produced goods resulting from the decline in the total
purchasing power of farmers and industrial workers alike.
Instalment purchase pressed to prodigious lengths did some-
thing to cover up the deficiency in effective demand out
of income ; but despite this artificial infusion of additional
consuming power American production had begun to sag
some time before the crisis on Wall Street occurred.

The utterly fictitious character of the valuations placed
on securities and real estate during the boom could be seen
even at the time in the absurd discrepancy between the
market prices of industrial stocks and shares and the in-
come yield from these same stocks and shares even under
the prevailing boom conditions. American stock market
and real estate prices were discounting in advance an
assumed increase of national prosperity far beyond what
had been actually achieved at the height of the boom.
They w£re based on a complete ignoring of the real con-
ditions of production and consumption, and an entire
failure to realise that the prosperity of industry is bound up
with the distribution to the main body of working-class
and agricultural consumers of a sufficient volume of pur-
chasing power to enable the rapidly increasing output of
commodities to be sold at a remunerative price. The policy
of maintaining the general level of prices stable in face of
rapidly declining real costs of production in both industry

THE ECONOMIC SITUATION AFTER THE WAR 421

and agriculture could only have worked at all if means
had been found of placing the additional purchasing power
brought into existence by the inflationary action of the
banks in the hands of those classes of consumers who would
have used it to buy the increasing supply of goods which
industry and agriculture were in a position to produce. As
this was not done, partly because less men were being em-
ployed, and partly because of the declining purchasing
power of the agriculturists, the new money issued in the
form of additional credits through the banking system in-
evitably lapped over into speculation in the hands of the
richer sections of the community, and this prepared the way
for an inevitable smash as soon as the disproportion between
the power to produce and the disposition to buy had be-
come manifest.

§ 2. THE WORLD SLUMP

I T H A s been necessary, in a book dealing primarily with
European conditions, to discuss the situation in America
during the boom of 1928-29 because the American boom
and the slump which followed inevitably upon it had such
tremendous reactions upon the situation in Europe. Both
the boom and the slump reacted adversely on the European
economic situation ; and, if now men are more disposed to
blame the slump because its consequences are nearer to
them and more obvious, it is still necessary to remember
that Europe's troubles began with the boom and were
serious in certain cases even before the coming of the Wall
Street crash.

The American boom reacted on the situation in Europe
chiefly by causing both a precipitate withdrawal of Ameri-
can capital from investment in Europe, and also to some
extent a diversion of European capital to the United States
in the hope of a share in the extravagant profits of American
speculation. How this happened can be seen at a glance
by studying the figures published by the League of Nations

422 ECONOMIC CONDITIONS IN EUROPE

to show the approximate magnitude of the exports of capital
from the principal creditor countries and the imports of
capital into the principal debtor countries during the years
between 1924 and 1929. In the five years from 1924 to
1928 the United States exported to foreign countries well
over 3,000 million dollars of capital, and well over 1,000
million dollars were exported in the one year 1928. In the
following year, 1929, the export of American capital fell
sharply from 1,100 million dollars to a little over 200
million dollars, thus creating a sudden void in the supply
of capital on which Europe had been basing the expansion
of its industrial production.

The effects of this withdrawal of American capital can
be seen in the figures showing the import of capital into
the leading European countries. In this connection by far
the greatest significance attaches to the situation in Ger-
many. In the five years from 1924 to 1928 the total import
of capital into Germany is estimated to have amounted to
over 3j5°° million dollars, of which over 1,000 million
dollars was imported in each of the years 1927 and 1928.
In 1929 the import of capital into Germany fell sharply
to 550 million dollars, and in 1930 to less than 150 million
dollars, thus bringing the movement of German ration-
alisation abruptly to an end, and creating the conditions
which led a little later to the complete suspension of re-
paration payments and the freezing of ordinary commercial
debts. These reactions were inevitable, in spite of the
tremendous efforts which the German Government made
to curtail imports while expanding exports at an unpre-
cedented rate, in both cases at the expense of a severe fall
in the standard of living of the German people. In the same
way the import of capital into Hungary iell from 91 million
dollars in 1928 to 38 million in 1929 and 24 million in
1930 ; and the import of capital into Poland from 1^4
million dollars in 1928 to 67 million in 1929 ; while Yugo-
slavia, which had imported 27 million dollars in 1928,
actually turned in the following year into a net exporter
of capital. There was a similar fall in the imports of capital

THE WORLD SLUMP 423

into many of the non-European borrowing countries ; thus
the Argentine, which had imported 181 million dollars in
1928, practically ceased in 1929 to import capital at all ;
and Japan, which had imported 80 million dollars in 1928,
became a small net exporter of capital in the following
year.

The devastating effects on Europe of this sharp falling off
in the importation of capital, a large part of which had
been drawn in the preceding years from the United States,
was only gradually felt, for to some extent the gap caused
by the cessation of long-term loans and commercial ad-
vances from America was made good for the time being
by the diversion of British lending to Europe and by the
straining of the resources of the European banking system
in the attempt to provide extended credits for industries
left in the lurch. But these attempts to maintain the supply
of credit in face of the tremendous fall in the volume of
American lending, while they staved off trouble for a time,
only served to aggravate the collapse when it did come.
The banks which had granted credit for short periods
found the money which they had advanced irrecoverable,
and were compelled to resort to various forms of standstills
and moratoria as the alternatives to complete and open
collapse. It was gradually realised to what an extent
Europe in general and Germany in particular had been
living during the years before 1929 on American loans,
and what disastrous consequences the withdrawal of these
loans was, under the existing conditions of international
relationships, bound to have upon the economic structure
of the European Continent.

For the withdrawal of American lenders from Europe
brought to light the inherent absurdity of the situation
which had existed even during the period of apparent pros-
perity before the world slump. Europe taken as a whole
imported from the United States far more goods than the
United States, behind a high tariff wall, was willing to
receive in exchange. And although the difference was to
some extent decreased by third-party trade — that is to say,

424 ECONOMIC CONDITIONS IN EUROPE

by American imports from non-European countries paid
for by European exports to these countries — as well as by
tourist expenditure and immigrant remittances, there re-
mained, even after making allowance for these factors, a
heavy adverse balance against the European importing
countries. But at the same time these countries were due to
pay to the United States, not only interest at high rates on
the large and accumulating loans of American capital
which had been made during the post-war years, but in
addition claims to debt interest and repayment of principal
arising out of public loans made by the United States to
European countries in connection with the World War.
The balance of trade being what it was, there was clearly
no possibility that Europe could meet these enormous
American claims. In the attempt to meet them gold was
exported from many of the European bank reserves to the
United States ; and the gold reserve of the American
Federal Reserve System mounted up by leaps and bounds.
This increase in the American stock of gold would have
been far greater had it not been for the special position of
France. For the French, especially during the period of the
flight from the franc in consequence of inflation, had built
up large private balances in the United States, and the
repatriation of these balances set up a reverse flow of gold
from the United States into the cellars of the Bank of
France. For the most part, however, this reverse flow came
later, after the onset of the world slump ; and the imme-
diate effect of the withdrawal of American capital from
investment in Europe was a great accumulation of gold
stocks in America, accompanied by a decline in the gold
resources of most of the European countries.

In these circumstances far more people began to realise —
what had been apparent previously only to a few — that
Europe had been living economically during the post-wa>
years in a quite unreal world. To all appearances Germany
had been paying reparations, and European countries had
been meeting, mainly out of the sums paid as reparations,
American claims to debt interest and interest on commercial

THE WORLD SLUMP 425

loans. But it now became clear that Germany had only
paid reparations at all to the extent that she had bor-
rowed from America the wherewithal to pay, and that in
effect the payments made by Europe as a whole to America
had been nothing more than a handing back of a part of the
sum simultaneously lent by the American investors to
a variety of European borrowers, both public and private.
It became apparent that America could only receive pay-
ment of the sums which she claimed from Europe as long
as she was prepared to go on lending to Europe the money
with which to pay, and thereby to swell year by year the
total of the claims which would have to be met in future.
The Americans could have their money on paper — on the
express condition that they never received any of it, but
rather continued to lend Europe each year substantially
more than European debtors were even supposed to repay.
For there was also the large adverse balance of commodity
trade against Europe to be taken into account.

Unless the Americans were willing to sacrifice not only
their claims in respect of war debts but also a substantial
part of the capital which they had invested in Europe since
the war, there was only one way out of this difficulty. They
would have so to lower their tariffs as to admit into their
markets an enormously increased quantity of European
goods. But this American big business, supported by a large
body of opinion among both investors and workers, was
wholly unwilling to do ; for it appeared to menace the
profits of the most securely entrenched American manufac-
turing industries, and also the vaunted " American stand-
ard of life " of the workers employed in these industries.
Accordingly, the Americans, willing neither to modify their
trade policy nor to give up their claims, were driven into the
same expedients of moratoria and standstill arrangements
as were arising in the European countries.

These realities existed just as much before the Wall
Street crash of 1929 as after it ; but until the crash had
actually occurred comparatively few people realised how
momentous for Europe the consequences of the contraction

426 ECONOMIC CONDITIONS IN EUROPE

of American overseas investment had already been. It
was hoped that the interruption of American lending was
only temporary, and that some sort of equilibrium would
be speedily restored ; and few economists and still fewer
statesmen or business men were prepared at that stage
to look squarely at the realities of the situation. Only in
Germany, on which the full brunt of the disaster fell, was
there an early awakening to the full gravity of the crisis
which was facing Europe ; for the Germans could hardly
help being aware that their ability to fulfil the terms of the
Versailles Treaty was dependent entirely on the mainten-
ance of the large-scale borrowing in which they had been
engaged continually since the adoption of the Dawes Plan
in 1924. But even the Germans, making an intensive effort
at fulfilment for the time being in the hope that political
conditions would so change as to make possible a clearer
appreciation of economic realities, were not concerned to
pull the underlying facts out into the light of day. They
were still following up the policy of Herr Stresemann, still
endeavouring to fulfil their Treaty obligations, not with any
expectation that these could in the long run be fulfilled, but
in the hope that a few years of fulfilment at whatever cost
would so re-establish Germany's position and confirm the
security of post-war Europe as to make possible rational
reconsideration of the Versailles Treaty.

So matters stood when, in the autumn of 1929, the
American boom collapsed in the sensational panic on Wall
Street, and the artificially inflated values of American
securities and real estate began to be written down at the
rate of many millions of dollars a day. Of the speculators,
American and foreign, who had been active in the stock
markets on the eve of the collapse, a very few got out while
the going was good, and a substantially larger number,
mistrustful of the confident prophecies that the collapse
would be of short duration and the boom be resumed
before long, cut their losses and escaped, damaged but not
completely wrecked by their experiences. But many others
held on, to incur further huge losses, as, after a brief and

THE WORLD SLUMP 427

partial recovery of prices in the early months of 1 930, the
slump deepened and deepened during the following years.
Among those who made heavy losses on the American
stock markets in 1929 and 1930 were many European
speculators ; and their losses further aggravated the diffi-
culties of European industry and commerce in the following
months. But far more serious than the losses of the specu-
lators were the collapse of the American market for Euro-
pean exports and the reactions of this collapse on the
demand for European goods in those non-European
countries which had largely paid for their manufacturing
imports by exporting raw materials to the United States.
There was everywhere on the morrow of the American
collapse an immense contraction in the volume of transac-
tions in raw materials ; and there followed before long
a sharp fall in the sales of manufactured goods all over the
world. But in addition to the decline in the volume of
world trade which came hard on the heels of the American
collapse, there was also a sharp fall in the level of prices of
practically every type of commodity, except those which
were temporarily protected by the policy of powerful
combines or by the holding up of prices of particular goods
in certain home markets with the aid of high tariffs and
other restrictions on the freedom of importation.

The extent of the decline of world trade cannot unfor-
tunately be measured effectively in terms of actual volume
except for a very few commodities ; for the tonnage figures
of imports and exports published by a number of countries
in fact convey very little information. It is therefore neces-
sary to fall back upon the statistics of prices, though of
course in using these it has to be remembered that the
decline in the volume of world trade was far less than the
decline in monetary values, owing to the sharp fall in prices
which was both cause and consequence of the decline. In
comparing values it is necessary to adopt some common
currency unit for measuring the movements of trade in
different countries, and it is best here to follow the statistics
compiled by the League of Nations which measure the

428 ECONOMIC CONDITIONS IN EUROPE

trade of the world in terms of gold dollars. From the accom-
panying table it will be seen that if the year 1928 is com-
pared with the year 1932 the value of world trade has
fallen in all by over 60 per cent in these four years. But this
decline was very unevenly spread among different countries,
and in the case of particular countries between imports and
exports. Thus in Europe the heaviest decline in the value
of exports was in the case of Poland, reaching 75 per cent,
followed by Austria and Estonia with 66 per cent, Czecho-
slovakia and Spain with 65 per cent, and Great Britain
with 64 per cent (U.S.A. 68 per cent) ; but whereas Spain's
and Estonia's imports declined quite as heavily as their
exports, in the case of Great Britain the decline in imports
was only 56 per cent as against 64 per cent for exports.
In the case of imports, four European countries — Hungary,
Finland, Estonia and Latvia — contracted their purchases
in terms of gold dollars by more than 70 per cent between
1928 and 1932 ; and eight others, including Germany,
Italy and Czechoslovakia, by more than 60 per cent.
Most of these were agricultural countries ; but Germany's
imports fell by 67 per cent as against a decline of 55 per
cent in exports — yet another sign of the intensive effort
made by the Germans to maintain their precarious position
in face of the withdrawal of American capital from invest-
ment in Germany. Among other developed countries,
Italy reduced her imports by nearly two-thirds as against
a fall of 56 per cent in exports, while Czechoslovakia and
Austria both suffered a fall of two-thirds. At the other end
of the scale stands the Soviet Union, which experienced
a decline of only 30 per cent in exports, and 27 per cent in
imports. France, on the other hand, contracted her im-
ports by 44 per cent as against a fall of 62 per cent in the
value of her exports. Over Europe as a whole, the gold
value of exports fell in these years by 58 per cent, and that
of imports by 56 per cent.

It is interesting to compare these figures with the
experience of the United States over the same four years.
As we have seen, in the world as a whole the gold value of

THE WORLD SLUMP 429

THE PERCENTAGE FALL OF
IMPORT AND EXPORT VALUES,
1928-1932

Balance of Commodity Trade
in millions of dollars*

Exports

Imports

1928

1932

Europe

58

56

-325

-163

Great Britain

64

56

-J43

-83

Germany .

55

67

-28

20

France

62

44

-5

-23

Italy

56

64

-32

-6

Belgium

52

49

-3

-4

Holland .

57

56

-23

-15

Czechoslovakia .

65

61

5

—

Denmark .

5i

54

— 2

—

Poland

75

57

-8

2

Roumania

37

64

-3

2

Spain

65

68

-14

-22

Sweden

59

54

-3

-3

Switzerland

63

33

-8

-16

U.S.S.R. .

QO

0-7

-6

— 6

Norway

o^
44

— /

55

-8

— 2

Finland

54

74

-4

2

Yugoslavia

57

66

— 2

.—

Bulgaria

46

51

-i

—

Austria

66

57

— 12

~7

Hungary .

60

72

-6

—

Greece

56

60

-7

~3

Turkey

45

64

— 2

*

Latvia

63

72

-t

_

Estonia

66

78

_

—

Lithuania .

27

43

—

—

Portugal

45

51

-6

-3

U.S.A.

68

68

79

25

World

62

60

-186

— 119

1 Monthly averages

430 ECONOMIC CONDITIONS IN EUROPE

import and export trade fell by something over 60 per cent.
In the case of the United States the fall was substantially
larger, reaching considerably over 68 per cent on both
sides of the account — the same figure for both imports and
exports. But whereas the United States exports in all only
a small fraction of its total output — about 10 per cent in
normal times — and therefore the direct effect of even a fall
of two-thirds in the value of exports need not have been
very considerable if conditions had been maintained in the
home market — which of course they were not — it is easy to
see how catastrophic must be the effect of a fall of over
two- thirds in the value of the United States purchases from
abroad. For America is, or rather was before the slump, the
world's greatest market for raw materials, the second
largest market — only a little behind Great Britain — for
manufactured goods, and the third largest market for
imports of foodstuffs. In 1928 the United States imported
4,078 million dollars' worth of goods, but in 1932 this
total had fallen to 1,322 million dollars ; meanwhile, in
face of all the restrictions in force in Europe, the corres-
ponding contraction of European imports was from
19,455 million dollars to 8,466 millions. Nevertheless, so
great was the fall in United States exports over the same
period that the favourable trade balance due to America
had shrunk from over 950 million dollars in 1928 to under
300 millions in 1932.

The extraordinary changes effected by the world slump
in the trading position of the leading European countries
can be further illustrated by its reactions on the commodity
balance of trade. In 1928, before the withdrawal of Ameri-
can capital, Germany had an adverse visible trade balance
of over 3,300 million Reichsmarks. This adverse balance
shrank to about 360 million Reichsmarks in 1929. In 1930
there was actually a favourable balance of nearly 1,000
million Reichsmarks, and in 1931 this favourable balance
had risen to nearly 3,500 millions. But in 1932 the fall in
exports reduced it to about 1,070 millions. France, on the
other hand, had in 1927 a favourable balance of over

THE WORLD SLUMP 431

THE FALL IN WHOLESALE PRICES
(1929 = 100)

March

A.

GOLD STANDARD COUNTRIES

1930

i93i

1932

1933

France .....

88

80

68

62

Belgium . . ...

87

74

63

59

Switzerland ....

90

78

68

64

Holland

82

68

56

51

Unweighted average of above

87

75

64

59

B.

RESTRICTED GOLD STANDARD COUNTRIES

Germany ....

91

81

70

66

Czechoslovakia

87

79

73

70

Italy

86

74

68

63

Poland

86

74

65

61

Yugoslavia

86

73

65

67

Bulgaria .....

81

68

60

53

Estonia .....

87

78

71

68

Latvia .....

85

7*

72

70

Unweighted average of above

86

75

68

65

C.

U.S.A

91

77

68

63

Canada .....

9i

75

70

67

D.

STERLING COUNTRIES

Great Britain ....

88

76

74

7I

Denmark ....

87

76

78

82

Norway .....

92

82

82

81

Sweden .....

87

79

78

75

Finland

92

86

92

9i

E.

OTHER COUNTRIES

Austria .....

90

84

86

82

Hungary .....

79

78

76

68

Greece

91

81

98

in

Spain

101

102

IOI

99

432 ECONOMIC CONDITIONS IN EUROPE

1,700 million francs ; by 1929 this had turned into an
adverse balance of over 8,000 millions, and by 1931 the
adverse balance had risen to over 22,000 millions — to fall
again to about 10,000 millions in 1932. Italy, on the other
hand, had reduced her unfavourable balance from nearly
7,400 million lire in 1928 to 1,440 millions in 1932.

In order to relate these figures showing the fall in the
value of trade to the volumes of commodities passing
between countries, it is necessary to take account of the
change in the level of prices over the four years covered by
the statistics. On the average, world wholesale prices fell
during these four years by about one-third in terms of gold
currencies, the fall being about 33 per cent in the United
States and 34 per cent in France, as against as much as
25 per cent in Great Britain, despite the depreciation of
sterling. These figures of course measure the general move-
ment of wholesale prices and thus lay the main stress on
those foodstuffs, raw materials and semi-manufactured
articles whose values most readily admit of comparative
measurement. The fall in the prices of manufactured
goods was substantially less than this, and the fall in food-
stuffs and raw materials slightly greater and, in the case
of certain commodities of vital importance to particular
countries, considerably greater. In the case of agricultural
prices, the magnitude of the fall up to the end of 1932 can
be measured by the accompanying table giving selected
British quotations for the prices of a number of leading
commodities.

The separate index numbers of prices compiled by a
limited number of countries for raw materials and manu-
factured goods make it possible for the relative magnitude
of the fall in prices to be at least approximately estimated.
Thus in Germany between the beginning of 1929 and the^
beginning of 1932 agricultural prices fell by 30 per cent,
prices of raw materials by 31 per cent and prices of manu-
factured goods by only 2 1 per cent, whereas in the United
States the corresponding figures are 50 per cent for agri-
cultural goods, 39 per cent for raw materials and 26 per cent

•THE WORLD SLUMP 433

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434 ECONOMIC CONDITIONS IN EUROPE

for manufactured goods. These changes in the relative
prices of different classes of commodities are further
reflected in the difference between the decline experienced
by particular countries in the values of the goods which
they import and export. Thus from 1929 to 1931 the aver-
age value of German imports declined by 33 per cent, and
that of German exports by only 18 per cent ; and in the case
of the United Kingdom import prices fell by 31 per cent
and export prices by only 14 per cent, whereas in Yugo-
slavia export prices fell by 45 per cent and import prices
by 32 per cent, and in Latvia export prices by 35 per cent
and import prices by 24 per cent. Again in Germany the
prices of imported raw materials fell between 1929 and
January 1932 by 48 per cent, and the prices of raw materials
manufactured at home by only 1 7 per cent, while in Czecho-
slovakia the general price level of imports fell by 35 per
cent, and that of home-produced goods by only 22 per cent.
Por France the corresponding falls were 59 per cent for
imports and 25 per cent for home-produced goods. These
differences of course reflect to a considerable extent the
protective measures adopted to shelter home markets from
the competition of cheap imports from abroad. That the
same result can be secured by industrial combination
within a particular country is shown by the official German
statistics dealing with the relative prices of goods subject
to the control of cartels and those still sold under relatively
competitive conditions. Between January 1929 and January
1932 the prices of non-cartelised goods in Germany fell by
one half, whereas the prices of goods subject to the control
of cartels fell by only one-fifth.

Differences in national policy in meeting the slump
resulted naturally in corresponding differences in the
internal price movements in the various countries. Practic^
ally everywhere the fall in wholesale prices was very much
larger than the fall in the cost of living, though in one or
two predominantly agricultural countries the difference
between the two figures was not very great. Latvia and
Estonia are examples of a fairly uniform rate of fall, while

THE WORLD SLUMP 435

in Finland, owing to currency depreciation, the cost of
living has actually fallen substantially more than the level
of wholesale prices.

These, however, are exceptional cases, as the accompany-
ing table clearly shows. Thus in France the fall in wholesale
prices has been almost five times as great as the fall in the
cost of living, owing to the effect of measures of domestic
Protection. In Switzerland and Italy wholesale prices have
fallen twice as much as the cost of living, and in Holland
nearly three times as much ; while in Great Britain and
Denmark abo the reduction in wholesale prices is about
twice the fall in living costs ; and in Czechoslovakia
actually eight times as great. As these figures are to some
extent affected by the depreciation of certain currencies
in 1932 after the abandonment of the gold standard a
column has been added to the table showing for January
1933 the approximate percentage of currency depreciation
in the countries affected by this factor.

These differences between the movements of wholesale
and retail prices must not of course be taken as measuring
the changes in the ability of industry to pay wages or make
profits in the process of production ; for the wholesale price
figures refer, as we have seen, chiefly to raw materials, raw
foodstuffs and some semi-manufactures, and must not be
taken as an indication of the prices charged by the pro-
ducer for manufactured goods leaving the factory. The fall
in the prices of manufactured goods lies at a point inter-
mediate between the fall in retail prices and that of the cost
of living, with great differences between one industry and
another in the extent to which manufacturers have found
it possible to maintain prices by means of combination,
with or without the aid of tariffs and other measures of
Protection. The difficulty of the manufacturers has been
that they have had to choose between lowering their prices
and attempting to maintain them in a falling ma»ket.
The latter policy could be pursued only at the cost of a
severe contraction in the demand for their goods, so that a
policy of high prices has resulted in much less being sold ;

436 ECONOMIC CONDITIONS IN EUROPE

whereas a policy of lower prices has been exceedingly
difficult to carry into effect in face of the determination of
the wage-earners to maintain money rates of payment
with as little diminution as possible, and even more in face
of the immense burden of debt arising out of money bor-
rowed and expended at a time when prices were at a far
higher level and rates of interest were ruling high. Inevit-
ably the assets bought with this borrowed money have
depreciated very seriously in value in consequence of the
slump, while the rates of interest which business men
undertook to pay before the coming of the slump are now
out of all relation to the current value of borrowed money.
In the case of purely short-term borrowings it has been
possible in some cases for businesses to pay off their existing
obligations and replace them by new money borrowed at a
substantially lower rate of interest. But this has not been
possible in the countries which have been suffering from a
severe shortage of working capital and seriously menaced by
the instability of their economic systems in face of large
external debt burdens and of a sharp fall both in the prices
of their exports and in their ability to find markets for them.
Consequently, the more distressed a country has been, the
heavier have been the debt burdens under which it has been
compelled to stagger. Even, however, if it had been possible
to reduce interest to substantially lower rates this would not
really have cured the difficulty. For it would have remained
true that the capital assets created by means of the borrowed
money no longer possessed anything like the value origin-
ally invested in them, so that the payments due on the debts
had become an almost unbearable burden. Something has
been done, by way of standstill agreements, moratoria and
similar methods of deferring payment, to ease the immediate
burden of the excessive interest charges ; but these measures^
which have at most only been pressed far enough to tide
the* distressed countries over their immediate difficulties,
cannot in any case, unless there is a sharp recovery in the
level of world prices, affect the larger question of the
disproportion between the sums owing by businesses in

THE WORLD SLUMP 437

respect of their past borrowings and the current value of
the assets which provide the sole means of off-setting these
charges. Standstills and moratoria can only be conceivably
of any use in dealing with a purely temporary emergency.
They are based on the assumption of a speedy recovery,
not only of world trade but in the prices at which world
trade is done, to a level corresponding far more closely to
the levels at which capital debts were originally incurred.
Failing a very considerable rise in the level of world prices,
cancellation or repudiation of pre-slump debts is bound to
occur on a very large scale over by far the greater part of
Europe ; and this applies no less to commercial debts than
to the international and domestic debts of States and other
public bodies.

§ 3. THE SITUATION OF EUROPEAN
AGRICULTURE

NATURALLY, apart from the complicating factor of exter-
nal debts, which has been of outstanding importance
especially in the case of Germany, the countries which have
suffered most acutely as a result of the world slump have
been those which rely for the means of paying for their
imports on the sale of the agricultural goods and raw
materials which have declined most sharply in value. Of
all commodities that which affects the largest number of
countries is wheat ; and it is on wheat above all other
classes of goods that attention has been concentrated in the
attempt to restore the position of certain of the struggling
countries of Eastern Europe.

Of the twenty-four European countries which are of
importance to the trade in wheat as either importers or
exporters, only seven are normally exporting countries, as
against fifteen countries which normally require a net
import of wheat. By far the largest wheat exporter of
Europe is the Soviet Union, followed at a long distance by

438 ECONOMIC CONDITIONS IN EUROPE

Roumania, Hungary, Czechoslovakia and Bulgaria. Poland
and Lithuania both export wheat in some years, but only
to a quite small extent. The Soviet Union, before the war of
overwhelming importance in the wheat market of Europe,
practically dropped out during and immediately after the
war, and even on the average of the years 1923-27 was only
exporting about 5^ million quintals a year out of a total
domestic wheat production of about 189 million quintals ;
but by 1930 production in the Soviet Union had risen to
nearly 270 million quintals, and exports in this and again
in the following year reached 25 million quintals. As com-
pared with these totals the six other wheat exporting
countries of Europe together exported on the average of
the years 1923-27 under 5^ million quintals, or about the
same as the Soviet Union during the same years. In 1931,
thanks to a bumper harvest in Roumania, the exports of
these other six countries rose to nearly 20 million quintals ;
but even so their total exports were well below the total
exports of the Soviet Union. Including Russia, European
countries had on the average of 1923-27 under n million
quintals of wheat available for export, and in 1 93 1 under
45 million quintals.

On the other hand, Great Britain alone imported on the
average of 1923-27 over 52^ million quintals, and in 1931
nearly 6o£ million ; so that, if Great Britain had set out to
meet her needs for \\heat from the European rather than
from Empire markets, she could have absorbed and could
still absorb the entire European surplus. The four next
largest wheat importers — Italy, Germany, France and
Belgium — together imported on the average of 1923-27
about 62 million quintals, and in 1931 56 £ millions, the
fall being accounted for mainly by the reduction of German
wheat imports from 14 million quintals to 5 millions, an^
the Italian from 23 millions to 15, as against an expansion
of the French imports from 13^ millions to 23 J millions.
Thus, even if Great Britain were out of the European
market as a buyer of wheat, Italy, Germany, France and
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44O ECONOMIC CONDITIONS IN EUROPE

without making any allowance for the imports of the smaller
countries. In all, the European import market amounted
on the average of 1923-27 to 137 million quintals a year,
and in 1931 to 135 million quintals, or more than three
times the total quantity available for export from the
European countries possessing a surplus, even including
the U.S.S.R. Even if Great Britain is excluded from the
calculation, owing to her relation to the wheat market in
America and Australia, there still remains in the rest of
Europe a sufficient net demand for wheat to absorb the
entire output of the European exporting countries and then
buy nearly as much again from the producing countries
outside Europe.

In these circumstances there has been strong pressure
from the countries chiefly concerned in the export of wheat
to secure a preferential outlet for their surplus in the Euro-
pean markets. These countries want of course not merely
a market for their exportable supplies of \vheat, but a
market at a price substantially above that ruling over the
world as a whole. For this price, determined partly by the
more favourable conditions of production in the New
World, and still more of late by the existence of large
stocks of unsold wheat which have hung continuously over
the market with a permanently depressing effect upon
prices, is far too low to enable the peasant cultivators of
the European producing countries to exist at a tolerable
standard of living, above all in face of the heavy burdens
of debt by which they are weighed down. The project of
securing a guaranteed market for the exportable surplus
of wheat from the countries of Eastern Europe has come up
during the past two years at a whole series of conferences,
beginning with consultative action by certain of the export-
ing countries without the U.S.S.R., and broadening out^
into an attempt to tackle the wheat problem on European
lines through the Special Committee on European Union
formed under the auspices of the League of Nations as the
outcome of Briand's proposal for a tentative advance to-
wards a United States of Europe.

THE SITUATION OF EUROPEAN AGRICULTURE 44!

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31

442 ECONOMIC CONDITIONS IN EUROPE

The wheat exporting countries included in the League
want a form of preferential treatment which will secure
them a price substantially above the world price for their
wheat, and they are encouraged to demand this because
of the drastic protective measures which many European
countries dependent on wheat imports have been com-
pelled to take by the pressure of their own wheat producers.
These countries, while they buy their necessary imports of
wheat at the world price, either subject imports to high
tariffs, or by other measures such as subsidies to the home
growers and import monopolies shelter their own farmers
in some degree from the effects of the fall in world prices.
What extraordinary results these protective measures have
produced upon the relative levels of wheat prices in different
countries can be seen clearly from the figures given in the
League of Nations World Economic Survey for 1931-32. It will
be seen from the accompanying diagram that there had been
from the coming of the world slump up to the end of 1 93 1
a quite extraordinary divergence in the domestic price of
wheat in various European countries ; and since then the
discrepancy has become in some cases considerably greater.
It will be seen that in the great overseas producing countries
the price of wheat per bushel in January 1932 was between
44 and 60 cents, largely in accordance with differences
in quality. Hungary, as a large wheat exporter, was com-
pelled to sell her wheat at the world price, and Great
Britain among exporting countries was still buying her
wheat at world prices. On the other hand, if we take 60
cents as the highest possible figure for the world price, we
find that the price of wheat in France was actually three
times as high, and in Germany and Italy about two and a
half times as high ; while even in Czechoslovakia the price
was more than twice as high as the world price. N

Nor is this situation at all surprising in face of the fact
that in July 1931, when the price of wheat was about 12
gold francs a quintal at most, the import duty in Germany
had already reached nearly 31 gold francs a quintal. In
fact, in those States where domestic wheat growing is

THE SITUATION OF EUROPEAN AGRICULTURE 443

important but not on a sufficient scale to meet the entire
demand, the home consumers are being compelled in the
interests of farmers threatened with ruin to pay exceedingly
high prices for the absolute necessaries of life.

In these circumstances it seemed to the wheat-exporting
countries, especially in view of the smallness of their avail-
able surplus in relation to the volume of European demand,
by no means out of the question to claim preferential treat-
ment for their exports to those European countries to which
they were most nearly allied by their political interests. The
Stresa Conference of 1932 worked out a scheme for a
European effort to raise the price of wheat by means of a
Guarantee Fund, and with the aid of a preferential system
for European imports. But Great Britain, relatively little
interested in wheat from the standpoint of domestic pro-
duction, and finding substantial relief to the strain on her
balance of payments from the abnormally low price at
which she was able to buy wheat from overseas, was not
at all likely to go into a European agreement designed to
raise prices in the interests of the peasant cultivators of
Eastern Europe. She had indeed, owing to her long- and
short-term investments abroad, an interest in saving some
of these countries from financial collapse ; but it was most
unlikely that this interest would outweigh her interest in
buying her wheat supplies at the cheapest possible rate,
especially as she was proposing, in connection with the
Imperial Economic Conference at Ottawa, to offer such
preferences in the wheat trade as she was prepared to give
at all to those Empire countries which had far larger sur-
pluses than Europe to dispose of. She had, of course, already
protected the domestic growers by means of a subsidy dis-
guised as a quota scheme.

The European wheat exporting countries associated with
the League of Nations had in their minds in endeavouring
to secure preferential arrangements on a European basis
not only the competition of wheat from the New World,
but to at least an equal extent the increasing re-entry of the
Soviet Union into the world market for wheat. As we have

444 ECONOMIC CONDITIONS IN EUROPE

seen, Russia was before the war by far the largest European
wheat exporter ; and even after the war she speedily
recovered the first place in European exports, though the
quantities which she was able to export still remained far
below the pre-war volume. In the meantime, her place as
an exporter had been supplied by the enormous growth of
wheat output in the New World, and especially in Canada,
so that the sudden re-entry of the Soviet Union on a large
scale into the world trade in wheat in 1930 and 1931
raised an acute problem for those exporters who had
regarded her disappearance as permanent. The Russians,
for their part, stood in sore need of industrial imports
required for the purposes of the Five Year Plan ; and apart
from oil and timber there was no commodity except wheat
which they could export on a large scale in payment for
their imports. They had therefore the strongest possible
incentive to increase the production and export of wheat
from Russia, despite the unfavourable conditions prevailing
in the world wheat market. For Russian external trade,
carried on by means of a State monopoly, is not quite in
the same position as the external trade of other countries.
The Russians were in a position to sell their wheat for what
they could get for it irrespective of its cost of production in
Russian money. The less they received for it the less im-
ports they were in a position to buy, and the higher was
the price at which these imported goods had to be sold in
Russia or accounted for by the Russian industries to which
they were consigned.

The Russians, even more than the peasant cultivators
of the other exporting States, were therefore in a situation
in which the lower the price they could get for their wheat
the stronger became their incentive to sell an increased
quantity. Only the difficulties experienced as a consequence
of the too-hasty collectivisation of a large part of Russian
agriculture and the deficiency of the 1932 Russian harvest
temporarily eased the situation created in the world market
by the revivial of Russian competition.

The other exporting countries of Eastern Europe want,

THE SITUATION OF EUROPEAN AGRICULTURE 445

then, to keep Russian as well as overseas wheat out of the
markets of the European importing countries, which they
hope to be able to influence until their own surpluses have
been absorbed at a satisfactory price. But the divergence of
interests among the European States has so far been |po
great for the wheat exporting countries to gain their point ;
and, although France has been sympathetic to their claims,
there has been no readiness to act upon the suggestions of
the Stresa Conference for an inclusive European wheat
pact at the expense of the U.S.S.R. and the New World.
The project will doubtless come up again ; but the growing
acuteness of political differences among the European
States makes the likelihood of any effective action being
taken upon it even more remote than it seemed when it was
first put forward two years ago.

Meanwhile, at the World Economic Conference, an at-
tempt has been made to secure an agreement between the
four leading non-European wheat producing countries to
restrict their acreage, as the first step towards a general at-
tempt to raise prices by the restriction of supply. It is, how-
ever, difficult to believe that, save perhaps in the United
States, such restriction can be successful, even if it was de-
sirable ; for if the Canadian farmer or the European peasant
is forbidden to grow wheat, what is he to grow instead, and
who is to compensate him if he has to leave his land un-
tilled ? As we write, the recovery of wheat prices in the U.S.A.
under the influence of reflation, is cooling the ardour of the
wheat interests elsewhere for restriction schemes ; and it is
to be hoped that the idea will have been dropped before
this book appears.

Wheat is not the only cereal which is of importance to
the agricultural countries of Europe. Barley, oats, rye, and
maize also play an important part in the agricultural
economy of Eastern Europe. Thus in the case of barley, five
countries besides the U.S.S.R. export considerable quan-
tities, and there has been a sharp increase in the total
European exports during the past few years. On the average
of 1923-27 Roumania, Czechoslovakia, Poland, Hungary

446 ECONOMIC CONDITIONS IN EUROPE

and Bulgaria together exported nearly 8 million quintals
of barley, and this total rose in 1931 to nearly 13 mil-
lion quintals. Corresponding figures for the U.S.S.R. at
the two dates are 3^ millions and g£ millions. The total
ne£ imports of barley into Europe amounted for these two
dates to 20 million quintals and 24 million quintals respec-
tively, so that if the U.S.S.R. is excluded, European ex-
porters supplied only about half the total demand of the
European importers, and even with the inclusion of the
U.S.S.R. at the relatively high level reached in 1931
Europe was not self- sufficient in its supply.

In the case of oats, the international trade between
European countries is of considerably less magnitude. On
the average of 1923-27 only five countries, including the
U.S.S.R., exported oats on any considerable scale, and the
total exports of these countries came to only 2.3 million
quintals, of which 600,000 quintals came from the U.S.S.R.
In 1931 the total exportation was larger, amounting to 4.4
million quintals, but of this total no less than 3.9 millions
came from the U.S.S.R. As against these total exports the
net total import into Europe amounted on the average of
the earlier years to over 1 1 million quintals, and in 1931
to nearly 13^ million quintals. The position is different in
the case of rye, of which Europe is by far the most important
producer. Total imports of rye amounted on the average
of 1923-27 to 2.4 million quintals from Bulgaria, Hun-
gary, Poland, Roumania, and Yugoslavia taken together,
and 4.8 millions from the U.S.S.R., and in 1931 to 3.7
millions from the same group of countries and over 1 1
millions from the U.S.S.R., making Europe more than self-
sufficient in this cereal. On the other hand, in the case of
maize, there is a very large net import into Europe from
the New World, the net European importation averagings
nearly 54 million quintals between 1923 and 1927, and no
less than 93 millions in 1 93 1 . The chief European exporters
of maize are Roumania, Yugoslavia, Bulgaria and Hun-
gary, Roumania having by far the largest export. These
four countries together exported nearly 16 million quintals

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THE SITUATION OF EUROPEAN AGRICULTURE 447

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448 ECONOMIC CONDITIONS IN EUROPE

on the average of 1923-27 and 13 million quintals in
1931. The U.S.S.R. is comparatively unimportant as an
exporter of maize, averaging only i£ million quintals in
1923-27 and i million quintals in 1931.

It was proposed at the Stresa Conference to provide
guaranteed markets for all these cereals in the European
importing countries. The proposed convention was based on
the granting by the importing countries of special facilities
for the import of cereals up to an aggregate tonnage equal
to the average exports of the exporting countries between
1929 and 1931. This would have given a total of 18 million
quintals of barley, 16 million quintals of wheat, 13^ mil-
lion quintals of maize, 4 million quintals of rye and I
million quintals of oats. It was proposed that all, or nearly
all, European countries should participate in the conven-
tion by making a financial contribution in aid of the re-
establishment of agricultural conditions in the exporting
areas. This contribution was to amount to 75 million gold
francs a year, to be devoted to the revalorisation of cereals,
the contributions made by the various States being sub-
ject to reduction " in proportion to the effective operation
of the advantages granted to the selling countries under
bilateral treaties for the importation of the above-mentioned
cereals." The fund was to be administered by an Interna-
tional Committee representing both the importing and the
exporting countries, and this Committee was to have some
power to supervise the use made by the agricultural States
of the sums received from the fund. But as we have seen,
there appears to be little chance of any proposal on these
lines being accepted by a sufficient number of the import-
ing countries to allow it to become operative. Nor is it by
any means clear how it would in fact work, or what re-
actions the attempt to close the European cereal market as a
whole to supplies from abroad, except to meet the com-
bined needs of Europe after absorbing the exportable
surplus of the East European countries, would be likely
to set up. It is at any rate highly unlikely that Great Britain,
in view of her commitments at Ottawa to her own

THE SITUATION OF EUROPEAN AGRICULTURE 449

Dominions, would agree to participate in any scheme
giving preferential treatment to cereal imports from Con-
tinental Europe ; while it is clear that the adoption of the
proposed convention would have serious consequences for
the U.S.S.R., which is bound to depend largely on the
export of cereals for the purchase of necessary imports.

The plan elaborated at the Stresa Conference dealt only
with imports of cereals from the countries of Central and
Eastern Europe, and did not attempt to provide any
special assistance for the producers of other types of agri-
cultural goods. Of these other types of goods the most im-
portant from the European standpoint are meat, butter and
cheese. In these cases too there has been during the world
slump a very sharp fall in prices, following in most cases on
a gradual decline during the preceding years. Thus in the
case of beef the average end of the year British price fell
from 5-7^. per 8 Ibs. in 1929 to 4-5^. in 1932. Argentine
chilled beef actually rose in price between 1924 and 1929,
largely owing to the successful operations of a ring, but
after 1929 there was a sharp fall from 5-2^. per 8 Ibs. to
3-85-. In the case of English mutton the fall in price was even
more severe — from *js. in 1929 to 4-8^. in 1932, while New
Zealand mutton fell from 4 8j. to 2-9^. Danish bacon was
129^. 6d. in 1925, but fell to 79^. 6d. in 1927, and then, after
a rise in 1929 to 1055., to only 655. in 1932. Meanwhile
Danish butter fell from i8oj. a cwt. in 1929 to 122^. in 1932.
And there was also a sharp fall, though not quite of the
same steepness, in the prices of the various types of cheese.

These declines in prices, though they were by no means
uniform in the different European countries, everywhere
exposed the countries exporting meat and dairy produce to
serious financial difficulties. The country in Europe which
possesses by far the largest number of livestock is the
U.S.S.R., which is far ahead of all other countries in the
number of horses, cattle, sheep and goats, and second only
to Germany in pigs. The socialisation of Russian agri-
culture is said to have caused a very large fall in the
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450 ECONOMIC CONDITIONS IN EUROPE

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454 ECONOMIC CONDITIONS IN EUROPE

peasants during the collectivisation campaign ; but
Russia remains even so by far the largest livestock pro-
ducer. She is, however, quite unimportant in the trade in
either cattle or meat, though she exports butter on a con-
siderable scale. Next to Russia the chief countries in terms
of numbers of livestock are Germany and France for
cattle, Great Britain, Spain and Roumania for sheep,
Germany, France, Poland, Denmark and Spain for pigs,
and Greece and Spain for goats.

But these figures by no means correspond to the relative
importance of the various countries in external trade. For
example, by far the largest cattle exporter of Europe is the
Irish Free State, which sent, until the recent dispute over
the land annuities, most of her cattle to the British market.
Next, but a long way behind, comes Denmark, which is
also, unlike Ireland, a large exporter of beef. Then, after
a considerable gap, come Yugoslavia, Poland, and Rou-
mania, exporting both beef and cattle, and after them
Lithuania and Hungary, also concerned with the export of
both live cattle and meat, and Bulgaria as an exporter of
cattle alone. By far the largest importer of both cattle and
meat is Great Britain, followed at a long distance by
Germany and France. Italy and Belgium are also fairly
important importers, and the U.S.S.R. has been importing
cattle in recent years for the improvement of her native
breeds, and for the replacement of recent losses. Mutton is
of relatively little importance in the trade of most of the
European countries, only Poland having any considerable
exports, while in the export of pigs and bacon Denmark
takes easily the leading place with her great bacon exports,
followed at a long distance by Holland and Poland as
exporters of bacon, and by Poland, Roumania, Yugoslavia^
Ireland and Italy as exporters of pigs. Great Britain is the
only considerable importer of bacon, but Germany and
France as well as Great Britain import pigs upon a sub-
stantial scale.

In the export of butter, the leading place is easily held by
Denmark. In most recent years Holland has occupied the

THE SITUATION OF EUROPEAN AGRICULTURE 455

second place, but her exports are seldom more than a
quarter of the Danish. Recently there has been a large
increase in the exports of butter from the U.S.S.R., which
in 1931 exceeded Holland's. Other exporters of some im-
portance include Sweden, Latvia, Ireland, Finland, Es-
tonia, Poland, and Lithuania, while Holland is the principal
exporter of cheese, followed at a long distance by Italy and
Switzerland. For both butter and cheese, by far the most
considerable importer is once more Great Britain, followed
by Germany at a long interval, and then, again at a con-
siderable distance, by Belgium, France, and Switzerland.

There is of course no question of the power of the
European market to absorb, if it is prepared to grant prefer-
ential treatment, the entire available supply of meat pro-
duced in Europe. In the case of cattle and beef, even if the
entire British market, which is much larger than all the rest
of the European market put together, is left out of account,
the requirements of the importing countries of Europe were
in 1931 many times as great as the total exports of the
exporting countries. In mutton both the import and the
export trade are, apart from Great Britain, on a quite
small scale in relation to the total consumption ; but in
this case too there is a net import into Continental Europe.
In the case of bacon alone Great Britain is the only substan-
tial importer, and it would be impossible for the Conti-
nental market to make itself self-sufficient apart from the
British demand. Denmark and Holland, and to a less extent
Poland and Lithuania, must sell their bacon in the British
market or outside Europe if they are to maintain their
present position. Denmark, for example, would lose the
entire basis on which her present economic system has
been built up if she were to be shut out from the British
bacon market ; for it would be utterly impossible for her to
find in Continental Europe an alternative market for even
a tiny percentage of the displaced supplies. Denmark's
economic fortunes are therefore intimately bound up with
her position in the British market, and any preferential
system which threatens to expand British imports from

456 ECONOMIC CONDITIONS IN EUROPE

Empire countries such as New Zealand, or any attempt to
make Great Britain herself more self-sufficient in her bacon
supply, constitutes a desperately serious threat to Danish
prosperity. This applies to butter as wrll ; for here too
Danish exports are on a scale for which it would be im-
possible to find an outlet if the British market were closed or
seriously restricted. In 193 1 , for example, no Euiopean coun-
try except Germany imported even one-tenth of the quan-
tities exported by Denmark, and the en tire German market
would only absorb a little over half the Danish exports.

If any European agreement on the lines of the Stresa
project were to be attempted for the marketing of meat
supplies and dairy produce as well as cereals, it is clear that
Denmark could not be a party to it except in the very un-
likely event of Great Britain also agreeing to come in. Any
such agreement, in order to be of use to the States of
Eastern and Central Europe, would have to apply pri-
marily to the trade in cattle and beef. For it seems unlikely,
in view of the preponderant importance of Denmark and
Holland, that any agreement could be even projected in the
case of either butter or cheese. Probably the realisation of
the extreme difficulties standing in the way of such an
agreement, even in the case of cattle and beef, prevented
the Stresa Conference or subsequent meetings of the Central
and East European countries from putting forward any
proposal for a guaranteed market for the European cattle-
raising industries. If, however, the Stresa proposals in rela-
tion to cereals were actually carried out, their success would
probably be followed up by an attempt to raise the question
of meat and dairy supplies as well.

§ 4. THE DEBTOR COUNTRIES OF
EUROPE

THE PLAN for the revalorisation of cereals was only
a part of the project elaborated at Stresa for the rendering
of assistance to the distressed countries of Central, Eastern

THE DEBTOR COUNTRIES OF EUROPE 457

and Southern Europe. The Stresa Conference was con-
cerned chiefly with the position of eight countries — Austria,
Bulgaria, Czechoslovakia, Greece, Hungary, Poland,
Rou mania, and Yugoslavia — though some consideration was
also given to the position of Turkey. These eight countries,
according to the reports presented to the Conference, had,
taken together, an external debt, including both public
and private and both long- and short-term obligations, of
well over 24,000 million Swiss francs, involving an annual
payment of over 1,300 million Swiss francs. But this debt
was very unequally divided between the eight countries
concerned. The largest aggregate sums were owed by
Roumania and Poland, followed by Yugoslavia and Hun-
gary, and then at a further distance by Greece, Austria and
Czechoslovakia ; the Bulgarian external debt was rela-
tively small. But if these debts are considered not as absolute
amounts, but in relation to the abilities of the various
countries to pay, the position appears in a rather different
light. The most useful way of measuring the debt in relation
to ability to pay is to consider the relation which the debt
service bears to the value of the exports of the countries
concerned. On this basis both Greece and Hungary had in
1931 external obligations which swallowed up almost half
the total sums due to them in payment for their exports, and
Yugoslavia and Roumania nearly 30 per cent. For Poland
tne corresponding figure was 24 per cent, and for Austria
22 per cent, for Bulgaria 16 per cent, and for Czechoslo-
vakia only 5 per cent. Clearly the burden upon Czecho-
slovakia as a developed industrial country is by no means
excessive ; but all the other countries, and especially
Greece, Hungary, Yugoslavia, and Roumania, have plainly
been placed in a position that cannot be sustained in face of
the sharp fall in prices and above all in the prices of those
goods which they principally export. Moreover, their
position in 19312 is very much worse than it was a year
before, owing to the further fall in the value of their exports.
If we turn now to the actual state of trade in these coun-
tries in relation to the balance existing between their

458 ECONOMIC CONDITIONS IN EUROPE

imports and exports, we shall find still further reason for
understanding the impossibility for them of maintaining
the payments upon their external debts. Thus Greece has
not only an exceedingly heavy net burden of debt, but also
a heavy adverse balance of commodity trade. In 1929 this
adverse balance — that is to say, the excess of imports
over exports — amounted to no less than 428 million Swiss
francs, or three times the total burden of the external debt.
In 1931 this adverse balance had been reduced to 259
million Swiss francs ; but clearly Greece, as a debtor on
trading account, had no resources for the meeting of debt
claims save as a result of fresh borrowing. Austria was in an
even worse position. In 1929 she had an adverse balanre
of commodity trade amounting to 782 million Swiss francs,
and even in 1931 this had only been reduced to 622 millions,
or again nearly three times as much as the total sum re-
quired for the service of the external debt. Austria, as a
country requiring to import foodstuffs and faced with
countless obstructions in the way of her exports of industrial
goods, is in an even worse position than Greece for the
re-establishment of her economy. Even the disappearance
of her entire external debt would by no means enable her
to make her accounts balance, though she still derives some
relief from the financial services which she continues to
perform, albeit to a far less extent than in the days of the
Austro-Hungarian Empire, for other parts of Southern and
Eastern Europe.

Greece and Austria are the two extreme cases ; but the
position is serious in several other countries as well. Thus
in the case of Yugoslavia, imports and exports about
balanced in both 1929 and 1931, but this left no funds
available for the payment of external debts. Hungary had%
a small adverse trade balance in 1929 and a very small
favourable balance in 1931 ; but this favourable balance
was only one-fifteenth of the sum required for the service
of the external debt. Poland, which had an adverse balance
of trade of 176 million Swiss francs in 1929, had converted
this by 1931 into a favourable balance of 242 millions ;

THE DEBTOR COUNTRIES OF EUROPE

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460 ECONOMIC CONDITIONS IN EUROPE

but even this amount was less by 26 millions than the
sum required to meet the debt service. Roumania again
had a small unfavourable balance in 1929 and a favourable
balance of 192 million Swiss francs in 1931 ; but this
balance fell 1 1 millions behind the sum required for the
service of the debt, and in 1932 the favourable balance of
trade was very greatly reduced without any corresponding
diminution in the volume of debt. Bulgaria was in a better
position. She had converted an unfavourable balance of
69 million Swiss francs in 1929 into a favourable balance
of 47 millions — 12 millions more than the cost of her debt
service — in 1931. But in 1932 this favourable balance was
not sustained, and the country was again plunged into
serious difficulties. Czechoslavakia alone of the countries
under discussion has had throughout a favourable trade
balance. This amounted to 78 milliorj Svxiss fiancs in 1929,
and 213 millions in 1931, so that in the latter year the
service of the external debt was covered more than twice
by the balance of exports.

Even these figures do not present by any means an
adequate picture of the difficulties which are being ex-
perienced by the agricultural countries of Eastern Europe,
for the improvement which they have brought about in
their trade balances has been achieved only by the most
drastic curtailment of imports, necessarily at the expense
both of the equipment of industry and agriculture, and
still more of the standard of life of their populations. Thus
Hungary practically halved the value of her imports
between 1929 and 1931, and reduced them in 1932 to a
third of what they had been in 1929. Poland curtailed her
imports to an even greater extent than Hungary. Bulgaria
almost halved hers, and even Czechoslovakia reduced
imports from well over 3,000 million Swiss fiancs in 1929
to i, 800 millions in 1931, with a further sharp fall in 1932.
Roumanian imports fell from over 900 millions in 1929 to
well under 500 millions in 1931, with a further sharp fall
in 1932, and Yugoslavian imports fell from 700 millions to
435 millions. Even Austria, which was in the worst position

THE DEBTOR COUNTRIES OF EUROPE 461

for curtailing imports owing to her dependence on imported
foodstuffs, reduced their value from 2,380 millions in 1929
to 1,580 millions in 1931, and this was followed by sharp
further curtailment in 1932.

The position of the countries which we have been dis-
cussing in relation to the rest of the world can be visualised
even more plainly if their trade one with another is elimin-
ated, and the total balance of their trade with the rest of
the world considered in relation to the magnitude of their
external debts, and of the annual debt service. In 1929
this group of countries taken together imported 7,474
million Swiss francs' worth from other countries, and
exported to other countries 6,103 millions — a total adverse
balance of 1,378 millions. In 1931 their combined imports
from other countries had fallen to 4,442 million Swiss
francs, and their combined exports to 4,286 millions. The
adverse balance had thus been reduced to 136 million
Swiss francs, or less than one-tenth of what it had been
two years before. But the service of the external debt for
the same countries taken as a group amounted in 1931-32
to 1,337 million Swiss francs and the total amount of their
public and private external debts to 24,360 millions. In
other words, under pressure of the sums due to other
countries, these debtor States had stopped buying from
abroad everything with which they could possibly dispense,
with disastrous results on the exports of the industrial
countries. But even so they had not succeeded in establish-
ing a favourable balance of trade, or in providing any sum
of money derived from exports for meeting the enormous
requirements of their foreign debts.

Under these circumstances, when the inflow of foreign
capital, which had up to 1928 preserved an apparent
ability to pay, ceased abruptly in 1929 and the following
years, a crisis was certain to occur, and either there was
bound to be currency depreciation of a most alarming
sort, or steps would have to be taken both to restrict
dealings in foreign exchange and to suspend to some extent
the payments due upon the external debts. If the exchanges

462 ECONOMIC CONDITIONS IN EUROPE

had been left free and the currencies of these countries
allowed to depreciate, this could not possibly have been a
means of straightening out their finances ; for every fall in
the external value of their currencies would have been
accompanied by a sharp rise in the effective debt burden
falling upon their populations. In view of the magnitude
of their external debts it was inevitable that they should
make every possible effort to remain upon the gold standard
at whatever external sacrifice in order to avoid this multi-
plication of their debts. Accordingly they were driven one
after another to impose drastic restrictions on foreign
exchange, in addition to limiting imports by means not
only of tariffs, but also of quotas and embargoes of the
most far-reaching character. Thus, Austria, after a pro-
longed attempt, with the aid of the Central Banks of other
countries, to avoid exchange restrictions, had finally to
restrict dealings in October 1931. In the same month
Bulgaria made foreign exchange dealings an absolute
monopoly of the National Bank, and introduced a drastic
system of control over imports by this means. Greece
restricted foreign exchange in September 1931 ; and in the
following months her system of control became more and
more drastic, until foreign exchange was granted solely
for the purchase of absolutely indispensable food imports.
But even this method was not effective, and in April 1932
Greece was driven off the gold standard despite the disas-
trous effects of a depreciation of the drachma on the
domestic burden of her foreign debts. Hungary restricted
foreign exchange in July 1931, and Roumania in February
1932, and more drastically in May 1932. Yugoslavia, which
only stabilised her currency early in 1931, and only theq
abandoned her earlier restrictions on foreign exchange,
had to reintroduce restrictions in October 1931, and to
establish direct State control over certain classes of imports
at the beginning of 1932. Of the countries under consider-
ation Poland alone had not up to the date of the Stresa
Conference imposed any restrictions on foreign dealings.

THE DEBTOR COUNTRIES OF EUROPE 463

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The difficulties just described have not of course been
confined to the group of countries whose situation came
under discussion at the Stresa Conference ; and the measures
for the control of imports and the restrictions on foreign
exchange have been applied over a far wider field. Germany,
despite the disappearance of reparations payments, first
under the Hoover moratorium and subsequently in accord-
ance with the settlement reached at Lausanne, is still a
very heavy debtor on international account. As we have
seen earlier, the Germans imported capital on a very large
scale between 1924 and 1928. According to the estimates
made for the London Conference of 1931, Germany in
1926 already owed abroad over 11$ milliards of Reichs-
marks as against German investments abroad of about 8
milliards. By 1929 German investments abroad had in-
creased to 10 milliards ; but foreign investments in
Germany were as much as 25 milliards, of which over
n$ milliards were in the form of short-term borrowings.
Foreign investments in Germany had thus more than
doubled between 1926 and 1929, and the meeting of the
annual claims arising out of these borrowings, even apart
from claims on account of reparations, involved a serious
strain on the German financial system. Moreover, Germany
had re-lent to foreign debtors, mainly with the object of
stimulating her export trade, more than half of the sums
which she had borrowed at short-term from abroad ; and
where these sums had been advanced to the necessitous
countries of Eastern Europe, the difficulties which we have
described in the case of these countries meant for Germany
the impossibility of recovering what she was owed, and
therefore of meeting claims for the repayment of the short-
term loans out of which she had made the advances in
question. ^

Germany in fact had been borrowing, in the anticipation
of the continued prosperity of international trade, very
heavily at both long and short term ; and when to the
withdrawal of American capital was added the world
slump, it was impossible for her, despite the most intensive

THE DEBTOR COUNTRIES OF EUROPE 465

efforts, to keep up her international payments. She had,
however, like the countries of Eastern Europe, a very strong
incentive for remaining upon the gold standard, in order to
avoid increasing still further the burden of her external
debts, and she had accordingly, no less than the countries
of Eastern Europe, to resort to the most drastic measures
for improving her balance of trade, and for restricting the
movement of money out of the country. If this had not
been done, there would have been added to the heavy
burden of the current claims upon her a growing attempt
by foreign creditors to withdraw their resources as her
financial position became more and more unstable, and
almost certainly a flight from the mark by German owners
of capital.

Germany, as we have seen, made a tremendous effort to
meet the situation at least in part by the stimulation of
exports. In 1929 total German exports were valued at
968 million Reichsmarks a month, and in 1930, despite the
slump, the monthly average was actually increased to
1,055 millions. Even in 1931, despite the sharp further
fall in prices and in the total of world trade, Germany still
succeeded in exporting over 767,000 million Reichsmarks'
worth of goods, and it was not until 1932 that this intensive
effort failed, in face of the intensification of the world
slump, and the total of German exports fell to a monthly
average of 478 million Reichsmarks. In the meantime
imports had been curtailed to a quite extraordinary extent ;
in 1928 they were valued at a monthly average of 1,167
million Reichsmarks, but by 1931 this total had been
reduced to under 561 millions, and in 1932 to under 389
millions. Germany thus converted an unfavourable visible
trade balance of 200 million Reichsmarks a month in 1928
into a favourable trade balance of over 200 millions a
month in 1931. But in 1932 this favourable balance, despite
all her efforts, fell to 89 millions a month, and in the open-
ing months of 1933 feH catastrophically to under 25 millions,
recovering to about 60 millions in the spring. In the mean-
time she succeeded in paying off a part of her short-term

466 ECONOMIC CONDITIONS IN EUROPE

foreign debt, and in converting a further part of it from
short to long term. But her total indebtedness remained at
the end of 1931 in the neighbourhood of 23 milliards of
Reichsmarks as against 25 milliards in 1929, while there
had been a fall in her own investments abroad practically
equivalent to the reduction in her foreign debt, so that her
net position was hardly any better, in spite of all the priva-
tions which her people had been forced to suffer. In 1933,
Germany still owed creditors in the United States over
£400,000,000, in Holland over £170,000,000, in Swit-
zerland £135,000,000, and in Great Britain about
£111,000,000, apart from smaller debts to creditors else-
where. In these circumstances the Germans were forced, in
the summer of 1933, to declare a moratorium on their
foreign debt payments at long as well as short term.

Germany, in addition to intensive measures to expand
exports and to the raising of tariffs to a very high level in
order to exclude imports, was compelled to resort to the
control of foreign exchange. All transactions in foreign
exchange were centralised in the hands of the Reichsbank,
and all persons becoming possessed of foreign exchange,
whether in payment for exports or in any other way, were
compelled to hand over their holdings to the Reichsbank.
Foreign owners of securities who attempted to sell them
in the German market were no longer able to take the
proceeds out of the country ; nor could short-term creditors
recover the sums due to them, as withdrawals were strictly
regulated under the provisions of the Standstill Agreements,
which have been regularly renewed since their conclusion
at the time of the Hoover moratorium. At the same time,
owing to the difficulties of the German banks, the Govern-
ment of the Reich has been compelled both to regulate
their operations by drastic Government measures, ana
largely to accept responsibility for the security of their
deposits and to invest fresh capital in them in order to
enable them to carry on, and so avert a complete collapse
of the internal economic system.

THE EUROPEAN MONETARY PROBLEM 467

§ 5. THE EUROPEAN MONETARY
PROBLEM

DRASTIC interferences with the free movement of goods
and money across national frontiers have, however, not
been limited to the debtor countries. Practically every
country has in the course of the world slump repeatedly
raised its tariff rates either generally or on particular classes
of goods, and a number of countries, including France
(which remains upon the gold standard), have added to
their ordinary rates of duty special discriminating duties
against imports from countries whose currencies have
fallen in international value. Again, a very large number
of countries, including creditor as well as debtor States,
have adopted quota or licence systems for the restriction of
wide classes of imports. Belgium has done this for wheat,
coal, and a number of other commodities ; Czechoslovakia
for meat, butter, and other food products and for all classes
of luxury goods ; France for wheat, meat, and other food
products, and also for coal, iron and steel, machinery, and
a number of other manufactured imports ; Holland for
meat, clothing, and luxury goods ; Sweden for wheat and
sugar ; Switzerland for wheat ; and so on, for the list could
be considerably prolonged. In effect, all over Europe even
the most drastic raising of tariffs has been found inadequate
for the protection of the national economy of each country
against the consequences of the world slump, and resort
has been had to all manner of other devices designed both
to improve the balance of trade and to shelter the home
producers of a wide range of goods against the consequences
of the fall in world prices.

But of course each of these measures, while it may do
something immediately to improve the trade balance or the
position of a particular group of producers in whose interests
it is carried out, is bound to react so as to worsen the
world situation as a whole, and by provoking measures
of retaliation and counter-protection in the long run to
cause a further decline in the general trading position of

468 ECONOMIC CONDITIONS IN EUROPE

the countries which resort to it. It may be possible by these
means for some countries to improve their trade balances
at the expense of others, and to increase the volume of
employment in certain special industries to which they give
a large measure of protection ; but this can be done only
at the expense of a declining total of world trade, and of
raising the average costs of production of commodities by
promoting artificially their production under less favourable
conditions than could be secured if trade remained even as
open as it \\ as three or four years ago.

In certain instances a country may be justified in desiring
at all costs to maintain a particular branch of production
within its national frontiers, even if this involves a higher
cost of the commodity to the home consumer. In a larger
number of instances it was impossible to expect that
countries faced with the closing of their traditional markets
would refrain from an endeavour to protect themselves
by retaliatory measures ; and it can be argued that in the
existing circumstances the drastic restrictions imposed on
international commerce were inevitable from the stand-
point of each country which put them into force. But it
cannot possibly be argued that their total effect on the
world as a whole and on every country individually has
been anything except disastrous. For whatever has been
done to help particular interests or for the improvement of
one country's balance of trade as against another's has been
far more than offset by the general decline in production
and employment which has necessarily resulted from the
restrictive systems now in force over practically the whole
of the world.

The debtor countries, as we have seen, have had under
the circumstances of the past few years very strong reason^
for remaining upon the gold standard, even where this
could be done only by imposing the most drastic restrictions
on foreign exchange. For, if they had attempted to re-
establish their trade balances by allowing the external
value of their currencies to fall, any advantage which they
could have secured by this method would have been far

THE EUROPEAN MONETARY PROBLEM 469

more than counteracted by the sharp rise which would have
taken place in their foreign indebtedness. Thus, in addition
to France, Belgium, Holland and Switzerland, which have
remained upon the gold standard by virtue of the strength
of their international financial position, the great majority
of the States of Central and Eastern Europe have also
preserved the nominal parity of their currencies, even
where this has been done only by foreign exchange control
of the most drastic kind through their Central Banks, and
sometimes at the cost of causing transactions on what is
called the " Black Bourse " at rates very different from those
nominally in force.

From the standpoint of the status of their national
currencies, European countries can now be divided roughly
into four groups. First come the real gold standard countries,
mentioned above, to which should be added Italy, and
doubtfully, Poland ; second comes the group of countries
which have followed Great Britain off the gold standard,
and pegged the values of their currencies more or less in
relation to the pound sterling. This group includes the
Scandinavian countries, Denmark, Norway and Sweden,
together with Finland — though there the amount of de-
preciation is somewhat greater — and also Portugal ;
thirdly, there is the group which remains nominally on
the gold standard, but under a system of drastic exchange
control ; besides Germany this group includes Bulgaria,
Estonia, Hungary, Latvia, Lithuania, Roumania, Czecho-
slovakia, and in effect Turkey, for although the Turkish
currency is heavily depreciated in terms of gold, the de-
preciation is no greater now than it was in 1929. Fourthly,
we have the group of countries which, after endeavouring
for some time during the slump to remain at least nominally
upon gold, have been driven to measures of currency
depreciation. This group includes Greece and Yugoslavia,
and in effect Austria, and with it must be classed Spain,
which can alternatively be treated as standing by itself,
in that the Spanish currency has fallen between 1929 and
1 933 from a nominal depreciation in terms of gold of 24

47O ECONOMIC CONDITIONS IN EUROPE

per cent to one of 57 per cent. It is clear that if the slump
continues much longer the number of countries in group
three is bound to decrease as other States find themselves
compelled to follow the example set by Greece and Yugo-
slavia in 1932 and to allow their currencies to depreciate
in external value.

This instability of European currency systems introduced,
even before the sudden abandonment of the gold standard
by the United States, considerable complications into the
working of international trade. The present situation means
in effect that, largely on account of the enormous burden of
European debts, currencies are being pegged by exchange
control at purely artificial values, which could not possibly
be sustained if the free movement of money from country
to country were to be again allowed. For despite the main-
tenance of a nominal parity of exchange, there exists no
real balance in the international economy of the countries
concerned, so that the freeing of the exchanges would be
certain to result immediately in heavy depreciation. This,
of course, could not occur if these countries were really,
as they still pretend to be, on the gold standard — that is,
if they were really prepared to give gold in exchange for
national currency at a fixed value. But this is altogether
outside the bounds of possibility. For most of the countries
in question have already lost the greater part of their gold
in their attempts to maintain gold payments during the
earlier stages of the slump, and not one of them has resources
in any way sufficient to meet even a tithe of the claims that
would be made upon them if they attempted to resume
gold payments under the existing conditions. As we have
seen, they have no real balance of exports out of which
to meet the claims of their external creditors. \

Nor have they for the most part any large invisible
imports to set against these claims. Certain of the debtor
countries of Southern and Eastern Europe used indeed to
have large invisible imports in the form of remittances sent
home by emigrants who had settled abroad, chiefly in the
United States. But although these remittances are still

THE EUROPEAN MONETARY PROBLEM 471

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472 ECONOMIC CONDITIONS IN EUROPE

maintained to a certain extent, the American slump has
caused an exceedingly sharp fall in their total amount ;
and this factor has been added to the withdrawal of
American capital from Europe, and has caused a further
discrepancy in the balance of payments between European
countries and the United States. Some of the debtor
countries have also been able in the past to derive a certain
revenue in invisible imports from tourist traffic ; but this
too has declined very greatly in consequence of the slump,
so that their unfavourable trading position taken in relation
to the volume of their external debts gives by no means a
misleading impression of their total ability to pay. In
present circumstances any effective restoration of the gold
standard in any of these countries is, by itself, totally out
of the question. Some of them may succeed in remaining
nominally on gold for some time to come, because it seems
better to them to do this than to run the risks of a currency
depreciation to which they can see no limit. But they can
only remain even nominally upon gold at the cost of a
continuation of the existing high tariffs, of the quotas and
embargoes and of the exchange restrictions \\ hich are more
and more strangling world trade as the slump becomes
intensified. And it is even more doubtful whether they can
keep their exchanges pegged at all now that the United
States has deliberately allowed the gold value of the dollar
to fall.

Nevertheless it is constantly being argued that the world
ought to make a combined effort to return to the gold
standard. This insistence on the necessity for a return to
gold is based on the belief that the stability of the inter-
national value of national currencies is essential for the
carrying on of world trade, in that the instability of curren^
cies in terms one of another necessarily introduces into
all international transactions an element of uncertainty
which converts ordinary trading operations into highly
speculative affairs. There must, it is urged, be some inter-
national standard in terms of which all national currencies
can be (stably measured ; and although many suggestions

THE EUROPEAN MONETARY PROBLEM 473

have been put forward for some other international
standard as an alternative to gold, there exists at present
no other standard likely to command any sufficient measure
of general consent to secure its international adoption, or
likely to work well or smoothly even if the nations of the
world could be persuaded to adopt it.

These arguments in favour of a return to the gold standard
raise a number of distinct considerations. In the first place,
as we have seen, whatever may be thought about the
desirability of a general return to the gold standard, no
such return is at present possible in any real sense for the
great majority of countries. Let us suppose for the moment
that all countries are agreed upon the desirability of going
back to the gold standard, as they were in effect agreed,
as far as the politicians and bankers were concerned, in the
period immediately before the world slump. What, then,
would be the difficulties standing in the way of a general
return ? The first fundamental difficulty would be that, at
the present levels of world prices, debt burdens are alto-
gether out of proportion to national ability to pay, so that
any attempt to return to the gold standard would involve
heavy and continued external payments by a large number
of debtor countries which could not possibly hope, at
present price-levels, to meet their debt claims out of a
surplus of exports. Even if these countries, which at present
have for the most part hardly any gold reserves, were
equipped somehow with a fresh supply of gold sufficient
to enable them to meet external claims for a year or two to
come, this would in no way meet the difficulty ; for there
is no reason to suppose that in a year or two's time they
would not again have lost the new gold supplied to them,
and be once more unable to meet external claims arising
out of their adverse balances of payments. But in these
circumstances who is going to supply them with the gold,
or alternatively with the foreign exchange as a substitute
for gold, which they would need in order to return even
temporarily to the gold standard ? The answer is that no
one in his senses is going to supply them on these terms ;

474 ECONOMIC CONDITIONS IN EUROPE

for to do so would be only to reproduce on an infinitely
larger scale the situation which has existed for some time
past in Austria, which has been provided with new credits
under the auspices of the League on a scale just sufficient
to prevent default on her existing obligations, without any
result in improving her ability to meet in future years the
undiminished volume of claims still outstanding.

It is clear in these circumstances that no effective return
to gold is possible for most of the debtor countries unless
either or both of two conditions can be satisfied. Either
existing debts must be cancelled, or so drastically scaled
down as to come again within the ability of the debtors
to pay without fresh capital borrowing for the purpose of
payment ; or prices must be so raised that the existing
debts come to represent a greatly reduced quantity of goods
of those kinds which the debtors are in a position to export.
This second condition would not necessarily be satisfied
by a general rise in the level of world prices unless this rise
were very considerable indeed. For what most of the debtor
countries — Germany is in this case an exception — need
most of all is a sharp rise in the prices of agricultural
products, and to a less extent other raw materials ; and a
moderate rise in the general level of prices would not have
nearly enough effect materially to increase their ability
to make external payments unless it were so distributed as
to increase the purchasing power of their exports not only
generally but also specifically in terms of industrial imports.

What seems to be needed from the standpoint of these
countries is not only an absolute rise in the price level,
but at least equally a rise in the prices of agricultural
goods in relation to those of the manufactures which they
chiefly require to import. To achieve this was of course th^
principal object of the proposals for the revalorisation of
cereals put forward at the Stresa Conference — at which,
incidentally, Turkey, Greece and Bulgaria also urged the
claims of tobacco for inclusion in the scheme. But if, as the
Stresa proposals involved, this revalorisation were to be
accomplished by a mere discrimination in favour of the

THE EUROPEAN MONETARY PROBLEM 475

exports of the agricultural countries of Eastern and South-
ern Europe, excluding the U.S.S.R., and not by a rise in
the world level of prices for cereals and other agricultural
products and raw materials, the advantages secured by it
would necessarily be conditional on the maintenance of
the system of high tariffs and import quotas and embargoes
which is widely regarded as a powerful obstacle in the way
of any general recovery of world trade as a whole. Any
advantages secured by the countries of Eastern Europe
by this method would therefore, from the standpoint of
the world, and even of Europe as a whole, be purchased
only at a very high cost, and at the expense of perpetuating
conditions which must be swept away if there is to be any
general recovery under the capitalist system.

It follows that, if an escape from the existing difficulties
is to be sought under the capitalist system by way of a
recovery in prices, this recovery must be brought about not
by an artificial raising of the prices of certain particular
classes of goods through preferential tariffs or similar
devices, but by some method compatible with the recovery
of a greater degree of freedom in international exchange.
This clearly involves in the first instance an attempt to
raise prices generally by monetary means, as the only
possible alternative to widespread bankruptcy and default
on the part of the debtor countries.

The alternative in whole or in part to action designed to
raise prices is the writing off of a very large part of the
existing debts, including not only external debts, but also
those internal debts which, at the lower prices now pre-
vailing, arc out of all relation to the ability of the debtors
to pay. But hardly a beginning has yet been made towards
a constructive solution of this problem. For it appears to
have been conceived throughout from the standpoint of
the creditors rather than the debtors, and with the object
of preserving as far as possible the existing structure of debt,
on the ground that any widespread departure from it would
be a serious blow at the whole conception of the sanctity
of contract. It is repeatedly stressed that " respect for

476 ECONOMIC CONDITIONS IN EUROPE

undertakings entered into is an essential factor " in the re-
turn of confidence, and that such readjustments of debt as
are required ought to be effected not by any general scaling
down over the whole field but only by separate arrange-
ments entered into directly between the parties to each
contract in accordance with the ability of the debtors to
pay. But it seems altogether Utopian to suppose that the
method of separate negotiations could bring about any
scaling down of the kind required, save as a result of wide-
spread default on the part of the debtors spread over a
considerable period of time. In effect, if this is to be the
method of settlement, it is likely to come about only at the
end of a considerable period of further deflation, and rather
as a recognition of accomplished bankruptcy than as a
means of re-establishing the prosperity of the world.

§ 6. PROPOSALS FOR RAISING THE
PRICE-LEVEL

THE QUESTION then is whether there is a real chance
both of devising measures likely to be effective in raising
general price-levels throughout the world and of persuading
a sufficient number of nations to put these measures into
force. Let us confine ourselves for the moment to the ques-
tion whether such measures can be devised, without raising
the further question whether, even if satisfactory action
along these lines is possible in theory, it stands any con-
siderable chance of acceptance in the near future. A large
number of different schemes have been put forward by
economists in the various countries during the past two OT
three years. At one extreme we have those economists who
believe that, if the Central Banks in the leading countries
were simultaneously to pursue, by means of open market
operations on a very large scale, the expansion of the basis
of credit, and if the currency laws of the countries con-
cerned were to be so modified as to make this possible,

PROPOSALS FOR RAISING THE PRICE-LEVEL 477

the mere increase in the supply of money would, without
any further action, be effective in raising prices, so that
it would only be necessary to secure that the expansion of
the basis of credit should take place at the right relative
rates in the different countries. It is very difficult to believe
in the probable efficacy of this method under the existing
circumstances. Even if it is not disputed that the expansion
of the basis of credit can by itself raise prices at a time
when trade and industry are either pursuing a normal
course or are definitely on the up grade, there is no reason
whatever for believing that in a period of intense slump
and lack of confidence among business men a similar effect
is at all likely to follow. On the contrary such a method is
certain to fail both for lack of the willingness to borrow
among business men and because the banks as lenders
will have under it no greater reason to believe in the
solvency of potential borrowers than they have at present.
If, for some quite other reason, the confidence of business
men were on the increase the infusion of an additional
supply of available credit might be effective in stimulating
business activity ; but it is quite irrational to hold that a
mere announcement of the readiness of Governments and
Central Banks in the leading countries to broaden the
basis of credit would by itself suffice to bring this increased
confidence into being, especially in the existing disturbed
political as well as economic conditions.

An expansion in the basis of credit need not mean any
expansion at all in the volume of credit actually being used.
Of course, if the basis of credit is expanded without the
additional supplies of money finding an outlet, this creates
an awkward situation for the banks, which find themselves
with a supply of unusable money on their hands, and there-
fore unable to earn profits at the levels to which they have
become accustomed. But it does not follow that the conse-
quent pressure upon the banks to expand their loans will
achieve any substantial result unless there are willing and
solvent borrowers ready to take up the money. The only
result that is likely to follow from such a situation is a

ECONOMIC CONDITIONS IN EUROPE

pressure of money into the markets for gilt-edged securities,
the prices of which will be forced up by the competition
to buy, so that the rates of long-term interest will tend to
fall, as has happened in Great Britain very notably during
the past year or so. This will facilitate conversion operations
in those countries whose financial standing is still relatively
good ; and it will accordingly to some extent ease the
burden of public debts, especially where there are large
masses of war debts available for conversion. It will also
enable a certain number of business men to replace borrow-
ings at a high rate by money at a lower rate of interest,
and will thus do something to reduce business losses, or
even to increase profits. But its effects in this latter field
are likely to be very limited, and are most unlikely to result
in any expansion of business activity, as the new money
will pass chiefly into the hands of banks and financial
institutions or of the owners of capital, and will not
necessarily be transferred to the public for increased
spending.

It is therefore necessary to reject the idea that under
present conditions world prices can be raised or world
business activity increased by the mere broadening of the
basis of credit in the leading industrial countries through
the action of their Central Banks, unless this broadening
of the basis of credit is accompanied by deliberate measures
designed to increase the demand for actual credits to be
applied to the purposes of production. If this further
requirement can be satisfied, no doubt monetary expansion
can be made to serve a very useful purpose in raising the
levels of prices. But the satisfaction of it involves a con-
siderable increase in the willingness of Governments to
spend both on capital account and upon current serviced.
Such a policy of expanded Government spending is
obviously inconsistent with the " economy " policies which
practically all Governments have been pursuing to an
increasing extent each year since the coming of the world
slump. In practically every field of public expenditure,
with the exception of expenditure upon armaments, there

PROPOSALS FOR RAISING THE PRICE-LEVEL 479

has been throughout the world and above all in Europe a
determined attempt to cut down outgoings in the hope of
balancing budgets heavily unbalanced on account of the
decreased yield of taxation and the increase in the cost of
maintaining the unemployed. The salaries of public
employees have been reduced ; normal programmes of
expansion in the services of health and education have been
indefinitely postponed, and even the existing forms of
provision have been pared to the bone in the attempt to
save money. At the same time housing schemes have been
drastically curtailed, and there has been a check to the
expenditure upon road construction and road improvement,
which had been rising rapidly during the years imme-
diately before the slump. Even schemes of long-term
capital development such as afforestation and the develop-
ment of electrical power resources, or in Great Britain
the electrification of the main line railways, have been
abandoned or postponed on the plea that the States con-
cerned clearly cannot afford them. All these measures have
resulted together in a sharp decrease in the volume of
consumers' demand ; for they have both thrown people
out of work in large numbers and decreased the purchasing
power of those who have remained in employment. They
have furthermore, as far as abandoned schemes of capital
development are concerned, reacted indirectly to cause
additional unemployment and business losses in the in-
dustries in which activity would have been stimulated by
the execution of Government works.

It has been attempted in all countries to justify these
measures of "economy" on the plea that taxation is already
far too high, and that high taxation is strangling enterprise.
It has been suggested that, if States will but push their
economies far enough, the benefits of the tax reductions
which they will be able to allow will bring about a revival
of industrial activity. It is of course quite true that taxes
are at present, in relation to the tax levels to which countries
have been used in the past, exceedingly high, and that high
taxation is bound to have at least some discouraging effect

480 ECONOMIC CONDITIONS IN EUROPE

on business enterprise, though this effect is often greatly
exaggerated by business men. For the chief adverse conse-
quence of high taxation on business enterprise arises through
its tendency to discourage fresh investment of capital in
industry. But at a time of slump investment has already
reached so low a level that not much further discouragement
is possible as a result of the height of taxes. High taxation
is in fact far more likely to slow down the rate of industrial
activity in times of boom, when such a slowing down is far
less open to objection, than at a time of slump. The fact
of course remains that during a slump the ability of the
community to bear taxation without hardship is less ;
and this applies especially where States raise a large part
of their revenue by indirect taxes. The pressure to get taxes
reduced is therefore perfectly natural ; but it is quite
mistaken to suppose that any reduction in taxation that
is likely to be brought about by economies of the kinds
at present contemplated can have any material effect in
stimulating industry. Indeed, if the lowering of taxes is
accomplished by way of economies in the social services
and in public capital expenditure, its effect on industry
is likely on balance to be markedly adverse.

When Governments decide on measures of economy and
look round for means of making their decision effective,
they are always apt to single out the social services for
special attention. Attempts to reduce military expenditure
meet always with strong resistance, and to-day encounter
exceptionally strong opposition because of the increasingly
disturbed political state of Europe. There remain as possible
fields for economy only the social services and the service
of the public debt. But although something can be done —
as it has been done with marked success in Great Britain
during the past year or so — to reduce debt charges by means
of conversion operations, and although a substantial further
saving is automatically achieved by the low rates of interest
possible on the short-term debt at a time when there is
little demand except from the Government for short-term
funds, by far the greater part of the debt is not open to

PROPOSALS FOR RAISING THE PRICE-LEVEL 481

these forms of treatment, since it consists of relatively long-
term obligations not immediately open to conversion.

This part of the debt can be made less onerous only if the
Government is prepared to break the contractual obliga-
tions into which it has entered with the bondholders ;
and this capitalist Governments are exceedingly reluctant
to do, except when they are driven right up against the
wall, as Australia was in her recent financial crisis. A
capital levy being virtually impossible at the bottom of a
tremendous slump, the contractual debt burden could be
reduced only by legislative measures lowering the rates of
interest in breach of the existing contracts. This lowering
of rates would, in the opinion of many people, be amply
justified on the ground that the real interest payable on the
debt has risen to an enormous extent during the past
few years, as a consequence of the fall in prices. But any
attempt at compulsory reduction of interest rates would be
certain to meet with very strong resistance from the monied
classes, who would be backed up in their opposition by a
very large number of small debtholders, unless it were
proposed to discriminate between large and small owners,
and also to continue payment in full of the interest on blocks
of debt held by such bodies as Friendly Societies, and other
collective institutions standing mainly for the interests of
relatively poor people. No capitalist Government, until it
is driven near to desperation by the magnitude of its
financial burdens, is therefore likely to be willing to adopt
this remedy.

Consequently, when economies are made by Govern-
ments in difficulty, the social services have usually to bear
the brunt. But it is difficult in practice to achieve large net
economies in this field because, even if expenditure on
health and education is drastically curtailed, the growing
burden of unemployment is bound to involve a heavy
additional cost to the State in one form or another, even
after the sums paid in relief to those out of work have been
cut down as far as public opinion will allow. One Govern-
ment after another starts out with promises of very large

482 ECONOMIC CONDITIONS IN EUROPE

net " economies," only to find that it can in practice do little
more than prevent expenditure from rising higher, as
unemployment grows. If, however, the effect of its supposed
" economies " is to make unemployment grow still faster,
it may well be that there is in fact no net decrease at all
in what the Government spends. It has merely ceased to
spend money in a more desirable so as to be compelled to
spend it in a less desirable way.

It has of course to be admitted that it would be difficult
at the present time for any Government to extend to any
significant extent its spending out of revenue. If Govern-
ments are to spend more in an effort to stimulate trade
revival, this additional spending must be done, unless there
is to be direct inflation on Government account, mainly
in the form of additional expenditure out of borrowed
money. The State must go into the market, or to the banks,
and borrow additional capital resources, which it will then
employ in setting men to work directly, and in placing
with contractors orders which will result in their setting
additional men to work. The spending power thus placed
in the hands of workers at present unemployed will be in
part offset by decreased expenditure in unemployment
relief, and this will of course relieve the budget as far as
relief expenditure falls at present upon national funds.
But men in work will be receiving larger incomes than the
unemployed, and there will accordingly be a net increase
in the amount of spending power distributed in the com-
munity. The direct expenditure incurred by the Govern-
ment will thus be passed on through its immediate recipients
into other hands, and the stimulus originally applied to the
industries to which the Government gives out its orders
will be diffused through the entire community, with the
effect of increasing business activity over a wide field.

It is often suggested that this policy is bound to result
in a rise in prices ; and indeed, to achieve a rise in prices
is under existing conditions one of its principal objects.
But it is probable that the increase in Government spending
would have to be pushed to considerable lengths before it

PROPOSALS FOR RAISING THE PRICE-LEVEL 483

would in fact result in any material rise in the price level,
on account of the large mass of productive resources now
lying unused. For this reason it is entirely within the power
of a single Government in a financially strong country to
carry a policy of reflation by increased Government spend-
ing to considerable lengths without fear of any adverse
reactions on the external value of the national currency.
For these reactions could come into being only if the policy
did lead to a rise in prices within one country, unaccom-
panied by a corresponding rise elsewhere. A national
policy of reflation, accompanied by the necessary increase
in Government expenditure, can therefore be used to a
certain extent even by a single country acting alone as a
means of reducing unemployment and stimulating indus-
trial activity within its own borders. But while the pursuit
of such a policy by the Government even of one only of
the leading countries in world trade would have some
stimulating effect on conditions elsewhere and so help
towards the re-establishment of confidence, it is unlikely
that it could have any material result in raising the level
of world prices unless the same policy were being pursued
by other leading countries as well.

If, therefore, the policy which we have just been dis-
cussing is to be used as an instrument for raising world
prices, it must be pursued internationally by agreement
among the leading Governments ; and this agreement must
include not only the broadening of the basis of credit by
means of the Central Banks, but also the initiation by all
the Governments concerned of a policy of public spending,
and a reversal of the " economy " measures at present in
force. If this were done by the Governments of the leading
countries acting together, there is every reason to believe that
it could be effective in bringing about a rise in world prices.

It will, however, be urged that, while the leading
creditor countries are in a position to institute a policy of
this sort, the same conditions do not apply to the debtor
countries, since these countries are compelled, in their
intensive efforts to arrest national bankruptcy, to impose

484 ECONOMIC CONDITIONS IN EUROPE

drastic restrictions on imports, whereas the policy of national
expansion obviously involves in all countries which are not
fairly self-sufficient in raw materials and machinery the
admission of additional imports of these classes. It must
be agreed that the debtor countries, now held firmly in the
grip of their respective bondholders, are not in a position
to embark upon measures of reflation ; and yet it may be
held that if the leading industrial countries did seriously
carry out the policy suggested above, the eflect would be
so to improve the position of the debtor countries as ex-
porters, both through the rise in prices which would follow
its adoption and through the increased demand for their
goods, as greatly to improve their position <M&1 increase
their ability to meet their debts. But it is highly questionable
whether the debtor countries can be expected, if a policy
of reflation is carried through on these terms, to consent
to the benefit of it being transferred almost wholly to the
foreign bondholders at the expense of a continuance of
poverty for their own populations. They could only be
expected to agree willingly — though it is true they might be
coerced against their will on other terms — if, side by side
with the proposed measures of reflation and Government
spending, an international agreement were reached for the
scaling down of their external debts to a figure well within
their re-established capacity to pay.

But can the nations of the world be persuaded to accept
an international scheme for the raising of prices, even if
such a scheme can be devised on sound working principles ?
On this point there is bound to be grave doubt. For the
entire idea is workable only on the assumption that there
is general agreement among a sufficient number ^f the
leading countries that world prices ought to be raised if it
is possible to raise them. But there are still in a number
of countries powerful forces which are opposed to any such
attempt, however feasible it may be ; and these forces
have up to the present been especially powerful in France,
though the French attitude has of late, under a more
Radical Government, shown some sign of weakening.

PROPOSALS FOR RAISING THE PRICE-LEVEL 485

Broadly the contention of those who are hostile to an
attempt to raise world prices is that, unpleasing as the
prospect may be, the only way to recover from the present
slump lies through a drastic scaling down of costs so as to
bring them into conformity with the prices at present
ruling, or even with the lower prices which are certain to
come into being if this deflationary policy is ruthlessly
pursued to the end. These critics of reflation hold above all
that the existing world levels of wages are far too high, and
that there can be no recovery of prosperity until wages
have been brought down in correspondence with the fall
in the level of wholesale prices in recent years. They hold
obstinately to this view despite the fact that the world has
at present a vast unused surplus of productive power which
appears to most people to require not a scaling down of
wages but rather a larger and more generous distribution
of consuming power to the great mass of the people. Their
answer to this criticism is that, if wages are sufficiently
reduced, there will be an increase in the volume of em-
ployment— so that more money will be distributed in wages
at the new lower rates than is being distributed at the high
rates now prevailing — and further that the purchasing
value of the wages will increase as prices fall, and as the
margin between wholesale and retail prices is reduced on
account of the fall in interest rates as well as in the wages
paid in distribution.

This argument is highly questionable, for it is improbable
that any reductions in wages which could be achieved
without tremendous friction in almost every country would
result in any considerable expansion in the volume of
employment. Moreover, the trades in which it is easiest
to reduce wages are precisely those in which wages have
already fallen most severely, and the resisting power to
wage decreases differs very greatly from trade to trade, so
that the attempt to re-establish equilibrium by these
means would be likely to result in practice in making the
existing disequilibrium even worse. Apart from this, the
process of scaling down costs so as to adjust them to existing

486 ECONOMIC CONDITIONS IN EUROPE

price-levels, or rather to the still lower price-levels which
the pursuit of such a deflationary policy would certainly
involve, would be bound to take a very long time, and would
in the interval condemn the world to a continuance and
intensification of the existing depression. Even if theoreti-
cally this method could succeed in the long run, it is most
unlikely that it could succeed in practice ; for long before
it could have produced the required effects European
civilisation would almost certainly have crumbled into
ruins.

Nevertheless the hostility to the attempt to raise prices
by international action finds influential support, not only
among deflationary economists but also among certain
sections of the public in each country. Co-operators, for
example, wedded to the consumer's point of view, are
exceedingly apt to oppose the suggestion that Govern-
ments should do anything to raise prices ; and, especially
in France, there is a very powerful and quite intelligible
sentiment of opposition amongst the large body of small
rentiers who form one of the most influential sections of
French public opinion. These small rentiers have already
passed through one period of inflation, as a result of which
a large part of their savings has been in effect taken away
from them. They regard the stabilisation of the franc at
one-fifth of its pre-war gold value as meaning in effect
that someone has stolen four-fifths of their savings ; and
they are determined to hang on desperately to the one-
fifth that they feel to be left them, and accordingly to
oppose any measures that savour of renewed inflation or
attempt by raising prices to decrease the purchasing value
of their money. These small rentiers have, to be sure, gained
considerably in purchasing power during the past few
years as a result of the fall in world prices, though their
gains from this source have been reduced by the protec-
tionist measures adopted in the interests of the French
producers. They might be reconciled to an attempt to
raise the level of international prices if they thought that
it would be accompanied by an at least equivalent fall in

PROPOSALS FOR RAISING THE PRICE-LEVEL 487

those French prices which are at present artificially raised
by protective measures ; but without some such guarantee
as this they are likely to remain suspicious of any effort
to raise prices by means of international reflation.

Until quite recently the influence of the bondholders
seemed likely to be decisive in determining French financial
policy ; and as long as France remained relatively immune
from the consequences of the world slump there was little
chance of persuading any French Government to act in
any way inconsistent with the bondholders' point of view.
But during the past year France has discovered that her
comparative immunity from the consequences of world
depression cannot be maintained in face of the prolongation
and intensification of the slump throughout Europe. The
worsening of economic conditions in France has already
produced some change of attitude. It is, however, very
doubtful whether even to-day France could be persuaded
to come wholeheartedly into any scheme of the kind
suggested. She would almost certainly, even if she agreed
to come in at all, seek to make her participation conditional
on the scheme being accompanied by special measures in
the interests of the smaller countries of Central and Eastern
Europe with which she has been so largely associated in a
political sense. In other words, she would probably try to
make the adoption of the Stresa scheme for revalorisation of
cereals a quid pro quo for her participation in any world
monetary agreement having a reflationary object. Even
this implies a great modification of her present attitude,
which is still based on a fanatical adhesion to the gold
standard, and a faith in the efficacy of plans for raising
commodity prices by the artificial restriction of output.

Could then Great Britain and the United States, even
in the absence of French co-operation, carry out a modified
scheme on the lines of that which has been discussed above ?
It might be possible for Great Britain and the United States,
acting together, to set going measures of international
reflation through an expansion in the basis of credit in
their own countries, and so to stimulate activity in the rest

ECONOMIC CONDITIONS IN EUROPE

of the world ; but it would not be possible without French
collaboration to place adequate resources at the disposal
of the debtor countries.

§ 7. PROPOSALS FOR RESTORING THE
GOLD STANDARD

PRACTICALLY all the schemes which are now being
put forward in responsible quarters for the restoration of
prosperity by international action involve the ultimate
restoration of the gold standard, if not in its old form, at
any rate in some form guaranteed to restore stability to
the international exchanges. But it is by no means clear
that those who demand this return to gold have for the
most part envisaged clearly the differences between the
pre-war situation and that of to-day. For in effect the gold
standard as it existed in the nineteenth century and before
the war was to a very great extent a sterling standard as
well. London occupied a position of such predominance
in the world's financial system as a clearing-house for inter-
national transactions of any and every sort that the gold
standard was in effect operated from London and in accord-
ance with the needs of London as a financial centre, though
by no means always in accordance with the needs of
British industry. There vsas little criticism of the gold
standard as long as it was worked in this way ; for London's
predominance secured in effect its management under the
auspices of a single authority with sufficient pouer in its
hands to control the situation. But since the war these
conditions no longer exist. The control of the world's
financial affairs is divided between a number of great
financial centres ; and, although London has continued to
hold its position of preponderance in the market for trade
bills, it has lost its old position in the market for new capital
issues, and is no longer the great reservoir of money for
supplying the needs of the whole world.

In these changed circumstances no one country can

PROPOSALS FOR RESTORING THE GOLD STANDARD 489

control the gold standard. The attempt has been made to
control it by creating in each country a Central Bank on an
approximately uniform basis, and bringing together the
leading personalities of these Central Banks by means of
regular consultations, as well as through the Bank for
International Settlements, which has, however, hitherto,
occupied a position of relatively minor importance. This
system of consultation among independent Central Banks
has never worked well or smoothly, and cannot be expected
to work well in face of the very difficult problems which
the post-war economic situation has presented to those
responsible for the world's monetary management. There
have been at work forces upsetting the monetary equil-
ibrium of each separate country and of the world as a whole.
There has been no real balance in the volume of payments
due to and from country and country. War debts and
reparations have again and again upset the normal working
of the financial system. There has been a mass of migratory
money moving from one financial centre to another in
search now of a higher return, and now not of any return
in the form of interest or profits but only of security against
loss. The successful management of the world's money
under these conditions has demanded a quite different
administration of the gold standard from that which
existed before the war, and has called for far stronger and
more unified control if the standard is to work smoothly
in accordance with the pre-war rules. But it was out of the
question to create any international agency strong enough
to exercise this control, for no great country was prepared
to let the control of its monetary affairs pass out of its hands.
Accordingly, what we have got has been neither strong
and effective national management nor strong and effective
international management, but rather weak national
management complicated by ineffective international
consultation.

It is, however, so important for the carrying through of
international transactions that there should be a common
standard linking together the different national currencies

4QO ECONOMIC CONDITIONS IN EUROPE

that we cannot, on account of the very real difficulties in
the way, agree permanently to abandon the gold standard
unless and until we can find some satisfactory international
alternative. For a world in which the relative value of
different national currencies is liable to constant fluctuation
is a world in which every transaction involving international
payments is bound to contain a very large speculative
element, and one in which financiers and traders, in their
attempts to protect themselves against these speculative
risks, try to safeguard their transactions by methods (e.g.
the gold clause in many American contracts) which are
apt to become extremely oppressive in their working, and
to throttle trade instead of giving it air to breathe. If,
then, we are to have an international standard, and there
is in practice no alternative to gold as a basis for this
standard, the question we have to consider is whether the
gold standard can be so modified as to avoid the over-
whelming difficulties which have arisen in its working
since the war.

In the first place, it is clear that a return to the gold
standard by any country which has been driven off it during
the present crisis does not at all imply a return to the
previous parity. There is no reason at all why, if Great
Britain or Scandinavia goes back to the gold standard, they
should go back on the basis of equating the pound sterling
or the crown to the same amount of gold as these currencies
represented before September 1931. It is perfectly open
to any country to return to the gold standard at a quite
different parity — for example, by stabilising its currency
at the parity now existing between it and those currencies
which are still based really as well as nominally Vpon
gold — in relation to the franc value of the pound sterling,
for example. It would indeed be madness even to consider
a return to the gold standard under present conditions in
any other sense than this ; for an attempt to write up the
value of the pound to what it was worth in terms of gold
before 1931 would be a repetition — far more disastrous and
far-reaching in its effects — of the profound mistake which

PROPOSALS FOR RESTORING THE GOLD STANDARD 491

Great Britain made in the terms of the return to the gold
standard in 1925. Let us assume therefore that if the world
is to return to gold at all the return will be made on a basis
of a substantial devaluation of the pound sterling and of
the currencies of those other countries which have gone
off gold since the beginning of the crisis — even including the
United States. For, though the U.S.A. was not driven off
gold by any adverse balance of international payments,
she may well desire to write down permanently the gold
value of the dollar in order to raise her internal prices and
reduce the real burden of farm mortgages and other
internal debts.

On this basis, a return to the gold standard is practicable
without disaster, provided certain other conditions are
satisfied. These conditions are of two kinds ; some of them
are conditions which must be met before the return to
gold can be safely carried into effect, while others are
conditions for the subsequent working of the gold standard
under the changed circumstances of world economy. Let
us take this second set of conditions first. Hitherto it has
been assumed that the adoption of the gold standard
involves the keeping of a large reserve of gold against the
internal issue of currency, and accordingly that the basis
of the national issue of credit must fluctuate in accordance
with the supply of gold in the possession of the Central
Bank of the country concerned. It has further been assumed
that the value of the national currency in terms of gold
must be fixed definitely once and for all, and that no
provision must be made for changing this value under any
conditions. If we are to restore the gold standard both
these assumptions ought to be definitely given up.

In the first place there is clearly no real need for keeping
a reserve of gold against the purely internal issue of currency,
or for maintaining any fixed relation or proportion between
the volume of currency issued for internal use and the
supply of gold in the possession of the Central Banks. It
is imagined that such an internal reserve is necessary only
because paper money has been evolved gradually as a

492 ECONOMIC CONDITIONS IN EUROPE

substitute for the direct use of coined gold as a medium of
exchange, and there is still felt to be something wrong in
treating paper money as having a value of its own unless
it is definitely representative of a stock of gold lying some-
where for which it can, at least in theory, be exchanged.
The existence of this supply of gold and of a definite
statutory requirement that the issue of currency shall bear
a fixed maximum proportion or relation to it is further felt
to be a safeguard against the manipulation of the national
money by a Government which desires to inflate. But no
one suggests that the reserve of gold held against the
internal issue of currency is of any real use except as a
means of giving people confidence in the currency, and of
acting as a barrier in the way of inflation.

The first of these arguments is now obsolete The existence
of a stock of gold serving nominally as a basis for the internal
issue of currency is no longer the necessary foundation for
confidence in the national issue of money or any real
foundation at all. For it has been amply demonstrated that
the existence of a stock of gold is no guarantee that if a
crisis really arises — and it is only in a crisis that men are
likely to "go for gold " in preference to paper — the holders
of paper money will be actually allowed to change it into
gold, or that the previously existing parity of the paper
money with gold will be even nominally preserved.
Countries will go off the gold standard, however they may
be committed to it by legislation, if they find themselves
unable to maintain it without disaster.

Under modern conditions a country needs a stock of gold
only for the purpose of meeting the normal requirements for
export — that is to say, for settling such balances as cannot
be settled in other ways, and for correcting when occasion
arises the tendency towards undesirable minor fluctuations
in the external value of the national money. It is impossible
to use gold for the purpose of preventing major fluctuations ;
for, as the history of the world during the past few years
has amply demonstrated, it is quite beyond the power of
the great majority of countries to carry a stock of gold

PROPOSALS FOR RESTORING THE GOLD STANDARD 493

sufficient to meet a real financial crisis without a suspension
of the right to export it. Gold as a means of settling inter-
national balances can only be used provided that these
balances are manageable in size and arise out of temporary
and not permanent disequilibria in the financial relations
between countries.

Accordingly, a country needs only enough gold to meet
potential demands for gold export, excluding such abnormal
demands as are liable to arise in connection with any serious
international crisis. To hold a stock of gold larger than this
requirement dictates is wasteful ; for it means locking up
resources in the holding of non-earning assets. Given a
stock of gold adequate within these limits, there is no
reason why the internal issue of currency should not be
wholly divorced from any quantitative relation to the stock
of gold — in other words, why countries should not adopt
in their internal issues of currency and credit a policy of
pure monetary management. This does not mean that a
country would be free to inflate ad lib. ; for it would still
be governed in its internal monetary policy by its adhesion
to the international gold standard in terms of the parity
laid down for the time being by its Central Bank, and it
would be under the necessity of so regulating its internal
issues of currency as to keep its internal levels of prices in
equilibrium \\ith the price-levels of other countries adhering
to the common standard, in order to avoid the possibility
of a drain of gold. What is suggested is, not that countries
should be set free to inflate as much as they like, but that
their policy in the issue of currency and credit should be
related to the need for preserving the established parity
of their money and preventing a drain of gold, and not by
means of a definite statutory relationship between the total
quantity of gold held and the amount of currency erected
upon it.

But it is here necessary to propose a further modification
in the international gold standard as it has been hitherto
conceived. It is desirable in the interests of international
trade to establish short-term stability in the relative values

494 ECONOMIC CONDITIONS IN EUROPE

of different national currencies ; but there is no reason why
the gold parity of any currency, or accordingly its external
value, should be fixed definitely for all time. It would be
far better to give the Central Bank the same power as it
now possesses in varying the rate of discount and re-discount
to regulate the gold value of the national currency by
changing from time to time its buying and selling prices for
gold. It would indeed be highly undesirable to make fre-
quent changes in the gold parity of the national currency,
or to use the power to alter this parity except in accordance
with long-run changes in the economic structures of the
different countries. But, provided that the short-term
stability of the external value of a currency were sufficiently
guaranteed, there would be no handicap to external trade
in recognising the possibility of rare changes in the gold
parity as the alternative to financial crises accompanied
by the suspension of the gold standard. It would be far
better for the trader to know that the Central Bank, in
consultation with the Government, had the power of
varying the rate of parity and so preventing a crisis than
to pass once again through the experience which he under-
went in 1931.

In other words, we must not expect too much of the gold
standard, or be prepared to put in it an absolute and un-
qualified trust. We must use it, if we use it at all, as an
instrument of which we recognise the fallibility ; and we
must not be so scared of the fallibility of bankers and
Governments as to fly from our fear of their mistakes to an
absolute reliance upon an automatic standard which has
of late served us exceedingly ill.

These are the two conditions which should be lai& down
for the working of the gold standard in the future, if it is
to be restored as a basis for international monetary trans-
actions. Let us be sure that we have them clear in our minds.
They are, first, that countries should cease to regulate their
internal issues of currency and credit in any definite pro-
portion or relation to the stocks of gold in the possession
of their Central Banks, and should aim at keeping gold

PROPOSALS FOR RESTORING THE GOLD STANDARD 495

reserves sufficient only to meet normal demands for export.
And secondly, that the gold parity of each national currency,
or in other words, each Central Bank's buying and selling
prices for gold, should be fixed in future not absolutely
and for all time, but subject to modification at long intervals
in order to adjust the relative values of national currencies
to long-term changes in the national economies of the
different countries.

There are, however, as we have seen, other conditions
than these which have to be satisfied before any return even
to such a modified gold standard can safely be made by the
countries which have departed from it during the past
few years. No gold standard, however modified, can possibly
work if there are in the economic relations between countries
such permanent disequilibria as are bound to set up a
drift of gold from one group of countries to another group,
or in the absence of free movement of gold certain to cause
a permanent disequilibrium in the balance of payments due
from country to country. Such disequilibria are, however,
bound to exist as long as prices remain at anything like
their present levels, and further as long as huge masses of
international debt not representative of real productive
assets have still to be met. In other words, any effective
return even to a modified gold standard pre-supposes
either a rise in prices so substantial as to make present debt
burdens nugatory — and this for many and sufficient reasons
no one is likely to contemplate — or, in the alternative, some
rise in prices combined with a drastic scaling down of
existing international debts both public and private. It
is not possible in this matter to isolate war debts, or to
claim that when once war debts and reparations have been
got safely out of the way matters will speedily right them-
selves without further readjustment. For even if these
aggravations of the trouble disappeared there would remain
commercial debt burdens which are impossibly heavy
either at present prices or at any level of prices which is at
all likely to be established by international action of the
kind discussed earlier in this section.

496 ECONOMIC CONDITIONS IN EUROPE

If these prior conditions could be satisfied, there would be
a great deal to be said for an attempt to work a modified
gold standard. For all sensible people want the countries of
the world to be drawn economically more closely together,
and to weaken the forces of economic nationalism which
have grown so strong in recent years. And most people
realise that the absence over the whole world during most
of the period since the war of an effective international
monetary system has been one of the principal causes
leading to the rise of nationalism in the economic field.
If we can get a workable international monetary standard,
we shall by doing this be erecting a framework within
which it will be far easier than it can be at present for
a system of international economic co-operation to be built
up. Even those who have no love at all for the gold standard
in the forms in which the world has known it hitherto
may well see very strong reasons against adding to the
existing potency of nationalism in the world the reinforce-
ment of a purely nationalist monetary policy in each
country.

To this some people would reply that the case for the
gold standard is sufficiently answered by the obvious fact
that the available world supply of gold, even apart from its
existing mal -distribution, is inadequate to serve as the basis
for the exchange, even at the present prices, of the greatly
increased emission of goods and services which is possible
with the aid of our rapidly expanding productive resources.
But there is no real reason for supposing that the supply of
gold in the world is inadequate, provided that this supply
is rightly used. Changes in the working of the gold standard,
such as a drastic reduction in the quantities of gold which
the laws of the various countries compel Central Banks to
keep as reserve against currency, would in themselves
result in very large economies in the total world demand
for monetary gold ; and there is no reason why these
economies should not be pushed further and further as the
world gets more used to the working of the new system.
Moreover, there is no reason at all why the supply of gold

PROPOSALS FOR RESTORING THE GOLD STANDARD 497

should not be reinforced to any extent that may be needed
either, as has been suggested, by the creation of a new in-
ternational paper currency which countries will agree to
treat as the equivalent of gold, or by the use of silver, or in
a variety of other ways. Any required expansion in the gold
basis of the world's credit economy could be made by these
methods without interfering at all with the operation of the
gold standard.

It is, however, sometimes urged that, if the world does
go back to gold, its demand for the actual metal will be
found to be not less but greater than it was before the crisis
of 1 93 1 . For up to 1931 a number of the smaller countries
kept a large part of their resources, not in the form of actual
gold in the cellars of their Central Banks but in gold
exchange — that is to say, in the form of deposits of money
in the gold standard countries. This system, it is said,
economised considerably in the use of gold, because it
meant in effect that the same gold reserve was being used
to back the issues of currency and credit both in the country
which actually had the gold and in the countries which
adopted the " gold exchange " method of working the gold
standard. But, it is said, after the experiences of 1931,
countries will never again be persuaded to treat gold
exchange as the equivalent of gold. Each country will
want to pile up its own gold reserve, as Switzerland,
Holland and Belgium as well as France have piled up their
reserves since 1929. For, if a country holds its reserve not
in gold but in foreign exchange, it stands to lose if the
country in which the whole or part of its reserve is held
goes off gold, or under the proposed new gold standard
system decides to modify the gold value of its currency.
This is, of course, true enough. But the objection would not
apply if the smaller countries were prepared definitely to
peg their own currencies to those of one or another of the
leading financial nations. For example, if Scandinavia and
certain of the countries within the British Empire were to
agree to enter a sterling area, they could continue to operate
the gold exchange standard, provided they kept their

ECONOMIC CONDITIONS IN EUROPE

balances in London or in some other centre falling within
the area. Similarly, some of the smaller European countries
could, if they so desired, peg their currencies to the French
franc, and some of the South American countries could
peg theirs to the American dollar. It is, however, true that
the gold exchange standard is not likely to work in future
unless there is either a general return to the gold standard
by the leading nations on the old pre-crisis terms (which
seems both unlikely and undesirable) or a definite linking
by certain of the smaller countries of the fortunes of their
currencies to the currency of one of the great financial
nations. A third alternative would of course be the creation
of a consortium of the smaller countries to manage a com-
bined currency of their own on the basis of a common gold
reserve. This might, for example, work in the case of
Scandinavia, but it is certainly unworkable amid the
existing antagonisms of the countries of Central and
Eastern Europe.

§ 8. THE SLUMP IN EUROPEAN
INDUSTRY

IT is NOW time to turn from the predominantly agricul-
tural countries of Southern and Eastern Europe to the
industrial nations of the west, and to see how these countries
have fared during the world depression and what are their
economic problems to-day. In predominantly agricultural
countries the onset of depression makes itself felt directly
in a fall in the standard of living among the general mass
of the population. The peasant finds himself able to buy
less industrial goods ; and as these goods are chiefly im-
ported from abroad, imports fall off, and the whole country
readjusts itself to a lower standard of living. Unemployment
does of course arise in such industries as exist within the
national frontiers ; but where a substantial part of the
industrial products used in the country is normally im-
ported from abroad, this unemployment can be to some

THE SLUMP IN EUROPEAN INDUSTRY 499

extent kept down by the imposition of high protective
tariffs and restrictions, which secure a larger share of the
domestic market for the home producers. Under these
circumstances, the effects of adversity are widely spread
among the mass of the population. Where the general body
of the peasants is heavily burdened with debts contracted
at a higher level of prices, the slump of course hits the
peasant population exceptionally hard, and reacts less,
and indeed may not react at all, on the standard of living
of the creditor classes within the country. How it will
react upon the industrial workers will depend largely on
the question whether the national industries are producing
exclusively for the home market, and can therefore be
effectively protected, or are working also for export, and
therefore subject to strong pressure from employers to
accept reduced wages in the interests of more effective
international competition. Trade Unions in these agricul-
tural countries are usually too weak to resist demands for
wage reductions if they are seriously pressed, and there
is usually no form of public provision for the unemployed ;
and where industrial workers are recruited from a much
larger mass of peasants, who are themselves suffering from
severe impoverishment on account of the slump, there is
usually a huge reserve of blacklegs on whom the employers
can draw if the workers attempt to resist their claims.
Wages in industry are therefore likely to be pressed down to
a very low level wherever the national manufacturing
industries are working under conditions of international
competition. Where, however, the protective system is such
as to afford complete shelter to native industries, and
production no more than suffices to meet the restricted
demand of the home market, this may not occur ; and in this
event the industrial workers will only suffer as a result of
the increase in the cost of living which is certain to follow
the adoption of a high protective policy.

On the other hand, in the industrial countries the effects
of a slump make themselves manifest first of all not in a
fall in the general standard of living of the population

50O ECONOMIC CONDITIONS IN EUROPE

but rather in an increase of unemployment. Industrialists,
finding the demand for their products restricted, cut down
output more readily than they reduce selling prices, and are
indeed apt to find that even a willingness to reduce prices
to a considerable extent produces relatively little expansion
in the demand for their goods in the overseas markets on
which they have been accustomed to rely. For the further
the depression goes the more the overseas countries shut
themselves up behind high tariff walls erected in the interests
of the home producers, and for the improvement of their
national balances of payments. Unemployment on a large
scale is therefore the habitual accompaniment of indus-
trial depression in the more advanced countries. In these
countries, moreover, Trade Unions are usually powerful
enough, save in the industries most exposed to foreign com-
petition, and most adversely affected by the slump, to put
up a strong resistance to the attempt to cut wages drasti-
cally ; and even if the Unions are compelled in the end
to accept substantial wage reductions, there is almost
always a lag between the incidence of the depression and
the acceptance of the reduced rates. The workers who are
able to retain full-time employment in the advanced
countries may even gain in purchasing power as a result
of the depression, and this applies especially to those
trades which are least subject to fluctuation in the demand
for their products. The so-called " sheltered " industries, in
which the demand is as a rule relatively well maintained,
therefore tend to gain at the expense of the unsheltered,
and the greater part of the economic loss, as far as it falls
upon the workers, is transferred to those employed in the
unsheltered industries, and to those workers in other
industries who either retain only part-time employment
or are thrown completely out of work.

Most of the advanced countries have some form of public
provision for the maintenance of the unemployed, either
through a national system of unemployment insurance —
which may or may not extend over the whole industrial
population — or by some locally organised system of relief.

THE SLUMP IN EUROPEAN INDUSTRY 50!

As the numbers unemployed or under-employed increase in
the course of a depression, the burden falling upon the
State or upon the local authorities, in as far as they are
responsible for the maintenance of the unemployed, rises
very greatly. This increase may be concealed where the
charge, or a large part of it, is met out of a separate unem-
ployment fund contributed to by employers and workers
as well as by the State. In such cases something may be
done to meet the increased charge for the maintenance
of the unemployed by raising the contributions levied upon
workers and employers, and this at the same time reduces
indirectly the wages of those still in employment, and places
an additional part of the cost of maintaining the un-
employed as a charge upon the productive system. Germany,
for example, which has an inclusive scheme of unemploy-
ment insurance, pursued this policy during the early years
of the slump to the fullest possible extent, raising the
contributions of employers and workmen to the unem-
ployment fund very greatly indeed, and provoking thereby
strong protests from both sides against the unfairness of the
impost. But even Germany reached before long, as unem-
ployment continued to grow, the limits of the resources
which could be raised by this method, and was compelled
to accept a greatly increased budgetary charge for keeping
the unemployed ftoin starvation.

In Great Britain, which has also a fairly inclusive scheme
of unemployment insurance, something was done by way
of raising contributions, but for a long time the increased
cost was mainly borne by according permission for the
unemployment fund to borrow money in anticipation of
a coming recovery of trade, which would reduce the number
of the unemployed not only within the current ability of
the fund to meet the cost, but to such an extent as would
enable it to repay the debts incurred during the depression.
This method relieved the budget of an additional charge,
but did this only at the cost of placing upon the unem-
ployment fund a debt which was never in fact likely to be
repaid ; so that in the end Great Britain, like Germany,

5O2 ECONOMIC CONDITIONS IN EUROPE

was compelled to accept the greater part of the charge as
a budgetary burden.

In both these countries this burden became, as the slump
continued, so heavy as to cause a great outcry among the
richer tax-payers. It was said that many people were
getting relief without having any real right to it, on the
ground that they were " not genuinely seeking work," that
unemployment benefit was on an unnecessarily generous
scale in view of the fall in the cost of living, and above all
that the existence of unemployment benefits to which the
workless were entitled as of right was a most powerful
cause in preventing the readjustment of wages to the
changed levels required by the world depression, because
it prevented a stampede for work at any price from breaking
down the established Trade Union conditions and the
bargaining strength of the Trade Union movement.

Germany, in far greater financial difficulties than Great
Britain, and confronted with an unbalanced budget at a
time when extensive State borrowing was virtually im-
possible owing to financial stringency, had by far the
strongest inducement for making all possible " economies "
at the expense of the unemployed ; and as the crisis
advanced, the scaling down of benefits, the weeding out of
those whose claims were open to question, and the
transference of the chronically unemployed to a different
form of relief at a much lower scale of payment proceeded
apace. But Great Britain was not long in following Ger-
many's example. Even before the financial crisis of 1931
the Labour Government of Great Britain had so far
responded to the attacks of the newspapers upon the
unemployment insurance scheme as to pass an Anomalies
Act, designed to weed out undeserving applicants and to
revise the conditions of relief so as to exclude a substantial
number of claimants who were legally entitled to it as the
scheme stood. This measure effected a financial saving,
especially at the expense of women, above all married
women, who were adjudged to be no longer genuinely
seeking work. But after the financial crisis of 1 93 1 and the fall

THE SLUMP IN EUROPEAN INDUSTRY 503

of the Labour Government, far more drastic " economies "
at the expense of the unemployed were speedily introduced.
The system under which unemployed workers had been
entitled, practically without limitation of period, to benefit
at a standard rate, was swept away, and on the German
model a differential system of relief, subject to a " means
test," was introduced for those whose idleness had extended
over a protracted period. By this measure, which created
widespread resentment in the industrial districts, a sub-
stantial saving in budgetary expenditure on the unem-
ployed was brought about, though some part of the charge
repudiated by the State had to be taken over by the local
authorities, which found themselves compelled more and
more to relieve the sheer necessities of workers whom the
State either declined to maintain at all or relieved on an
obviously inadequate scale. Undoubtedly a further effect
of the " means test," besides the privation which it caused
to large masses of workers who had been for a long time
out of a job, was to weaken the power of the Trade Unions
in resisting wage reductions, by making available a large
mass of labour which was prepared to take a job at prac-
tically any wage. A similar result followed to an even
greater extent the " reforms " introduced into the German
system of unemployment insurance.

In the countries which have no general system of public
maintenance for the unemployed an increase of unemploy-
ment is bound to result immediately in a far larger amount
of economic distress. In these countries, though there may
be, as in France, some system of local relief, the unem-
ployed worker is left without any assured income at all,
and any relief accorded to him through public or private
agencies is generally at best only on the poorest subsistence
scale. He begins by using up any savings he may possess,
and by getting such assistance as he can from relatives or
friends ; but when these resources are exhausted he has
nothing to fall back upon except the soup kitchen and the
meagre help extended to him out of local funds. In coun-
tries in which, though they are considerably industrialised,

504 ECONOMIC CONDITIONS IN EUROPE

there remains in being a large peasant population, a certain
fraction of the unemployed industrial workers is usually
able to go back to the land, and share in the reduced
standard of living available for the peasant population in
face of the depression. This to some extent relieves the
pressure of indigent populations in the industrial centres ;
but those who are unable to return to the country usually
suffer in such countries the most desperate privations of all.
They are not numerous enough to be able to force redress
for their grievances, and they are left to live in a condition
close to sheer destitution by picking up such scraps as they
can. Most of the larger industrial towns in the less indus-
trialised countries of Europe have thousands of people
living in them to-day on the very verge of starvation,
miserably clothed and housed, and deteriorating further
and further, men, women and children alike, in health
and physical efficiency as the slump drags on. These un-
fortunates are strong enough at times to make a riot, but
they are far too weak to secure any effective repress. They
are ready to turn to anyone who will offer them food and
shelter, and they can accordingly be found allying them-
selves now with Communism and now with the extremest
sort of Fascism, according to the hopes which are held out
to them from either left or right. They are too far " down
and out " to afford the luxury of real political or economic
convictions ; all they are looking for is some way, they
care not what, out of the desperate situation in which they
are compelled to live.

The more advanced industrial countries have no such
pockets of utter misery as these in their midst. But even
in their case the position becomes sufficiently serious when
over a prolonged period a large part of their industries is
shut down. The situation would not be quite so bad if the
unemployment were fairly evenly spread over industry as
a whole ; for in that case it would probably take the form
of spells of unemployment between jobs for a large pro-
portion of the total body of workers rather than of chronic
unemployment year in and year out for a more limited

THE SLUMP IN EUROPEAN INDUSTRY 505

number. What happens in fact is that unemployment,
falling very unevenly upon different industries, also bears
very differently upon different areas ; for the heavy indus-
tries, in which for the most part unemployment has been
most severe, are usually localised in particular districts
especially round the coalfields and the iron deposits, and
in both Great Britain and Germany there are many almost
derelict areas in which the greater part of the population
has been unemployed for years on end.

Both in areas of this sort and elsewhere the privations of
the German workers have been far worse than those of the
British, both because German wage levels have fallen more
sharply and because the pressure on the German economic
system has caused a more drastic curtailment of benefits
and relief. But even in some parts of Great Britain the
position is bad enough. In South Wales, in Durham, and
in some areas in Lancashire, there are industrial centres in
which practically the v^holc population is living on some
form of public relief which barely suffices to keep families
fed and housed, without providing any surplus for the
purchasing of new clothing, much less for any of the
ordinary amenities of life. These conditions have caused in
more than one country dangerous divergences of point of
view, and even antagonisms, to develop between the em-
ployed and the chronically unemployed sections of the
working class. The latter have been driven, in despair,
either towards Communism or towards Fascism, whereas
the employed have for the most part remained within the
ranks of the older parties.

It is often urged by industrialists and even by some
economists that the provision of unemployment benefit on
anything like a living scale serves to exaggerate depression
because of the high taxation which it involves at a time
when profits, and accordingly the ability of the rich to
meet taxes, are low. But against this contention must be
set the fact that the distribution of a large mass of purchas-
ing power among the unemployed is a most important
factor in maintaining the domestic demand for consumers'

'506 ECONOMIC CONDITIONS IN EUROPE

goods, and therefore in checking depression in the indus-
tries producing these goods. If the sums levied in taxation
for the maintenance of the unemployed were left in the
pockets of their original recipients it is exceedingly likely
that a substantial part of them would, under the prevailing
conditions of depression, not be spent at all either on con-
sumers' goods or by way of investment as new capital in
industry. The money, or a large part of it, might be accumu-
lated instead in idle bank balances or in some other way
diverted from any use which would serve as a stimulus to
industry and employment. It is, on the other hand, certain
that its distribution in the form of unemployment benefit
will cause most of it to be spent immediately on the pur-
chase of necessary products, and that the money so spent
will thereby be made to circulate among the general body
of the community, stimulating further demand in the
course of its circulation. It is surely evident that the
economic position in Great Britain would be a great deal
worse than it is but for the existence of a general system
of maintenance of the unemployed, and that the " econ-
omies " made in this maintenance by the National Govern-
ment in 1931, so far from improving the economic situation,
tended to make it worse. It is at any rate a fact that most
people have been surprised at the success with which
demand in the British home market has been maintained
during the worst period of the depression ; and it is difficult
to find for this any sufficient cause apart from the partial
preservation of the purchasing power of the unemployed
which the system of compulsory State insurance has
brought about.

This assertion of the beneficent influence of a system of
adequate maintenance for the unemployed still seems to
fill many people with surprise. But why should it ? It is
obvious that the present world crisis is not the result of any
shortage in the world's means of producing wealth. The
poverty and unemployment which the crisis has brought
into being co-exist with a productive power far more abun-
dant than the world has possessed at any previous time.

THE SLUMP IN EUROPEAN INDUSTRY 507

There is no lack of physical or of human resources for the
achieving of a higher standard of living for everybody.
The flaw in our present economic system lies in its failure
to find means of creating an adequate demand for the goods
which it is well able to produce. In these circumstances
it is not at all surprising that a distribution of purchasing
power in a form in which it is certain to result in an in-
creased demand for the products of industry, so far from
worsening the economic situation of the country which
adopts it, should help to preserve that country from the
worst consequences of the slump.

It is not of course suggested that the mere adoption of a
system of provision for the unemployed even on the most
adequate scale can be a remedy for trade depression. For
the existence of unemployment implies a fall in the real
income of the community below what its productive re-
sources are sufficient to create. Even if purchasing power
over consumable goods is maintained by adequate grants
for maintenance, the money required for these grants, in
as far as it is raised by taxation, comes out of someone's
pocket and subtracts from the purchasing power of one
section of the community what it adds to the purchasing
power of another section. In the circumstances of a trade
depression this will probably result in an increase in the
amount actually being spent, and so prevent the depression
from going as far as it otherwise would. But it will not avail
to turn a depression into prosperity ; for this involves not
merely a diversion of purchasing power from one section
of the community to another, but an increase in the
aggregate amount of purchasing power, combined with a
fuller utilisation of the available resources of production.

Let us now look at the actual situation of the leading
industrial countries of Europe from the standpoint of the
effects of the slump upon the volume of employment
and production. There are unfortunately no complete
statistics available of the unemployment existing even in
the industrial countries of Europe. For whereas Great
Britain and Germany have fairly adequate, though not

1 508 ECONOMIC CONDITIONS IN EUROPE

complete, figures, France has no records covering more than
a fraction of the unemployed, while some of the smaller
countries have either no statistics at all or only very incom-
plete figures. But some idea of the effect of the world
depression on the volume of unemployment in Europe can
be gathered from such statistics as are available. The com-
bined figures for 22 countries for which statistics, com-
plete or incomplete, can be secured, show that the average
number recorded as unemployed in 1928 for all these
countries taken together was well under 3 \ millions ; and
of this total Great Britain and Germany together accounted
for about 2^ millions. As against this at the end of 1932
the total numbers registered as unemployed in the same
group of countries had risen to over 13^ millions. Germany
alone had over 6 millions and Great Britain nearly 3 mil-
lions out of this total, while Italy had over 1,200,000.
Unemployment, as far as it is revealed by the European
statistics, had thus risen fourfold as a consequence of the
world slump, and almost every country had recorded a very
large increase in the numbers out of work. In Great Britain
the number of registered unemployed had been multiplied
by two and a half and in Germany and Italy and Sweden by
four ; while in Belgium, France, Holland and Czechoslo-
vakia the percentage increase was many times as great as
in any of these countries.

It is not of course suggested that a large percentage in-
crease necessarily indicates an exceptional severity of un-
employment, for that depends on the level from which the
figures start. But a glance at the accompanying table will
suffice to show that almost every country engaged in indus-
trial production was suffering from unemployment at a
level which implied a severe restriction in the quantity of
the national production and a considerable strain on the
financial resources of the community where any system of
public provision for the unemployed was in force. Unem-
ployment is most spectacular in Germany, but in relation
to some of the other countries the smaller totals recorded as
unemployed represent an even greater loss in production

THE SLUMP IN EUROPEAN INDUSTRY

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5IO ECONOMIC CONDITIONS IN EUROPE

and an even more serious decline in national purchasing
power. The 1,225,000 unemployed in Italy, the 873,000 in
Czechoslovakia, the 403,000 in Belgium, the 397,000 in
Austria, the 351,000 in Holland, to say nothing of the
smaller totals for countries with relatively tiny industrial
populations, reveal the intensity of the economic crisis
through which European industry as well as European
agriculture has been passing. The 352,000 unemployed
recorded for France represent only a relatively small pro-
portion of the total numbers out of work in that country ;
but it is unfortunately not possible to make any inclusive
estimate. Some idea, however, of the magnitude of French
unemployment can be secured from the fact that in 1931,
when the number recorded as unemployed was only
75,000, a writer in the Economist estimated that the real
number out of work was already well over a million.

Unemployment on this scale obviously implies a con-
siderable fall in the volume of production, and the exist-
ence of such a fall is borne out by the indices of industrial
production published by a number of the leading countries.
We have already seen to what an extent these indices had
shown a rising tendency in the European countries in the
years immediately before the slump, and we have now to
study their decline during the past few years. If we take
the position in the last quarter of 1932, or the nearest
available figure, we see that production in Germany had
fallen since 1928 by nearly 40 per cent, and production in
Poland by as much as 46 per cent. For Austria the fall is as
much as a third, and for Belgium and Hungary nearly a
third. For France and Sweden it is a quarter ; and Great
Britain is the only country for which figures are available
where the decline is relatively moderate, amounting to no
more than 10 per cent in spite of the serious falling off in
British exports.

These figures relate to the general volume of industrial
production, including all those industries for which it is
possible to compile adequate figures. It is perhaps worth
while to set beside them the separate indices for two highly

THE SLUMP IN EUROPEAN INDUSTRY

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512 ECONOMIC CONDITIONS IN EUROPE

important classes of manufactured goods — textiles and
machinery. In the case of textiles, output in both Germany
and Great Britain had been relatively well maintained ;
but it has of course to be remembered that in Great Britain
employment and production in the textile trades were
already at a low level before the world slump began, and
it should be further noted that there was a sharp recovery
in the volume of British textile production from 1931 to
1932, almost wholly as a result of the bonus to British ex-
ports which followed the departure from the gold standard.
The French textile industries, supplying to a large extent
luxury goods, fell off much more than the German or the
British ; and the decline was still more serious in the textile
trades of Poland and Czechoslovakia, these falls reflecting
the decreased purchasing power of the consumers in Eastern
and Central Europe.

In the case of machinery, indices are available for four
countries only. But the figures for these countries are of the
highest significance. Again it is Great Britain which shows
the smallest aggregate fall — 24 per cent ; but in this case
the maintenance of output cannot be attributed mainly to
the departure from the gold standard or to the new tariff
policy inaugurated in 1931-32, as the figures for 1932 are
substantially below those for 1931 and the previous years.
The explanation is to be found partly in activity in the
British electrical industry in connection with the construc-
tion of the new " grid " system, partly in the relative success
of the British motor trade in standing up against depression,
and partly again in the effects of the maintenance of the
general volume of consumers' demand in keeping the
demand for machinery and miscellaneous metal goods at
a not unsatisfactory level. But here again it must be remem-
bered that Great Britain had a large volume of unemploy-
ment in the machine-making industries before 1929.

France, with a fall of nearly a third in the volume of
machine production, stands next to Great Britain in her
success in resisting the slump ; but again a study of the
figures shows that in France demand was well maintained

THE SLUMP IN EUROPEAN INDUSTRY 513

up to 1931 and then showed a very sharp falling off, which
was still continuing in 1933. The two remaining countries,
Germany and Poland, both show an appallingly heavy
decline in the volume of machine construction. Polish
machine output has fallen since 1928 by 56 per cent, and
German by no less than 62 per cent. These figures of course
reflect directly the cessation of the great movement of
rationalisation and re-equipment with the aid of borrowed
capital which was taking place in Germany and to a less
extend in Poland before the withdrawal of America from
the European capital market.

It is unfortunately not possible to present corresponding
figures for other manufacturing industries ; but it is worth
while to set beside the above figures the statistics showing
the production of two commodities which are both vital
to the economy of the developed nations of Western Europe.
It will be seen from the accompanying table that the output
of coal in Europe stood at a monthly average of about 46
million tons for the eight chief producing areas in 1928,
and that in 1932 this monthly average had fallen to rather
under 37 J million tons. This decline is considerably less
in most countries than the decline in the general volume of
industrial production, the difference being largely due to
the maintenance at a relatively high level of the demand
for household coal and coal used in transport and public
utility services, and also in certain of the industries pro-
ducing consumers' goods. It will be seen that in this
case too the decline is considerably greater in Germany
than in either the United Kingdom or France ; for in
Germany there has been both a heavy falling off in the
coal-using industries and a serious decline in consumers'
demand.

The figures for steel naturally show a considerably
larger reduction than those for coal, in that a large pro-
portion of the output of steel is designed for use in the con-
structional trades, which are always the most seriously
affected by an industrial depression. Taking together the
eleven leading steel-producing countries in Europe, with

RR

514 ECONOMIC CONDITIONS IN EUROPE

.the exception of the U.S.S.R., we find that in 1928 their
average monthly production of steel was just under 4
million tons. In 1932 this average monthly production had
fallen to less than 2j million tons, though there was a small
rise in the final quarter of the year. Again the fall in output
was more serious in Germany than in any of the other
leading countries, as the table on page 5 1 1 shows. But
among the smaller producing countries, Poland and
Czechoslovakia showed a decline comparable in severity
with that which occurred in Germany. The paralysis in
the constructional industries of Central and Eastern Europe
is thus abundantly illustrated.

It is interesting to compare the incidence of the world
slump on European production, as measured by these
statistics, with the experience of the United States. In the
United States the index of general industrial production
fell between 1928 and the last quarter of 1932 by 41 per
cent — a larger fall than occurred in any of the European
countries v\ ith the exception of Poland. On the other hand,
in the case of textiles the fall in America between the same
dates was only 12 per cent ; but this was the result of a
sharp recovery in American textile output in the later part
of 1932, and for the year as a whole the fall in textile pro-
duction was 23 per cent. Even this last figure, however,
shows American textile output to have been maintained
better than that of any of the European countries with the
exception of Germany and the United Kingdom.

In the case of machinery, there is unfortunately no
comparable index available for the United States ; but the
American figures ol coal and iron production^ tell with
sufficient clearness the tale of prostration in the heavy in-
dustries. In 1928 the average monthly production of coal
in the United States was over 46^ million tons, but it fell in
1932 to under 27 million tons ; while for steel the fall was
enormously greater, from nearly 3$ million tons in 1928
and over 3^ millions in 1929 to under three-quarters of a
million tons in 1932. Europe had thus fared in the heavy
industries infinitely better than America, and had also done

THE SLUMP IN EUROPEAN

appreciably better on the whole in
general volume of industrial produc

The above statistics have through
periencc of the U.S.S.R., as this runs <
of the capitalist countries, at any
quarter of 1932. Thus, between 1928!
production in the U.S.S.R. rose, accordil
figures, by no less than 89 per cent ;
quarter of 1932 the rise exceeded 100 per
there is known to have been a falling off; but the figures for
the last quarter of 1932 are not yet available. Similarly in
the case of coal a monthly output of three million tons in
1928 rose to one of over 5^ millions in 1932, and the monthly
output of steel from 354,000 tons in 1928 to 482,000 tons
on the average of the first ten months of 1932. Of course
these figures reflect the intensive effort made by the
U.S.S.R. to carry through the rapid industrialisation of the
country under the first Five- Year Plan ; and Russia, start-
ing from a very low level of industrial production, was
naturally able, by applying all her energies to the increase
of production, to record a very large percentage increase.
But the fact remains that for several years in which produc-
tion over the rest of the world was falling at an unexampled
rate, the U.S.S.R. alone was able to go forward rapidly on
the basis of a planned economy under Socialist control.

Even if in 1 933 the process of Russian industrialisation
appeared to be suffering a setback, it is clear that this
tendency arose from quite different causes from those
operating in other countries ; for there can never be under
the Russian system any question of the lack of an adequate
demand for all the goods that Russian man-power can
produce, though it is of course possible for the Russians to
make mistakes by applying a disproportionate part of their
limited resources to certain kinds of capital equipment,
and it is arguable that they have done this in recent years
in the giant power-stations which they have installed. A
Russian, however, would probably reply that, even if
provision has been made for the generation of electricity

5l6 ECONOMIC CONDITIONS IN EUROPE

on a scale far exceeding present or immediately prospective
requirements, this is only reasonable foresight designed to
avoid the necessity for the reconstruction of plants in the
near future as industrialisation continues its rapid advance.
This argument may be open to question, or it may be held
that it has tye^n pushed too far in practice ; and there has
undoubtedly beg/some setback in Russia at the beginning
of the secdhdJfive-Year Plan. But the point is not that all
is going well in Russia, but that in as far as things go ill the
cause is to be found not in lack of markets but in lack of
skill and power to organise production under the totally
new conditions which the Russians have set themselves to
master at a prodigious pace.

It is possible to get some further light on the effects of
the slump in Europe by considering the amount of freight
traffic being carried over the various European railway
systems. This is shown in the accompanying table, which
again brings out, despite the serious financial plight even
of the British railways, the relative immunity of Great
Britain from the most serious consequences of the slump in
depressing the volume of internal trade. For here again the
decline is far more serious in Germany than in most of the
other countries for which statistics are available. Roumania,
thanks to the construction of new lines, shows an advance
in total freight traffic over the figures for 1928. But every-
where else the decline is very serious indeed, reflecting
directly both the fall in the volume of external trade and
the decline in the internal demand for commodities and
therefore in the standard of living of the people. The figures
of shipping clearances tell for the most part A the same
story. It is unfortunate that comparable figures are not
available for Germany for 1928 and 193-2. It is, however,
possible to get comparable figures for 1930 and 1932 ; and
these show an exceedingly heavy rate of decline, from
2,409,000 tons in 1930 to under 2 million tons in 1932.
The figures showing the amount and proportion of tonnage
laid up idle in the leading countries in the latter part of
1932 tell the same tale. France and United States had about

THE SLUMP IN EUROPEAN INDUSTRY 517

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518 ECONOMIC CONDITIONS IN EUROPE

30 per cent of their total tonnage laid up at these dates,
Poland 26 per cent, and Germany 22 per cent, as against
1 6 per cent in the case of the United Kingdom, although
even the British position was serious enough, with a total
of over 3 million gross tons out of use.

Enough has been said to show clearly the disastrous
effects which the world slump has had on the industries
of the leading European countries. This decline in industry
has of course reflected itself, as the corresponding decline
in agriculture has reflected itself in Eastern Europe, in
serious budgetary difficulties in all the industrial States.
For declining production at falling prices has meant every-
where a narrowing of profit margins and therefore a de-
creased yield of existing taxes, and especially of taxes
levied upon the incomes derived from profits. In the case
of taxes falling upon the rentier classes the position is some-
what different, since the proportion of the national income
falling to these classes has considerably increased as a
result of the drop in prices. Rentier incomes as a whole
have been comparatively well maintained ; for, despite the
widespread difficulties of the debtor countries, the amount
of absolute default on existing debts has been in most of
the industrial countries kept within fairly narrow limits,
and even the needy agricultural States have to a large
extent kept up their interest payments on their external
debts. Rentier incomes have indeed been reduced to a
certain degree by conversion operations carried through
by Finance Ministers under the favourable conditions
created by the fall in interest rates ; and the same result
has been secured by reborrowing at lower rates o^short-
dated commercial debentures and other loans. But these
reductions in rentier incomes have been by no means
sufficient to offset the relative advantages which rentiers
have gained as a result of the fall in prices. Accordingly,
rentier incomes have become for most countries an increas-
ingly important source of tax revenue, though there has
been surprisingly little attempt to impose any special
taxation upon them, despite the relative improvement in

THE SLUMP IN EUROPEAN INDUSTRY 519

their ability to pay. The special position of wage incomes
will be discussed later in this Part. It suffices to say here
that, while particular groups of wage-earners have doubt-
less gained as a result of the fall in prices, the general effect
of this fall upon wage incomes has been fully offset and in
some countries much more than offset by the extension of
unemployment and short time. It has therefore not been
possible, even apart from the resistance certain to be
offered by the wage-earners to attempts either to tax them
directly or to increase heavily the burden of indirect
taxation, to make budgets balance by additional taxation
levied either upon wage-earners or upon commodities of
necessary consumption, though the effect of rising tariffs
throughout Europe has undoubtedly been to transfer to
the general mass of consumers a considerable part of the
costs of the depression.

§ 9. THE GREAT INDUSTRIAL
COUNTRIES

So FAR we have been considering the effects of the
world slump upon the industrial countries, but it is clearly
necessary, apart from this, to attempt to give some sort of
picture of the industrial situation in Europe apart from the
abnormal influences exerted upon it by the world crisis.
For we are concerned with the economic situation in
Europe not only as it exists to-day at the bottom of the
depression, but as it existed in 1914 and as it might be
expected to exist again if the efforts of the world to bring
the depression to an end met with some real measure of
success. We must, then, look at the position of the leading
industrial countries of Europe on the eve of the world
slump, when, as we have seen, most of them had settled
down or appeared to have settled down on a basis of
stabilised currencies, and to be going forward with an
increase of productive activity corresponding to the
changed economic conditions of post-war Europe. The

52O ECONOMIC CONDITIONS IN EUROPE

leading industrial countries which it seems necessary to
consider in this connection are Great Britain, Germany,
France, Belgium, Holland, Italy, and for some purposes
Czechoslovakia. The first six of these countries, excluding
Czechoslovakia, for which no pre-war figures are of course
available, were responsible in 1913 for 45 per cent of the
total export trade of the world, and for over 50 per cent of
the world's net imports. In 1929, on the eve of the world
slump, their share in the world's exports had fallen to about
35 per cent, while their share in imports was about 41 per
cent. In the meantime the United States had increased its
share of world exports from ia£ to nearly^ per cent, and
of net imports from 8£ to 12 per cental therefor** rest of
Europe, excluding the U.S.S.R., ha<^pecia?Jced from a
share of 10 per cent to one of 13 per V^rm exports, and
from 12 per cent to 14 per cent in net imports. Meanwhile
the share of the U.S.S.R. had fallen from 4 per cent to less
than i £ per cent in net exports, and from 3^ per cent to not
much more than i per cent in net imports.

Among the leading countries there had been considerable
shifts in relative importance. Thus Great Britain had
actually increased her proportion of net imports from 15 to
over 1 6 per cent of the world total, but if trade with the
Irish Free State is excluded, her proportion remained about
the same. On the other hand, her share in net exports had
fallen from 13 per cent to under 12 per cent, or, excluding
trade with the Irish Free State, to less than u per cent.1
Germany had suffered a decline in her share of both im-
ports and exports, from 12.3 per cent to 9 per cent in the
case of imports and from 12.4 per cent to just undeV 10 per
cent in the case of exports. France too had lost, despite her
increased territory, with a fall roughly from y£ per cent to
6 per cent of the world total of imports, and 7 to 6 per cent
of world exports. Italy retained her share of both imports
and exports practically unchanged, while Belgium and

1 Trade between Great Britain and the Irish Free State did not count
as external trade before the war, and the foreign imports and exports of
the Iriiih Free State were then included in the United Kingdom totals.

THE GREAT INDUSTRIAL COUNTRIES 58!

Holland had both suffered considerable declines ; but most
of the countries registering a decline in their external trade
had been to some extent regaining their position during the
years immediately before the world slump.

If we analyse somewhat more in detail the composition
of the export trade of the leading European countries, the
immense dependence of most of the leading countries on
exports of manufactures at once becomes plain. Thus in
1929, of total British exports amounting to £729 million,
£563 million were accounted for by manufactured goods as
against £ 1 1 8 million for raw materials (largely coal) and
only £46 million for food and drink. Germany, out of total
exports valued at £660 million, exported £481 million's
worth of manufactures as against £143 million's worth of
raw materials and only £34 million's worth of food and
drink. France's total exports were valued at £403 million,
and these included £273 millions' worth of manufactured
goods, £79 million's worth of raw materials, and £48
million's worth of food and drink. Italy exported in all £161
million's worth of commodities, and of these over £100
million's worth were manufactures, £40 million's worth
food and drink, and £20 million's worth raw materials.
Czechoslovakia exported £89 million's worth of manu-
factures out of total exports of £124 million, and only £14
million's worth of food and drink and £2 1 million's worth
of raw materials.

These figures show to what an extent the more indus-
trialised countries depend on the sale abroad of manufac-
tured goods, whereas their imports consist to a very large
extent of foodstuffs in a raw state and of materials, including
some semi-manufactures, necessary for the carrying on of
their industries. It used to be held that, especially under
Free Trade conditions, each country would tend to develop
a range of industries corresponding to its special productive
opportunities, and that accordingly world trade would tend
to benefit buyers and sellers alike by promoting the produc-
tion in each country of those goods for which it enjoyed
the maximum comparative advantage. Tariffs, of course,

522 ECONOMIC CONDITIONS IN EUROPE

interfere to a considerable extent with these desirable
forms of specialisation ; but even apart from tariffs it is a
marked characteristic of the modern productive system
that each country which advances to the possession of a de-
veloped industrial system tends to direct its efforts largely to
the manufacture of the same types of commodities, so that
each of the highly industrialised countries is in fact trying
to sell in the world market very largely the same classes of
goods, and not different goods according to the different
productive advantages which it possesses. Each advanced
country depends in a high degree for the maintenance of its
exports on a comparatively narrow range of industries — iron
and steel, engineering, and textiles above all others — and
there is growingly keen competition to sell the products of
these industries in the less industrialised parts of the world,
as well as a tendency for each country to protect its home
market against the products of its rivals.

It is of course true that within this broad grouping of
industries there is room for a large amount of specialisation
upon particular products. It does not follow, because Great
Britain and Germany and Belgium are all trying to export
steel, that they are all producing exactly the same kinds of
steel ; and especially in the higher qualities of production
a considerable degree of specialisation does exist between
one country and another. But over an increasingly wide
range of products there is competition in the production
and marketing abroad of exactly the same types of goods ;
for any country which desires to carry through a process of
advanced industrialisation necessarily sets itself to develop
many of the same products, and the differential advantages
which in the nineteenth century were held to count for so
much in determining the forms of national specialisation
are in practice nowadays of a good deal less account than
they once were. For it is often possible artificially to repro-
duce, as in the case of the cotton industry, the atmospheric
conditions which once gave predominance to a particular
area, while the evolution of machine technique and the
development of supplies of raw materials unworked in the

THE GREAT INDUSTRIAL COUNTRIES

523

524 ECONOMIC CONDITIONS IN EUROPE

nineteenth century have combined with the improvement
of transport to make it easier to carry on a wide range of
industrial production in almost any country which possesses
a seaboard and adequate supplies of a few primary materials
in reasonable proximity to the sea.

In these circumstances, international competition be-
tween the industrial countries necessarily becomes more
acute, and the differences between them tend to disap-
pear, or at least are narrowed, while the contrast between
their position and that of the primary agricultural countries
becomes sharper with the advance of industrialisation. The
truth of this can be seen in broad outline by comparing the
position in production and export of certain of the leading
commodities of the great industrial nations of Western and
Central Europe. Take first the case of iron and steel.
Germany, France, and Great Britain are all important steel-
producing countries, and of the lesser Powers, Belgium
also occupies an important position in this trade. Every
highly industrialised country in the modern world in-
evitably desires to produce steel on a substantial scale,
although some countries are unable to do so on a sound
economic basis owing to the lack of the necessary materials
— especially coal. France, before 1918, was fatally hampered
in this respect by lack of both coal and iron ore ; but the
acquisition of Alsace-Lorraine, and temporarily of the Saar
coalfield, has raised her to a position of practical equality
in the world steel trade with her pre-war rivals. These
four countries— the United Kingdom, Germany, France,
and Belgium (with which Luxembourg must ndw be in-
cluded in view of the Customs Union concluded at the end
of the war) are in sharp competition in the steel markets of
the world. Three of them consume at home the greater
part of the steel which they produce ; but the fourth,
Belgium, is under the necessity of exporting the greater part
of her output owing to the narrow limitations of her own
home market. In 1929 these four countries shared among
them in not unequal proportion the greater part of the
steel trade of the world ; for, although the United States

THE GREAT INDUSTRIAL COUNTRIES 525

produced almost as much steel as ail Europe put together,
by far the greater part of this steel was consumed at home,
and America was of relatively little importance in the
export market.

In 1929 Germany led the way in European steel output
with an export of over 5 million tons. Belgium came next
with 4J millions, and France and the United Kingdom had
both over 4^ millions, as against less than 2$ million tons
exported by the United States. These four countries were
largely producing the same types of commodities and
attempting to sell them in acute rivalry in the markets of
the world. Three of them, Germany, France, and Belgium,
belonged to the Continental Steel Cartel, and had entered
into an agreement among themselves and with certain of the
smaller producing countries for a limitation of the total
quantities produced in accordance with a quota system,
allotting a definite maximum output to each national
group, with fines for exceeding the permitted quantities.
Great Britain remained outside the Cartel, not so much as
a matter of principle as because the British manufacturers
had been unable to reach any satisfactory agreement with
their Continental rivals concerning the quota which ought
to be allowed them. The British manufacturers claimed
a virtual monopoly of the Empire markets, but wished to be
free to export a considerable quantity of steel to Europe as
well, whereas the Continental manufacturers, while they
were prepared to grant Great Britain her predominant
position in the British Empire, wished drastically to limit
the quantities ol British steel which could be exported to
the markets of Europe. In all these countries productive
capacity was in 1 929 considerably ahead of actual output,
for the steel industry v\as among those most expanded in
each country as a result of the war, and the territorial
readjustments after 1918 had the effect of inducing each
country to try to build up within its own territories an
extensive and self-sufficing steel industry of its own. This
applies especially to Germany, which, finding herself de-
prived of a large part of her pre-war resources in the iron

526 ECONOMIC CONDITIONS IN EUROPE

and steel trades, set to work to create a new industry with
the aid of the most modern processes of production on a
scale fully commensurate with that which had existed
within her pre-war territories.

This redundancy of productive capacity naturally accen-
tuated the competitive struggle between Great Britain and
the groups belonging to the Continental Cartel, and in
this struggle the lower wage rates prevailing on the Con-
tinent, and especially in Belgium and France, acted to the
detriment of the British producers, especially as post-war
developments of technique had tended to reduce the quali-
tative advantage previously possessed by the general mass
of British steel over the Continental product. Great Britain
still retained to a large extent her supremacy in the manu-
facture of the most highly priced special steels ; for in these
her qualitative advantage remained almost intact. But in
the cheaper types of steel she was definitely losing ground,
especially in relation to Belgium. Before the war, in 1913,'
Belgian exports of steel, not including those from Luxem-
bourg, for which no separate figures are available, only
amounted to i£ million tons against the 4^ millions of
1929, whereas the British exports had fallen from almost
5 million tons in 1913 to 4,380,000 in 1929.

There was keen competition between the leading indus-
trial countries, not only in the various branches of iron and
steel manufacture, but to an equal extent in the machine-
making trades which use steel as their principal material.
In this field, too, the advance of modern technique has
tended to reduce the differential advantage possessed by
this or that country for the manufacture of particular types
of product, and international competition to sell the same
classes of goods has become more intense. In 1929, Ger-
many, Great Britain, and France were the leading exporters
of machinery, with Belgium, Sweden, and Holland coming
next, but a long way behind. The German export of
machinery, other than electrical machinery, reached in
1929 a total of 700,000 tons. Great Britain came next
with over half a million tons, and France third with over

THE GREAT INDUSTRIAL COUNTRIES 527

200,000. Belgium and Luxembourg exported over 80,000
tons, Sweden 58,000, and Holland 54,000. In electrical
machinery Great Britain occupied the leading position,
closely followed by Germany, with Sweden and Switzer-
land next, then France and then Belgium. Great Britain's
export in 1929 was not far short of 40,000 tons, Germany's
about 35,000, that of Sweden and Switzerland about 1 1,000
in each case, France's 6,500 and Belgium's 3,000. Once
again, while each country had to some extent its own
specialities, these exports were directly competitive over a
very wide range of goods, and the same considerations as
in the case of steel largely applied, in that Great Britain's
comparative advantage was tending to some extent to dis-
appear except in the range of the highest quality products.

Or take again motor-cars, a field in which the entire
European output is dwarfed by that of the United States,
and European exports are exceedingly small even in relation
to the volume of European production. As a producer,
France in 1929 led the way among the European countries,
closely followed by Great Britain, with Germany a bad
third and Italy a long way behind. In exports, France
also took the leading place, followed fairly closely by Great
Britain, with Italy third at a considerable distance and
Germany relatively unimportant. In all these cases by far
the greater part of the output was actually marketed within
the country of origin, and British sales for export were very
small indeed in the European market, which was mainly
filled by the United States, France, and Italy.

The chemical industry was a further field of intense
competitition between the leading European Powers. In
this case there seem to be no satisfactory figures on a
comparable basis for any year later than 1925. In that year
Germany had the largest share in the world trade in
chemical products — 23 per cent of total world trade as
against 28 per cent before the war, whereas her share of
world production had fallen from 24 per cent to 17 per
cent. The United States came next with 16 per cent
of world exports as against only 10 per cent before the

528 ECONOMIC CONDITIONS IN EUROPE

war ; and the United States share in world production had
actually risen from about a third to almost half of the total.
Great Britain stood third with 14 per cent of total exports
as against 16 per cent before the war, but France was only
a very little behind with an export percentage of 13 as
against 10 per cent in 1913. It will be seen that the British
share in world exports, like the German, had actually
fallen ; but this fall had been accompanied by a substantial
improvement in the British position in the matter of dye-
stuffs. Before the war, Germany had more than four-fifths
of the total production of aniline dyes, whereas in 1925
her share was less than one half. Great Britain had mean-
while increased her percentage of the world total from 5
to 12, and France hers from i per cent to 9 per cent. In
view of the increasing importance of the chemical industries
from both an industrial and a military standpoint there has
naturally been keen rivalry to develop them within each
national area ; and special measures of protection, of which
the British Dyestuffs Act is an example, have been instituted
with this object. In the sphere of chemical as well as in that
of metal goods, productive capacity is a long way ahead of
world consumption, so that in this field too the various
countries which are largely producing the same types of
products are in keen competition one with another.

So much for the group of trades usually known as the
heavy industries. Let us now turn to the textile trades,
as the outstanding example of international competition in
the sphere of consumers' goods. The textile trades have
declined in relative importance in the economy of the lead-
ing industrial nations since the rise of the metal industries
during the past half century ; but they still occupy a posi-
tion of very great prominence, and despite the sharp fall
in British exports of cotton goods, these are still by far the
largest single item in the total of British exports. Before the
war Great Britain occupied a position of practically undis-
puted pre-eminence in the world trade in cotton piece goods,
her exports of which far exceeded those of all the other
European countries put together. Even in 1929 she retained,

THE GREAT INDUSTRIAL COUNTRIES 529

though to a reduced extent, her position of suprem-
acy, with an export of over 8,000 million square yards
of piece goods as against i ,000 millions each exported by
Italy and France, her two nearest rivals. But there had
been a sharp reduction in the total volume of British ex-
ports. This was due to a considerable extent to the rise of
cotton production in the Far East, and especially in Japan.
During the war the British cotton trade was largely shut
down, owing to the impossibility of affording tonnage
either for the supply of necessary raw materials or for ex-
ports on the old scale, and also on account of shortage of
labour. During this temporary absence of British exporters
from the Far Eastern market, the production of cotton
goods for domestic use was extended very greatly in both
India and China ; and Japan not only equipped herself
for supplying most of her own requirements, but also em-
barked upon an active policy for the expansion of her
exports. Consequently, when the British producers at-
tempted to re-enter the markets which they had lost, they
found themseves confronted with the competition of Far
Eastern production, based on exceedingly ill-paid labour
working with the aid of the most up-to-date technical
machinery. Man for man, the British cotton operative re-
mained more productive than his Far Eastern rival ; but
in the cheaper classes of goods the superiority of Great
Britain in terms of costs had been so narrowed as to make
it increasingly difficult to compete with the low-wage pro-
ducts of the Far Eastern countries, especially when, as in
Japan, exporters received the active aid of the Govern-
ment. Under these changed conditions a substantial part
of the pre-war market could not be regained, and in the
years after the war the continued expansion of Far East-
ern production menaced the Lancashire cotton trade to
an ever-increasing extent. At the same time, European
countries, intent on expanding their production, raised
their protective duties in the interests of home manufac-
tures ; and this rendered more difficult the access of
British goods to the Continental markets, while production

53O ECONOMIC CONDITIONS IN EUROPE

in the United States was also increasing fast, mainly for the
fulfilment of domestic needs, for even in 1929 the United
States remained quite unimportant as an exporter of cotton
goods.

The raising of tariffs in Europe was, however, far more
important in relation to the wool and worsted trades than
to the trade in cotton goods ; for the great bulk markets
for cotton piece goods lie outside Europe, whereas in the
case of woollens the European market is of primary import-
ance. Great Britain remained in 1929 the principal country
in the export trade for the leading types of woollen goods.
In the sphere of woven goods of wool and worsted her
exports were considerably more than twice as large as
those of any other country, with Germany and France as
her nearest rivals, and Italy and Czechoslovakia some
further distance behind. But in the trade in semi-finished
materials, wool tops and yarn, though Great Britain
occupied the leading position, France was not far behind
her, and Germany and Czechoslovakia were also of sub-
stantial importance. All these countries, as well as the
smaller European producers, had adopted systems of tariff
protection in the interests of their own industries, and they
were all in keen competition to export their goods to the
markets of the agricultural countries. The exports of the
different countries were not indeed entirely competitive,
both France and Great Britain concentrating to a consid-
erable extent on the finer qualities, whereas Germany
and Czechoslovakia were more concerned with the trade in
the cheaper classes of goods. In the artificial silk Trade, there
was also sharp rivalry among much the same group of
countries, Great Britain, Italy, France, and Germany all
competing for a share in the European as well as in the
world market in this growingly important form of textile
production.

The purpose of this analysis of certain of the major in-
dustries of Europe has been to bring out the growingly
competitive tendency of modern industrial countries.
Internally the tendency in each country has been away from

THE GREAT INDUSTRIAL COUNTRIES 53!

unregulated competition and towards closer forms of com-
bination among the different producers, with the object of
regulating both output and prices ; but, in the international
field, competition has become more intense as each country,
on reaching an advanced stage of industrial development,
has equipped itself with much the same range of industries
and entered into the world market with directly competi-
tive goods for sale. It is perfectly true that this intensifica-
tion of international competition has led in a number of
trades, notably steel, to the development of international
cartels between rival national groups of producers, and that
sometimes large combines have been created directly upon
an international basis, with affiliated organisations in
each country for the exploitation of that particular market.
This tendency may in the long run considerably limit the
competitive character of international capitalism. But it
is quite a mistake to suppose that international capitalist
combination has yet in most industries reached such a
point as seriously to limit national rivalries or competition
between rival national groups of producers in the world
market. Despite the counter- tendency towards international
combination, the general movement has been in the direc-
tion of intensified competition on a national basis, with an
increasing element of support from each national State
for its own producers. Indeed, the tendency towards inter-
national combination has arisen only because of the
adverse effect on the profits of the various national groups
of unregulated competition in the world market. It is
therefore a sign of the strength of the competitive tendency
and a reaction to it, and by no means a sign that Capitalism
is of itself becoming progressively more international.

How, indeed, could competition fail to be intensified in
face of the influence of technical invention on the industrial
systems of the leading countries ? If each country sets out to
produce much the same classes of goods, and if the im-
provement of technique over the world as a whole is such as
to give a great advantage in respect of cost to large-scale
production and to make possible the creation of huge

532 ECONOMIC CONDITIONS IN EUROPE

producing plants with a capacity considerably ahead of the
total consuming power of the world market, it is inevitable
that the national groups of producers, each desirous of
taking the fullest possible advantage of these productive
opportunities, should compete more and more aggres-
sively one with another — at least up to the point at which
they find that a continuance of competition is likely to drive
prices down to a ruinous level, even in face of the economies
that they have been able to achieve by the application of
the newest productive methods. For it is characteristic of
these new methods of large-scale production that, \\hile
the new factories can produce far more cheaply than their
older rivals as long as they can be kept working up to their
full capacity, as soon as they fall below this capacity costs
of production in them rapidly increase. This happens
largely because modern plants are designed in relation to
a definite optimum output, so that if they produce either
more or less than this some of the advantages of their
efficiency are lost ; and it is also because their equipment
with heavy machinery of a very expensive sort makes the
capital costs of constructing them very great. These
capital costs have to be met out of the selling price of the
product ; and they can be kept down only if they can be
spread over a very large quantity of output. If, then, in the
producing countries taken together, the total productive
capacity is considerably ahead of the total \\orld demand
at the prevailing prices, and if, further, efficiency does not
differ very greatly from one country to another, it follows
that, in default of agreement, the trade is likely to be so
shared out as to keep the industry of each country working
at an uneconomic level — unless indeed the producers in
a particular country are able so to press down the wages
of their employees as to gain a comparative advantage in
terms of costs, even if they have no real superiority in
efficiency.

Under these circumstances strong inducements arise for
the rival national groups of producers to get together and
try to reach some sort of accommodation. But even the case

THE GREAT INDUSTRIAL COUNTRIES 533

of steel, in which this has been done, serves to illustrate the
extreme difficulty of making a durable working agreement
of this sort. There is almost certain to be continual quarrel-
ling over quotas and allocation of markets, even in so com-
paratively simple a case as that of steel, while in most in-
dustries the far greater diversity of the products renders it
much harder to draw up and apply any system of quotas
at all. Consequently in most industries competition between
national groups of producers and exporters remains in
force, comparatively little affected by those tendencies to-
wards international cartels or agreements which have
manifested themselves in those branches of the heavy
industries where products are most standardised, and output
most easily measurable.

In default of international combination among the
national groups of producers, it becomes highly important
to each national group to retain to the fullest possible
extent a monopoly in its own home market ; and the very
difficulty of arriving at international agreement is therefore
one of the factors which tend to increase the pressure for
protective tariffs in the interests of the home manufac-
turers. But protective tariffs, while they may be of con-
siderable advantage to industries whose home markets are
able to absorb a high proportion of their total output of
a particular class of goods, can do little for industries, like
the British cotton trade, which have been accustomed to
sell the greater part of their total output in foreign markets.
Under these circumstances industries highly developed for
purposes of export, and countries largely dependent upon
such industries, suffer relatively to those which have not
pushed industrial specialisation to so advanced a point.

In view of what has been said about the similarity of the
productive systems and of the exports of the leading indus-
trial countries, it is perhaps worth while to set out by way of
a table a very rough statement of the composition of the
export trade of certain of the leading countries according
to the values of 1930. The figures given on page 523 show
the values of certain of the main classes of exports as a

534 ECONOMIC CONDITIONS IN EUROPE

percentage of the total value of each country's exports in that
year. It will be seen that in Great Britain, Germany, France
and Belgium — that is to say, in the four most industrialised
countries — the two groups of metals and textiles occupied
a predominant position, but there is some difference in their
relative importance in the various countries. Thus, in
Great Britain metals and textiles stand about on an
equality, whereas in Germany and Belgium metals are
much more important than textiles, and in France, as also
in Italy and Czechoslovakia, this position is reversed.
Next in importance comes in the leading countries the
chemical group. This is most important in Germany and
France, but substantial in Great Britain and Belgium as
well, whereas in the industrially less developed countries,
Italy and Czechoslovakia, this group of exports is of
smaller relative importance. In the case of Poland, which is
industrialised only in a very minor degree, metals stand
first among the manufactured exports, and textiles second.
But both these groups are still small in relation to the
exports of coal and agricultural products. Figures for the
United States, given for purposes of comparison, show
that there too the metal group now stands easily first ; but
after metals, the most important exports of the United
States are foodstuffs, raw cotton and oil, and American
manufactured exports are still of relatively little importance
save in the metal and engineering industries.

Naturally, all the most highly industrialised countries,
with the exception of Germany, show an excels of imports
over exports ; for these are the countries which have had
time to grow wealthy on a basis of industrialisation, and to
build up for themselves by the export of capital claims to an
annual revenue from abroad. Such a situation normally
expresses itself in what is sometimes called an " adverse "
balance of trade. Germany alone among the advanced
countries of Europe has built up for herself in recent years
a surplus of exports ; and, as we have seen earlier, she has
achieved this only by means of a drastic curtailment of
imports at the expense of her domestic standard of life —

THE GREAT INDUSTRIAL COUNTRIES 535

a measure forced upon her partly by the exaction of
reparations, but to an even greater extent by the loss of her
pre-war foreign holdings of capital and the magnitude of
her post-war borrowings for purposes of economic recon-
struction. Of the remaining countries Great Britain has by
far the greatest excess of imports — five times as great in
1929 as that of any other European country. Great Britain
was able, up to the coming of the world slump, to sustain
this enormous excess of imports partly because she had by
far the largest holdings of capital abroad, and partly
because she derived a large net revenue annually from her
mercantile marine, and from the services performed by the
City of London in the financing of world trade. Italy,
which had the next largest excess of imports in 1921, was
only able to balance her payments by a considerable net
import of capital, while France and Holland, which stood
next in excess of imports, were both countries owning a
large amount of capital abroad. In the case of France, the
excess of imports was far less than the actual balance of
current payments would have allowed ; and the account
was being squared by the deposit of considerable sums of
French money abroad, and also by the accumulation of
gold in the Bank of France. Apart from Germany, the only
country at all advanced in industrialisation which pos-
sessed a surplus of exports was Czechoslovakia, and in this
case the export surplus was so small as to be of little signi-
ficance. Czechoslovakia had roughly a balanced industrial
system in respect of her external claims and payments. The
U.S.S.R. which, owing to large exports of wheat and
timber, had in 1929 a small export surplus, had converted
this by 1931 through short-term foreign credits into a
considerable surplus of imports. But it is also noticeable that
several of the less developed countries which had in 1929
a surplus of imports had by 1931 so reversed the position as
to have an export surplus instead. This applies to Poland
and to the group of less advanced countries in South-
Eastern Europe.

536 ECONOMIC CONDITIONS IN EUROPE

§ 10. THE STRANGLING OF EUROPEAN
TRADE

MUCH ATTENTION has been drawn to the disastrous
effects of the tangle of restrictions on trade which country
after country has built up in the years since 1929, and more
especially during die past two years. This restrictive
policy has been in the circumstances practically inevitable,
in that each country has found itself faced with a set of
circumstances in which there has seemed to be no alterna-
tive to a purely nationalist policy of sauve qui peut. It is of
course quite true that the world was seriously afflicted by
economic nationalism even before the coming of the world
slump. When the first World Economic Conference met in
1927 the chief object before it was that of removing or
reducing restrictions on world trade which had already
risen to heights unparalleled in pre-war times. Even then,
European tariffs were in most cases far above the tariffs
which existed before the war, and many countries were
operating side by side with their tariffs systems of import
control and regulation designed both to protect their
domestic industries and to improve the balance of trade, or
even, in certain instances, to discriminate against the pro-
ducts of countries with which they were on bad terms.

But in 1927 most of the delegates to the World Economic
Conference regarded these restrictions rather as signs of the
continued dislocation arising out of the war tl^m as indica-
tive of the considered policy of post-war Europe. The pro-
cess of returning to the gold standard and of stabilising the
currencies of the post-war nations was not yet complete ;
and as long as currencies remained unstable the work of
building up the post-war system of international economic
relationships could hardly be carried through to a satis-
factory conclusion. The World Economic Conference of
1927 was conceived as the direct successor to the Genoa
Conference, which had dealt with the stabilisation of cur-
rencies and the return to the gold standard. It was to be

THE STRANGLING OF EUROPEAN TRADE 537

an important stepping-stone towards the re-establishment
of normal trading relations between the nations of the
world on the basis of the work already done for the re-
establishment of normal financial relationships. The various
quotas, restrictions and embargoes which then existed were
thought of as in process of disappearance as European con-
ditions became more stable, and the Conference actually
adopted a draft convention aiming at the complete abolition
of all restrictions and embargoes on the import and export
of goods except by way of tariff duties and in the excep-
tional case of State monopolies. This convention was in
fact never brought into force ; for it failed to secure the
required number of ratifications. But most people supposed
in 1927 that even if embargoes and quotas could not be
at once altogether swept away they were destined for the
most part to disappear before long.

Moreover, the World Economic Conference of 1927
strongly recommended an international effort for the
reduction of tariffs, and the Tariff Truce negotiations
initiated by the British Labour Government in 1929
followed logically upon the work of the Conference in this
field. Between 1927 and 1929 the actual accomplishment in
the reduction of tariffs was almost nil ; but it is probable
that the effect of the Conference of 1927 was to slow down
the growth of economic nationalism by preventing tariffs
from rising during the next two years as fast as they would
have risen if it had not been held. Even as late as 1929
most people thought that, currency stabilisation having now
been virtually completed by the adhesion de jure or de facto
of practically all the important trading nations except
China to the gold standard, most countries would speedily
go on to the establishment of more liberal trading relation-
ships on the stable financial basis thus ensured.

The coming of the world slump swept away all these
hopes of a re-establishment of world Capitalism on the
basis of an economic liberalism approximating to that of
the nineteenth century. Very soon after the Wall Street
crash of 1929 tariffs began again to rise sharply, and the new

538 ECONOMIC CONDITIONS IN EUROPE

development was most marked in the case not of manu-
factured goods but of agricultural products. For the distress
of the agriculturists led in one country after another to
special measures designed to raise the domestic prices of
cereals and other foodstuffs beyond the world level, which
was set by conditions in the exporting countries of the
New World. Before long, tariffs on manufactures also began
to rise again ; and as the crisis deepened, especially in
I93i> tariffs began to be used in a new way and to be
reinforced, as we have seen earlier, by all manner of new
restrictions on the importation of goods. After September
1931, when the world had ceased to have any effective
common monetary standard, there was added to high tariffs
and restrictive embargoes on trade the new factor of a far
more drastic control of foreign exchange, through the cen-
tralisation in many countries of practically all foreign ex-
change transactions in the hands of the Central Banks.

All these measures, from tariffs to the control of foreign
exchange, were deliberately used by countries with the
object of sheltering themselves from the effects of the world
depression, and more specifically of improving their
balances of payments in relation to other countries.
Normally, a protective tariff, or any substitute for it in the
form of a regulation of imports by licence or quota, is
designed to foster the production in a country of goods
that would otherwise be imported from abroad. But under
the new conditions this object became for many countries
secondary, and was replaced, or rather complemented, by
the quite different object of preventing imports, irrespective
of the possibility of manufacturing the goods in question
at home. The object was now to sell more exports and to
buy less imports in order to have a balance available for
meeting external claims, above all the service of the growing
burdensome external debts, as well as to protect home
producers against the consequences of sharply falling world
prices. Of course in practice these two essentially different
objects could not be kept distinct, in that a protective
tariff may tend to restrict imports more than exports and

THE STRANGLING OF EUROPEAN TRADE 539

thereby to improve the trade balance, while a tariff
designed to keep out imports in the interests of the trade
balance may also stimulate to some extent production of
the excluded goods at home. But, though the two aims of
the policy pursued during the crisis intermingle, it is
important to keep the distinction between them in mind.
Protectionism became Protectionism run mad because its
objects were no longer merely Protectionist in rhe familiar
sense of the term.

It is unfortunately quite impossible to make any quanti-
tative measurement of the new restrictions on trade which
have developed since the beginning of the world slump.
In 1927, for the purpose of the World Economic Conference,
an approximate measurement was made of the changes in
tariffs which had taken place between 1913 and 1925. This
showed that in some countries the ad valorem incidence of
the general rates of duty in force was substantially lower
than before the war, largely as a consequence of the higher
prices prevailing for goods on which the duty was levied
at a fixed money rate. Thus both France and Denmark had
in 1929 tariff levels lower by 30 per cent on the average
of their ad valorem incidence than the tariffs in force before
the war, while in Sweden there was a fall of 20 per cent,
and in Austria one of 35 per cent. On the other hand, the
German tariff was up by 25 per cent, theDxitch, Hungarian,
and Spanish tariffs by 30 per cent, the Belgian tariff by
35 per cent, and the Swiss tariff by no less than 70 per cent.
These percentages of course do not indicate the absolute
height of the tariff barriers imposed by the countries
mentioned. For a comparatively small increase in tariff
rates means a large percentage increase in the«rates of low
tariff countries such as Switzerland. Absolutely, the highest
tariff in 1925 was that of Spain, which was estimated at
44 per cent ad valorem on the average of all classes of imports.
As against this, the French and Austrian tariffs were only
12 per cent, and the German 15 per cent, while the Danish
tariff was as low as 6 per cent, and the Dutch and British
only 4 per cent, the latter of course then consisting of

54O ECONOMIC CONDITIONS IN EUROPE

relatively high duties on a narrow range of goods. The
tendency towards high tariffs in the new countries of
Southern and Eastern Europe can, however, be seen from
the fact that the tariff levels of Hungary, Poland, and
Yugoslavia were all estimated as averaging 23 per cent
ad valorem, and that of Czechoslovakia as averaging 19
per cent. Italy, with a 17 per cent tariff, had maintained
the average ad valorem incidence unaltered from what it
had been before the war. It should, however, be borne in
mind in considering these figures, which relate to 1925, that
in 1926 the French tariff was raised by two increases, each
of 30 per cent, in view of the depreciation of the franc.

Up to 1925, and indeed for some time afterwards, the
increase in tariff rates had been mainly applicable to
manufactured goods. If the average ad valorem rates for
manufactures alone are considered, instead of the rates
averaged over all classes of imports, both the post-war
tariffs of Europe and the increase in relation to the pre-war
levels work out a good deal higher. Thus for Germany,
whereas the general rate of increase was only 25 per cent,
the rate for manufactured goods only was higher by 54 per
cent than before the war. For France, duties on manu-
factured goods were higher by 5 per cent, as compared with
a fall of 30 per cent in the duties on all classes of goods,
even before the additional increases of 1926. In Belgium the
rise was 67 per cent for manufactures as against 35 per cent
for goods of all sorts ; while Hungary was taxing manu-
factures at a rate 50 per cent above that of 19^3 compared
with 30 per cent for all goods, and Italy had raised her rates
on manufactures by 22 per cent, while admitting foodstuffs
and raw materials at lower rates than before the war.

Between 1925 and 1929 a substantial further rise oc-
curred. Holland and Great Britain, both starting from a
very low level, more than doubled their average rates of
duty on goods of all classes. Denmark raised rates by more
than two-thirds, and Belgium by one half. The French rates
rose by more than a third, and the German by nearly a third,
and Switzerland and Sweden also showed small increases.

THE STRANGLING OF EUROPEAN TRADE 541

On the other hand, the Italian, Polish, Yugoslav, Czecho-
slovak, and Hungarian tariffs all fell to some extent, and the
Spanish tariff was nominally reduced to a considerable
extent ; but in this case the reduction was in fact offset
by special additional charges of various kinds. It is not
possible for the years between 1925 and 1929 to calculate
accurately the relation between the general rise in tariff
levels and the rise on manufactured goods taken alone. But
it seems clear that during these years the upward movement
of agricultural tariffs was even more marked than the rise
in the rates charged on other classes of commodities.

After 1929, as we have seen, tariffs rose faster still. But
it is neither possible, nor would it be of much use, to measure
their rise by any attempt to continue to the present time
the tariff level indices compiled for the use of the World
Economic Conference of 1927. For after 1929 the absolute
height of a country's tariff or the change in its tariff rates
no longer measures with any degree of accuracy the extent
of the barriers which it places in the way of imports.
Especially after the abandonment of the gold standard by
a considerable group of countries, the rates payable on
imports were in many cases subject to additions designed to
offset the effects of currency depreciation in the exporting
countries ; while direct restrictions and embargoes, and
even more in the countries of Central and Eastern Europe
the control of foreign exchange, came to be instruments of
restriction far exceeding in their effects even the high tariff
rates which were now in force. There wras in addition a
growing tendency towards tariff discrimination according
to the origin of the imported products, though this tendency
was kept in check to a great extent by the operation of the
Most Favoured Nation Clause, which appears in a very
large number of commercial treaties, including practically
all the treaties concluded by Great Britain and the United
States. For the Most Favoured Nation Clause secures that
any concession made 10 a particular country shall be ex-
tended, if it takes the form of a tariff preference, to all
countries which have commercial treaties including the

542 ECONOMIC CONDITIONS IN EUROPE

Clause with the country granting the preference. This of
course does not prevent discrimination in the form of a
higher rate of duty at the expense of a country with which
there is no commercial treaty, or none embodying the Most
Favoured Nation Clause ; but it has served to limit the
extent to which discrimination can be carried.

It is, however, highly questionable whether, in the cir-
cumstances of Europe to-day, this check on the power to
discriminate has in practice been a good thing. For, while
the Most Favoured Nation Clause has a liberalising in-
fluence in extending to a wider range of countries any
concession made in a particular bilateral treaty by one
country to another, the mere fact that this is so may prevent
countries from making actual tariff concessions which they
would be prepared to make if these concessions could be
confined exclusively to their mutual relations. Again and
again it has been suggested that the best hope of escape
from the existing regime of high tariffs in Europe lies not in
an attempt to get countries to reduce their general tariff
rates for the benefit of all nations, but rather in the con-
clusion of bilateral or multilateral commercial treaties
between neighbouring countries which have a great deal
to gain from freeing their mutual economic intercourse.
This applies especially to the new States created by the
Peace Treaties ; for in many cases the frontiers of these
States, drawn primarily in relation to ethnical factors, cut
clean across previously unified economic areas, and the
pursuit of purely nationalist tariff policies by the separate
countries results in serious economic loss through the dis-
location of established industries and the added costs of
production where raw materials or semi-manufactured
goods have to pay duty on passing across a national
frontier. If, for example, the Danubian Slates, or some of
them, could be induced to modify their existing tariffs so
as to encourage trade among themselves, even perhaps
ultimately to the point of constituting a complete Customs
Union, this would obviously minister to their collective
prosperity and increase their collective power in the

THE STRANGLING OF EUROPEAN TRADE 543

European economic system. Or if, again, the Scandinavian
countries, or any other neighbouring groups, could agree
to modify their internal tariffs, even without altering the
degree of Protection accorded to their combined industries
in relation to the outside world, this could be made the
means of improving the economic condition of their own
peoples to the advantage of the world as a whole.

In practice, however, any attempt to negotiate a bilateral
or multilateral arrangement on these lines between a group
of countries at once leads to objection on the part of those
countries which use the Most Favoured Nation Clause as
an instrument of international economic bargaining. During
the past few years several promising attempts at mutual
tariff reduction, or at the conclusion of arrangements
designed to facilitate the exchange of goods between
neighbouring countries, have been brought to nothing by
the objection of other powers to any departure from the
strict letter of the Most Favoured Nation Clause. Great
Britain has taken a prominent part in the raising of objec-
tions on this ground ; for the traditional bargaining asset
of British commercial policy has for a long time been the
negotiation of commercial treaties based on Most Favoured
Nation treatment. As long as Great Britain was, to all
intents and purposes, a Free Trade country, she had a
strong claim to demand the admission of her goods into all
markets on the most favourable terms consistent with the
national attitude of the importing country — that is to say
with its determination to protect any or all of its own
industries. But when Great Britain became not merely a
Protectionist country, but a country with a high protective
tariff based on preferential treatment for her own Domin-
ions and Colonies, the force of her old arguments for Most
Favoured Nation treatment largely disappeared, and the
sole ground on which she could base a continued claim for
such treatment came to be her economic power in the
world market.

It seems clear that under these conditions no Protec-
tionist country can reasonably stand in the way 9 those

544 ECONOMIC CONDITIONS IN EUROPE

neighbouring countries which are prepared to conclude
bilateral or multilateral treaties among themselves. The
Most Favoured Nation Clause is bound in the near future
to be modified ; and there is much to be said for the view
that the agreement to modify it is much the most effective
step that can be taken towards the reduction of world tariffs.
For, with Europe in its present condition, any frontal
attack upon high tariffs, or for that matter upon the other
forms of restriction which stand even more than tariffs in
the way of an expansion of world trade, is practically
certain to fail, whereas there might be a real chance for the
conclusion of arrangements for the freer movement of
goods between neighbouring countries. The past two years
have, however, afforded ample evidence of the difficulties
in the way of making effective progress along these lines.
First the attempt of the Scandinavian countries to negotiate
mutual arrangements among themselves for economic
consolidation and a mutual basis for tariff relations
reached towards the end of 1 930 the favourable point of a
positive though limited agreement, and a convention was
signed at Oslo by the representatives of Denmark, Holland,
Norway, Sweden and Belgium, which both stabilised
mutual tariff relationships and provided for the notification
of any suggested changes in tariffs in the future by each of
the signatories to the rest. This seemed to be a favourable
beginning for the attempt to build up a system of multi-
lateral arrangements between particular countries. But the
next stages of the process afford far less ground for satisfaction.
With the encouragement of France, the mainly agri-
cultural countries of Eastern Europe set about considering
the possibility of mutual trade arrangements designed to
enable goods to pass more freely within their combined
frontiers. But at an early stage very serious difficulties arose.
Of the States of Central and Eastern Europe which have to
be considered in connection with any proposal for mutual
tariff arrangements on a basis of multilateral treaties, the
great majority are agricultural countries. But two —
Austria and Czechoslovakia — are also industrial producers

THE STRANGLING OF EUROPEAN TRADE 545

on a considerable scale. The agricultural countries want an
outlet for their goods in the markets of the industrial
countries ; but even if both Austria and Czechoslovakia
were totsupply their total demand for agricultural imports
from inside this group of countries, there would still remain
a considerable surplus of agricultural goods to be marketed
elsewhere. The agricultural States want to secure preferen-
tial arrangements for the marketing of this surplus in other
importing countries, for example, in Italy and Germany.
But these countries will obviously not consent to give the
required preferential treatment except in return for similar
treatment for their own industrial exports. On the other
hand, Czechoslovakia is only prepared to consider a closer
customs relationship with her agricultural neighbours
because she hopes thereby to secure a preferential outlet
for the products of her industries ; and if the more strongly
organised industries of Germany were to be given the same
treatment as her own the value of the preference would be
from her standpoint largely nullified. Czechoslovakia,
therefore, is willing to consider multilateral arrangements
with her agricultural neighbours, but is not prepared to
consider any wider tariff union or system of preference
which would include Germany or any other highly in-
dustrialised nation. On jhe other hand, the Great Powers
have no desire to see mutual tariff arrangements which
might be the precursors of a complete customs union be-
tween the countries of Central and Eastern Europe on any
terms which might involve the exclusion of their industrial
products from these markets, or build up these countries
into a powerful political bloc not susceptible to their
respective influences. The Italians would by no means allow
such a bloc to arise under conditions which might bring it
within the German sphere of influence, nor would the
Germans tolerate it on terms which might strengthen the
hand of Italy or France.

In these circumstances, the attempt to make an approach
to a customs union, or at any rate to a preferential tariff
convention, among the Danubian countries and their

SR

546 ECONOMIC CONDITIONS IN EUROPE

agricultural neighbours broke down, both because of the
internal differences and hostilities of the countries directly
concerned, and because of the mutual suspicions of the
Great Powers, which insisted that no scheme must he drawn
up without regard to their political and industrial interests
in the Danubian and Balkan areas. In addition, any
chance that the project of a Danubian customs union might
have liad was almost completely wrecked when Austria
and Germany, in the midst of the discussions, announced
the decision to create an Austro-German Customs Union ;
for this project, the alternative for Austria to inclusion in
some sort of Danubian economic union, was regarded by the
French as a first move in the direction of the political
absorption of Austria into Germany, and as a violation
both of the terms of the Peace Treaty and of the under-
taking entered into by Austria in return for the financial
assistance given to her under the auspices of the League of
Nations. The announcement of the projected Austro-
German Customs Union therefore caused an international
political crisis. It was made clear to the Austrians that they
could no longer expect any help from the League if they
persisted in the project, and to the Germans that persistence
on their side would involve the disappearance of any hope
of an accommodating disposition on the part of the Allied
signatories to the Peace Treaty in the matter of reparations
and Treaty revision. In these circumstances both Germany
and Austria were coerced into the abandonment of the
projected Union, which was subsequently declared by the
Hague Court to be inadmissible on the ground of under-
takings previously entered into by the Austrian Govern-
ment.

This question of the Austro-German Customs Union,
coming in the middle of the negotiations for a mutual
economic arrangement among the Danubian and Balkan
countries, further emphasised the interrelation of political
and economic forces in the precarious post-war settlement
of Europe. Germany, Italy and France had taken up diver-
gent attitudes in the Danubian negotiations, and Germany

THE STRANGLING OF EUROPEAN TRADE 547

and France again fell foul of each other over the Austro-
German Customs Union. It soon became clear that progress
along these lines was to all intents and purposes hopeless
for the present ; and even if the intensification of the
world economic crisis in 1931 had not further prejudiced
the position, it is clear that the attempt to promote any
sort of economic unification among the Danubian States
would have been bound to break down. In the event, the
intensification of the crisis after the collapse of the Credit
Anstalt in Austria, the subsequent difficulties of the German
banks, and the run on the pound and the suspension of the
gold standard in Great Britain, so added to the economic
difficulties of each of the countries directly concerned as to
make them more intent on the erection of further trade
restrictions designed to safeguard their respective balances
of payments than on attempting to build up any wider
union favourable to the re-establishment of international
trade.

During this period, side by side with the attempt to
build up closer economic relationships between particular
groups of countries, the League of Nations, and its auxiliary,
the Committee for European Union, were discussing the
proposal originally put forward by Briand in 1930 for a
closer political relationship among all the States of Europe
belonging to the League. At the outset, the Committee for
European Union, which met for the first time in January
I93l> was concerned largely with discussing the special
difficulties of the agricultural countries in Eastern Europe.
But later, when the difficulties in the way of success in this
field had become manifest, the discussions of the Committee
turned largely on the pact of economic non-aggression
suggested by M. Litvinov on behalf of the Soviet Union.
This project had no better fate, though the policy which
lay behind it did result in the negotiation of a substantial
number of political non -aggression pacts, accompanied in
some cases by commercial treaties between the Soviet
Union and other European countries, and in particular in
a substantial improvement in the relations between Poland

ECONOMIC CONDITIONS IN EUROPE

and the U.S.S.R. Apart from this, the Committee for
European Union accomplished nothing. In May 1931
sixteen States did sign a draft scheme for the establishment
of an international agricultural credit association, designed
to ease the financial difficulties of agricultural producers
in Eastern Europe ; but this scheme was also submerged,
before it had ever become effective, in the intensified
economic crisis of the latter part of the year. The Committee
for European Union continues to meet and to discuss, but
it has shown no signs as yet of any ability to grapple with
the difficult situations which confront it.

It is indeed doubtful whether in the present condition of
Europe any body which attempts to negotiate inclusive
economic pacts for the whole of the Continent stands any
chance of success. The political conditions of stability
which are indispensable as the basis for such pacts simply
do not exist, and it is beyond the power of the Committee
for European Union to call them into being. In its political
aspects, Briand's project for a United States of Europe in-
volved the assumption that the existing States of Europe
could be taken as stable entities, strong enough and settled
enough in their established constitutions and within their
existing frontiers, to become the units of a permanent
federal organisation. In other words, Briand's proposal for
a federal Europe rested on the assumption that the settle-
ment of European sovereignties imposed by the Treaties
of Peace would endure, and that countries could be per-
suaded to reach mutual arrangements based on the recog-
nition of the permanence and inviolability of the existing
frontiers. At the time when the project was originally put
forward, there appeared, superficially at least, to be some
warrant for this view ; but subsequent events in Europe
have largely knocked away the foundations on which it
rested, and revealed the insecurity of the political as well
as the economic structure of the European States.

All the negotiations of the past few years have therefore
produced no real effect in removing the barriers in the way
of international intercourse, which have on the contrary

THE STRANGLING OF EUROPEAN TRADE 549

become more and more obstructive and difficult to sur-
mount as the economic crisis has deepened, and as political
suspicions have become more intense. Vainly has one
conference after another, and one expert committee after
another, proclaimed by universal consent the desirability
of resuming more normal international economic relations
and of sweeping away a large number of the restrictions
which at present exist. These aspirations have remained
wholly ineffective in influencing the actual policy of the
European States. They were nevertheless repeated almost
without modification in the Report of the Preparatory
Committee for the World Economic Conference, and the
States of Europe were once more adjured to declare in
favour of the things they have declared in favour of on at
least a dozen occasions already. But it is surely obvious
that the restrictive system which now exists is a symptom
of the world's disease, and that accordingly there is no
hope of removing it unless the causes which underlie it
cease to operate. These causes are two-fold — economic and
political. Economically, the outstanding causes are those
which we have discussed already in this book — the sharp
and unequal fall in world prices, and the existence of funda-
mental disequilibria in the balances of payments due from
country to country and in an altogether top-heavy burden
of both internal and international debts. Politically, the
causes are to be found in the growingly articulate and open
dissatisfaction with the settlement reached at the conclusion
of the war, and the increasing determination of the defeated
countries to reassert themselves in European affairs, and to
reverse at least in part the sentence passed upon them in the
hour of defeat.

These political causes are doubtless largely aggravated by
economic factors. If Europe had been prosperous and ad-
vancing in wealth and economic prosperity, far less would
have been heard of the demand for Treaty revision, and
militaristic nationalism would have far less room for
growth. Nazism in Germany would never have risen to
power had there not been a vast .mass of economic distress

55° ECONOMIC CONDITIONS IN EUROPE

and discontent on which it was able to work. The Balkan
countries would probably never have passed under largely
military dictatorships if they had not been plunged into
economic difficulties by the world crisis. Even Hungary,
which has most cause, on purely nationalist grounds, to
resent the Peace settlement and to demand territorial
redress, would probably have stayed quiet if there had not
been a marked recrudescence of militarism over Europe.
When the economic foundations of society are utterly in-
secure, and men are in despair of finding remedies for their
economic troubles, they are apt to turn to militarism and
nationalism as a way of escape from sheer wretchedness,
and to make political conditions the scapegoats of economic
adversity.

The moral is that if Europe is to be lifted out of the present
depression, and some greater measure of freedom restored
to international trade, this cannot possibly be accomplished
by a direct attack on tariffs, embargoes, exchange restric-
tions and the other secondary phenomena of national dis-
tress, but only by a courageous attempt to remove the
underlying economic causes of the trouble. Nothing will
be achieved by international economic action umtil
countries are prepared to concentrate their attentkjp
mainly upon an attempt to raise world prices, and to pro-
vide a more satisfactory basis for the issue of currency and
credit, with the object of promoting in each country effec-
tive national action to stimulate demand and set the pro-
ductive system once more at work, to raise the standard of
living of the employed population, and to bring the un-
employed back into useful economic activity. Unless this
can be done, we must expect a continuance of the existing
restrictions on trade and commerce, and even a further
intensification of them as lesser measures fail to achieve
their purpose. A little may indeed be done by bilateral
negotiations between particular countries, such as the
mutual arrangement for the gradual reduction of tariffs
arrived at between Belgium and Holland in 1932 ; but
there seems to be little hope that measures of this sort will

THE STRANGLING OF EUROPEAN TRADE 55!

in the existing conditions be adopted by most of the States
which are in the worst economic situation, most exposed to
the interplay of political and economic causes of friction,
and most at the mercy of the jealousies and antagonisms
of the Great Powers.

§ ii. WAGES IN EUROPE

SOME REFERENCE has been made in the foregoing
sections to the importance of relative wage-levels in their
effects upon the competition between the leading indus-
trial countries of Europe. The purpose of the present sec-
tion is both to throw what light can be thrown upon the
relative levels of wages in these countries, and to say some-
thing about the movements of wages during the world
slump. Unfortunately, it is exceedingly difficult to make
any reliable comparisons between either the money wages
paid in the various countries or the real value of these
wages in terms of purchasing power ; and it is still harder
to compare wages in the different countries as elements
in die cost of production. These difficulties arise partly
filfB the absence of the necessary statistics, and partly
from the fact that international statistical measurement of
wages and of their purchasing power is a problem of ex-
treme complexity even where figures are available.

There seem to be no reliable figures by means of which
the general levels of money wages in the various European
countries before the war can be compared. The only com-
parisons that seem to be available are in terms of real
wages, and not of money. The Ministry of Labour in Great
Britain has attempted a rough comparison of the real
wage levels existing in 1914. According to these figures,
real wages in Berlin were rather more than four-fifths of
real wages in London, while real wages in Paris were
rather less than three-quarters of the London rates. Pro-
vincial rates in France were a long way below the Paris rates.
Belgian real wages were appreciably lower, at about

552 ECONOMIC CONDITIONS IN EUROPE

three-fifths of the British level, real wages in Scandinavia a
little higher than in France, while real wages in Italy were
little more than half the London rates, and in Spain substan-
tially less than half. On the other hand, industrial wages in
the United States and Canada were between 80 and 90
per cent higher than the corresponding rates in Great
Britain.

For the post-war period a somewhat more authoritative
comparison is available from the figures compiled by the
International Labour Office. These figures are based on
taking the actual money wages in the various countries,
and then assessing their purchasing power by a somewhat
complicated process in terms of the cost of a standard
basket of commodities, making allowance for the different
standards of consumption in the various countries. Accord-
ing to these figures, in the middle of 1929 German wages
were about 70 per cent of the British, and French wages
about 53 per cent, while wages in Spain and Austria were
only about 45 per cent of the British level, and wages in Italy
only 42 per cent. On the other hand, the Dutch level was
85 per cent of the British, and wages in Scandinavian
countries, calculated on a somewhat different basis, since
the original figures represent earnings and not rates of
wages, were as high as wages in Great Britain. Thus, since
1914 real wages in Germany, France and Italy had all
fallen substantially in relation to real wages in Great
Britain. In the meantime the relative levels of real wages
in Great Britain and the United States had undergone
little change, American wages being in 1929 rather more
than 90 per cent higher than British wages in terms of
purchasing power.

Let us turn now from real wages reckoned in relation to
the cost of living to the actual money wages paid in the
various countries. Again let us take 1928 as the most con-
venient date for studying the wage position before the
coining of the world slump. In that year wages in Great
Britain, according to the calculations of the Ministry of
Labour, were from 70 to 74 per cent higher than pre-war

WAOES IN EUROPE

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wages ; wages in Germany were from 50 to 60 per cent
higher ; and in France the rise was from 25 to 35 per cent,
after allowance has been made for the fall in the gold value
of the franc. In Switzerland, wages had rather more than
doubled, and in Sweden substantially more than doubled ;
while in Denmark, where the figures are based on hourly
earnings, and therefore exaggerate the increase, the rise was
over 150 per cent. Unfortunately no particulars are avail-
able for Italy or for most of the smaller European countries ;
but in the United States the various published indices
show that wage rates had on the average rather more than
doubled between 1914 and 1928. Thus the rise in money
rates of wages was higher in the United Kingdom than in
Germany or France, but in both Scandinavia and the
United States money wages had advanced at a substantially
more rapid rate than in Great Britain.

For one trade only is it possible, as the result of a special
investigation, to present an estimate of the relative wages
paid in each of the chief producing countries. These figures
are taken from a Report on the Conditions of the Steel Trade in
Continental Europe, made by a British mission of investigation
in 1930. In that year the average wages of steel workers of
all grades in Great Britain were about GOJ. a week, in
Germany about 51*., in France about 37^., in Belgium and
Luxemburg from 355. 6d. to 365. 6d., and in Chechoslovakia
only 305. 6d. These figures illustrate the amount of leeway
which the British steel industry had to malfe up by means
of higher efficiency in order to offset the lower wages paid in
the various Continental countries. It should, however, be
observed that the chief competition with British steel in
foreign markets, except for the cheapest grades, came not
from the countries with the lowest wages, but from Ger-
many, where the rates most near]/ approached those in
force in Great Britain. This fact illustrates the impossibility
of measuring wage-costs — i.e. the amount of wages involved
in producing each unit of product* — by the sum paid out
in money wages per hour or per wfeek to each worker em-
ployed* For wage-costs depend not [only on the efficiency of

WAGES IN EUROPE 555

the workers, but also to a large extent on that of the plant
upon which they are employed, and of the management in
all its aspects. High wages are not necessarily a handicap if
they go with high personal efficiency on the part of the
workers, and a high level of plant equipment and adminis-
trative capacity on the managerial side.

A similar conclusion arises from the figures published by
the International Labour Office showing for the coal in-
dustries of the various European countries both the relative
wage-levels, in terms of a common currency, and the labour-
cost per ton of coal extracted. The figures, which relate to
1929, bring out the wide disparity between the labour-costs
per ton and the relative daily earnings of the miners.

Daily earnings Labour-cost
per ton
100

Great Britain

Ruhr .
Upper Silesia
Saar
France .

Holland
Poland .
Czechoslovakia

i

zoo

94

73
81

£4
61

IOO

52
62

112
107

119

70

This comparison, of course, takes no account of the
quality of the coal produced or of the ease of production as
distinct from the efficiency of the industry. Nor does it take
any account of the differences in working hours.

Let us now turn to the movement of wages during the
world slump. It is unfortunately impossible in this field to
present really up-to-date comparable particulars, and no
attempt has been made to carry the comparison beyond the
third quarter of 1932, or to take account of the serious
wage reductions which have been made since then in
certain countries, notably in Germany and the United
States. Using as a basis the wages paid in 1928, which we
took as representative of the wage levels existing on the eve
of the world slump, we find that in the summer of 1932
there were two countries in which, despite the fall in the

556 ECONOMIC CONDITIONS IN EUROPE

level of world prices, money wages were slightly higher in
1932 than they had been four years before. These two
countries were Czechoslovakia and Denmark. In all the
other countries for which particulars are available there
had been a fall in money wages ; but the fall was very
different in the various countries. In the United Kingdom
it was only 4 per cent, whereas in Germany it was already
15 per cent, and in Italy 13 per cent. In the case of the
United States the fall in weekly wage rates was only about
12 per cent ; but the figures of weekly earnings showed a
reduction, in comparison with the earnings of 1928, of no
less than 42 per cent, largely as a result of widespread
short-time working. In the case of France no particulars
seem to be available.

If, however, we consider the movement of wages during
the world slump in terms, not of the amount of money paid
out or of the weekly rates of money wages, but of the pur-
chasing power of these wages, we get a very different situ-
ation ; for in all the countries for which particulars are
available real wages for full-time work as distinct from
money wages were higher in 1932 than in 1928. The rise
was highest in Denmark, where it amounted to 15 per
cent ; but Czechoslovakia with 13 per cent and Great
Britain with 12 per cent were not far behind. Poland, for
which statistics are available only in terms of real wages,
showed a rise of 19 per cent, on account of the very heavy
fall in prices, and was thus actually ahead of Denmark and
Czechoslovakia. In the case of the United Sjtates, figures
are available only for earnings. Weekly earnings had fallen
by 23 per cent owing to short-time working, but hourly
earnings had risen by 8 per cent. Thus in all countries the
workers, to the extent to which they were able to find
regular employment, had benefited between 1928 and 1932
by the fall in the cost of living. But for the working
class as a whole this benefit was more than counteracted
by the great increase in unemployment and under-
employment.

On the basis of these figures it is possible for employers to

WAGES IN EUROPE 557

argue that wages have remained too high in face of the fall
in prices, so that wages costs are now disproportionate to the
selling prices of goods, and are a cause of maintaining the
prices of finished commodities and goods at retail too far
above the prices of raw and semi-manufactured commod-
ities. According to this view, wage-rates ought to be re-
duced at least in proportion to the fall in the cost of living,
if not actually in proportion to the much greater fall in the
level of wholesale prices. Many employers and some
economists contend that, if this were done, the effect would
be to cause an expansion of employment, by making it
profitable for firms to carry on production where they are
at present unable to produce at a profit. It cannot of course
be disputed that if, in a particular country which exports
a substantial proportion of its products, wage-rates are
reduced without corresponding falls in wages in other
countries, the country which reduces its wages will be in
a position, other things being equal, to capture some trade
from its rivals in the markets of the world. But this " advan-
tage " to the country which reduces its wages is conditional
upon other countries not following its example, whereas in
practice a faD in wages beginning in the exporting indus-
tries of one country will usually be communicated before
long to the competitive industries of other countries, so as to
restore something like the old relation between the cost-
levels of the two groups of employers.

When this has happened there is no reason to suppose
that any country will benefit as a result of the reduction of
wages ; for any tendency for more goods to be sold when the
fall in wages is passed on to the consumers in the form of
lower prices will, if the change in wage rates is generalised
over industry as a whole, be likely to destroy so much
purchasing power in the hands of the main body of con-
sumers as to leave the total demand for the products of most
industries no higher at the lower prices than it was when
both prices and incomes were at a higher level. Indeed, this
is an understatement ; for, as we have seen in our dis-
cussion of the effects of unemployment insurance, one

558 ECONOMIC CONDITIONS IN EUROPE

highly desirable result of the provision of adequate main-
tenance for the unemployed is to keep up consuming power
in the domestic market, and this advantage applies fully as
much to the maintenance of wage-rates as to the provision
of unemployment benefits. This desirability of maintaining
wages during a slump holds with especial force in those
countries, such as the United States, which rely on their
home markets for the sale of a high proportion of their
output. Its force is somewhat less in the case of the exporting
countries, at any rate where there is a real prospect that
they will be able to reduce wage-rates faster than their
rivals. But any gain secured to an exporting country by the
application of this policy will clearly be secured only at
some other country's expense, and so far from helping
towards the recovery of world trade as a whole will be
likely to intensify the general depression. Low wages are
assuredly no cure for business depression ; for their effect is
to diminish demand, whereas what is needed is a stimulus
to additional production and employment.

This argument would lose some of its force if in fact
reductions of wages were accompanied by a corresponding
fall in the prices of consumers' goods. But this is prac-
tically never the case. Even if prices at the factory were to
be reduced by the whole amount of the wage reduction —
itself a most unlikely supposition when wage reductions are
made on the plea that industry is becoming unprofitable —
this fall in factory prices would practically never be re-
flected in a corresponding fall in the prices pf goods to the
retail consumer. There is always a lag between the fall of
wholesale and that of retail prices ; and even after this lag
retail prices never rise so much as wholesale prices during
a boom, or sink so much in the course of a slump, owing to
the many fixed charges which have to be met in the course
of the passage of goods from the factory to the consumer.
Accordingly a reduction in wages tends to reduce the funds
available in the hands of consumers for the purchase of
finished commodities by more than it tends to decrease the
unit cost of these commodities to the consumers ; and it thus

WAGES IN EUROPE 559

usually brings about a net decrease in the real volume of
demand for consumers' goods.

Nevertheless, it has of course to be admitted that, while
countries continue to rely on the incentive of profit for
getting production carried on at all, it is impossible for them
in the long run to sustain a level of wages which makes
production unprofitable. But the remedy is to be sought not
in reducing wages and so destroying yet more purchasing
power, but rather in so stimulating demand as to provide
fiiller employment for industry, and make possible a reduc-
tion in the costs of producing goods by enabling employers
to spread their overhead charges over a larger volume of
output. If this is not sufficient, then it is far better to allow
factory prices to rise to a somewhat higher level through the
stimulation of demand than to attempt to accommodate
wage incomes to a level of prices which is unduly low.

Under conditions of modern technological development
in industry all the more advanced industrial countries in
Europe have of late years been achieving very large
economies in the use of manual labour. Each successive
census in these advanced countries shows a diminishing
proportion of the total population engaged directly in
productive industry, and a higher proportion occupied in
the various auxiliary services, such as transport and dis-
tribution, and in professional, administrative and technical
occupations. At the same time, the proportion of the
national income paid out in salaries tends to rise, while the
proportion paid in wages, despite the increase in average
wage-rates, remains practically constant. These are the
inevitable results of the process of rationalisation, which to
an increasing extent substitutes machinery for human
labour in the carrying out of standardised productive opera-
tions and also results in the elimination of waste labour
through the more scientific organisation of industry. It is
a question much disputed how far the present height of
unemployment in the world is the consequence, not only of
the slump conditions at present prevailing, but also of what
is called " technological " unemployment — that is to say,

560 ECONOMIC CONDITIONS IN EUROPE

of the supersession of human labour by machines and by
more scientific industrial organisation. Undoubtedly, there
existed even at the height of the boom in the United States
a considerable amount of industrial as well as agricultural
unemployment. Great Britain and Germany both had
serious unemployment problems even before the coming of
the world slump ; and while a large part of the British
unemployment was undoubtedly due to the decline in the
great British export industries, a substantial part of the
unemployment in Germany seems to have been the result
of the intensive campaign of technical rationalisation which
was carried through in the German coal mines and heavy
industries between 1924 and 1929.

Indeed, it stands to reason that if widespread substitution
of machinery for labour occurs in the industries which
have hitherto employed the largest quantity of labour,
considerable unemployment will result. For, even if it
is possible ultimately to re-employ the displaced operatives
in other rising industries, and to receive into these industries
the fresh recruits who leave school each year, there is bound
to be a considerable interval of dislocation while the neces-
sary readjustments in the economic system are being made.
This interval is likely to be longest where the industrial
system is carried on at haphazard and not in accordance
with any co-ordinated national plan for directing the
available resources into the right channels. Above all, under
these conditions a large amount of unemployment of an
obstinately prolonged character is likely to ^anse in those
areas which have in the past specialised chiefly in the trades
whose demand for labour is falling off. Obvious examples
are the areas in which coal mines, iron and steel manu-
facture and the cotton industry are chiefly carried on.
Moreover, during this period of dislocation there will be a
marked tendency to displace from industry the older
workers ; so that when men or women of middle age once
lose a job it is exceedingly difficult for them to find alterna-
tive employment. The new industries tend to recruit chiefly
the younger workers, and the older workers find it harder

WAGES IN EUROPE 561

to sacrifice their acquired skill and adapt themselves to
totally new methods of production.

In these circumstances, the registers of unemployment in
the advanced industrial countries come to include a large
number of older workers who are not likely to find jobs at
all ; and it has repeatedly been urged, with obvious justice,
that the right way of dealing with these older workers is to
take them off the unemployment registers, and provide
them, at the expense either of industry or of the community
as a whole, with adequate pensions. It is, however, usually
impossible to place this charge directly upon the industries
in which the displacement of workers chiefly arises, because
these industries include many which, owing to the decline
in the demand for their products, lack the ability to meet
any additional charges. Accordingly, the greater part of the
burden has to be shouldered by the community as a whole.

The existence of a large mass of unemployed workers
eager to find jobs is in itself a factor likely to result in the
depression of wage-rates. This is especially the case where
the State does not make adequate provision for the main-
tenance of the unemployed ; whereas, as we have seen, the
effect of an adequate system of maintenance for those out of
work helps the Trade Unions, where they are well
organised, to maintain wages even under adverse conditions.
Accordingly, in periods of depression wages tend to fall
fastest in those countries which (a) are most subjected to
competitive pressure in the marketing of their products,
(b) have the weakest Trade Union movements, and (c) make
least provision for the public maintenance of the unem-
ployed. Not all these conditions need to be satisfied at once ;
in the United States, for example, international competi-
tion is a relatively unimportant factor, but Trade Unionism
is weak in most trades, and there is no system of public
maintenance for the unemployed. In Germany, because of
the exceptional financial situation, which compelled the
forcing of exports on the world market at any price, the
existence of strong Trade Unions and a system of unem-
ployment insurance have not availed in the long run to

562 ECONOMIC CONDITIONS IN EUROPE

protect wages, though they did considerably delay the fall,
which only began in 1931 and became really serious in
1932. In Great Britain and in Scandinavia wages have
been relatively well maintained, despite competitive
stringency, because Trade Unionism and public provision
for the unemployed have combined to strengthen the
workers' povver of resistance.

The tendency towards rationalisation and the displace-
• ment of productive labour in the industries of the most
advanced countries has highly significant effects upon the
class structure of these countries. It increases the numbers of
salary earners, including not only clerks, but also the more
highly paid technical and administrative staffs attached to
the various forms of industry and service. At the same time
the relative decline in the old basic industries and the rise of
newer industries of a highly mechanised type gradually
undermine the strength of the older Trade Unions, which
have grown up principally in the basic industries. The
strongholds of Trade Unionism in all the advanced coun-
tries of Europe are in the coal-mines, the iron and steel
works, and the engineering and textile factories ; and the
relative weakening of the position of these industries
inevitably affects Trade Union bargaining power. Mean-
while the newer industries grow up largely in areas remote
from the older centres of Trade Union strength. They
employ a much smaller proportion of highly skilled labour,
and rely largely on the services of semi-skilled machine-
minders, including a higher proportion of women. These
workers are less readily susceptible to Trade Union
influence. A high proportion of the women do not expect
to remain permanently in industry, and have therefore not
the same abiding interest in their industrial conditions as
the male workers, while even among the men the smaller
proportion of highly skilled workers to the total number
employed tends to make Trade Union organisation less
stable ; for it is among the skilled craftsmen that the
strongest Trade Unions have for the most part hitherto
been built up.

WAGES IN EUROPE 563

-The Trade Union movement may in process of time be
able to overcome these difficulties and adapt its methods
and organisation to the needs of the new industrialism. But
it is already evident that considerable adaptation will be
required if Trade Unionism is not permanently to lose
strength as a result of the modern changes in industrial
technique. Above all it seems clear that the Trade Unions,
in order to retain their power, will have to organise in future
far less on exclusive craft lines, and far more in such a way
as to bring together in one closely knit organisation the
whole mass of workers, skilled and unskilled, employed in
a particular industry, as well as to co-ordinate the Unions
in the various industries for closer common action. It is
also clear that under these changed circumstances Trade
Unionism is bound to become far more political, in the sense
of seeking the realisation of its objects to a greater extent
than in the past by securing protective industrial legislation.
This has already become manifest in the strengthening of
the movement for the passing both of minimum wage laws
and of laws limiting the duration of the working day. But
it goes further than this ; for under modern conditions,
wage-rates and the treatment of the unemployed come to be
inseparably connected problems, and Trade Unionists
come more and more to realise that they cannot hope to
secure their position unless they are able to exercise poli-
tical as well as economic pressure. Trade Unionism thus
becomes to an increasing extent a political force, and in-
dustrial disputes take on more and more the added character
of political conflicts. This was seen in the highest degree
in the British General Strike of 1926 ; but it also appeared
very clearly in the relation of the German Trade Unions
to the successive Republican Governments up to the date
of the Hitler coup. For it was by using the State as an instru-
ment for the enforcement of wage rates rather than by their
unaided industrial strength that the German Trade Unions
were able to maintain wage rates through 1930 and 1931.
Fascism, in its special aspect of a movement directed against
the independence of the Trade Unions, and helped with

'564 ECONOMIC CONDITIONS IN EUROPE

this end in view by the great industrialists, is among other
things an attempt to defeat these claims of the Trade
Unions to political power as a necessary instrument of in-
dustrial protection. And it is already clear from the experi-
ence of Italy during the past ten years that the tame Fascist
Unions created within the structure of the Corporative
State are highly ineffective, and indeed are meant to be
highly ineffective, instruments for the preservation of the
workers' standard of life.

PART IV : EUROPEAN POLITICAL
SYSTEMS

1. The New Constitutions of Post- War Europe

2. Politics in Great Britain

3. Politics in France

4. Fascism in Italy

5. Fascism in Germany

6. The Challenge of Communism

7. European Socialism

§ i. THE NEW CONSTITUTIONS OF
POST-WAR EUROPE

POST-WAR EUROPE has been a laboratory of acw
experiments in the art of politics. Before the war ended,
Russia had led the way, passing in her two Revolutions of
1917 swiftly from Tsarist autocracy to the dictatorship of
die proletariat. In Germany, the Bismarckian system had
begun to crumble some time before the military collapse ;
and there had been concessions to popular sentiment which
helped to prepare the way for the new order. The compli-
cated political adjustments of the Austro-Hungarian Empire
had lost their perilous balance long before 1918. And
finally the German occupation of Poland and the confusion
in the other territories severed from Russia under the
Treaty of Brest-Litovsk had already raised in an acute form
the question of constitution-making for brand-new States,
mostly of uncertain boundary and highly doubtful political
complexion. During the last year of the struggle between the
Allies and the Central Powers civil war went on side by

EUROPEAN POLITICAL SYSTEMS

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NEW CONSTITUTIONS OF POST-WAR EUROPE 567

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568 EUROPEAN POLITICAL SYSTEMS

side with international war ; and civil war raised everywhere
the problem of the organisation of government.

Europe plunged into an orgy of constitution-making
when most men — even most statesmen — had no clear vision
of the needs or situation of the countries for whose political
future they were called upon to provide. Except in Russia,
where the break with the past was as complete as it could
be made, and Lenin and his associates were setting to work
to apply a definite theory, statesmen as a rule continued to
think of the problem of the constitution in terms of pre-
war ideas and policies. The established countries were only
adapting their pre-war constitutions in various secondary
ways — by wide extensions of the franchise, for example ;
and even Germany, though she did make a brand-new
constitution for herself, built largely on the foundations
of the German Empire, and almost wholly on ideas and
programmes of pre-war vintage. In the new States —
Czechoslovakia, Austria, Hungary, the Baltic countries —
the problem of constitution-making was eti "a -v^ed mainly as
that of imitating the familiar features oft CJ £ lie-systems al-
ready existing in the established politica1 des of Western
Europe and in the United States — on if fx>asis of an eclectic
choice of methods and machinery from among the reper-
tory of these societies, with only secondary additions or
adaptations ; and even those were taken from pre-war
programmes of constitutional reformers. Proportional
representation, adopted almost universally by the new and
reconstructed States, was the chief innovation upon the
older parliamentary models ; and there was assuredly
nothing novel about the idea of P.R.

In these circumstances, the constitution-making of the
post-war settlement showed in most countries a singular
lack of originality. The Germans used the opportunity of
defeat, carrying with it the collapse of Kaiserdom, to
realise, at any rate on paper, the pre-war programmes of
the democratic parliamentary parties ; and statesmen in
the new States, eager to secure recognition from the Great
Powers and to keep Bolshevism beyond the pale, saw the

NEW CONSTITUTIONS OF POST-WAR EUROPE 569

safest hall-mark of national respectability in the traditional
parliamentary regime. They set up in business as good
bourgeois ; and if they often succeeded in equipping them-
selves with parliamentary institutions based rather on the
academic theory than on the political practice of pre-war
Parliamentarism, this was hardly their fault. For the par-
liamentary institutions of Great Britain, France, Holland,
Belgium, Scandinavia, and Switzerland have grown, and
not been made in a few months by a convention of pro-
fessors and politicians ; and often the most vital elements
in them appear least in their formal structure.

Except in the case of Russia, the really interesting features
of post-war political experiment occurred, not when States
were re-making their constitutions in 1918 and 1919, but
later, when they had had some experience of the conditions
of the new world into which they had been born. Even then
the originality came mainly, not from the new States set
up on the basis of the Peace Treaties, but from older States
which found their established constitutions unsatisfactory
or inefficient. Fascism came first in Italy, and not in any of
the new States, or in Germany. Another sort of dictatorship
invaded Spain, the last stronghold of an obsolete feudal
and religious autocracy. The example of dictatorship no
doubt became contagious ; but the minor dictatorships
of Southern and Eastern Europe furnished no fresh enlight-
enment in the art of governing.

To the observer who set out to sum up, in the immediate
post-war years, the consequences of the struggle in terms
of constitutional structure and practice, it must have seemed
that, apart from the giant exception of Russia, there had
been a resounding victory for the cause of parliamentary
government. Had not enthusiastic Liberal propagandists
on the side of the Allies — including many who deemed
themselves Socialists — repeatedly proclaimed that the war
was " a war for democracy " as well as " a war to end war " ?
Had not the two great Empires of Central Europe — two
out of the three chief strongholds of autocracy — fallen,
and been replaced by " democratic" parliamentary systems

57O EUROPEAN POLITICAL SYSTEMS

modelled on Great Britain and France ? Had not Tsardom
too gone the way of all tyrannies ; and would not the
obvious and inherent instability of the new Soviet regime
speedily lead to its replacement by yet another imitation
of English or French Parliamentarism ? For most respect-
able people in 1920 were prophesying without hesitation
the imminent collapse of Bolshevism ; and the Great Powers
were still helping, by blockade and assistance to " White "
invaders, to give it a few stout pushes in the required
direction. The first Russian Revolution had been pro-
claimed by Mr. Bonar Law in the British House of Commons
as heralding the reorganisation of the Russian Empire on
impeccably British lines ; and much the same view of it
was taken in the United States and other democratic
countries, except that in each country the imitation was
thought of in terms of its own, rather than anyone else's,
democratic institutions.

The hopes centred on Prince Lvov and Kerensky were
disappointed ; but it was difficult for opinion in Western
Europe or in America to believe that Communism had come
to stay. For respectable opinion — including that of most
Socialists — all over Western Europe and North America
had come to believe that, in broad terms, the central
problem of the art of politics — that of the right basis of
government for a right-minded State — had been settled
for generations to come, if not for all time. States ought to
be democratic, which was taken as meaning that they
ought to have political institutions based on Representative
government with the backing of a wide popular franchise.
They ought to have Parliaments, preferably of two Cham-
bers, though the right form for the less powerful Chamber
was a matter of difficulty and disagreement, and there
were some who held to the theory of two co-equal Chambers.
These Parliaments were to "represent" the country, so that
legislation passed by them could be regarded as expressing
the real will of the electorate — even on those occasions
when most of the electors appeared to be indifferent, or
even hostile. In addition to its Parliament, each State ought

NEW CONSTITUTIONS OF POST-WAR EUROPE 571

to have an executive — a Government — possessing the
"confidence of the country." There was a difference of
opinion over the question whether the executive ought to
be chosen separately by the people, as the President of
the United States is chosen, or in effect by the Parliament,
or subject to the veto of the Parliament, as it is chosen
in the French Republic and in the constitutional monarchy
of Great Britain. But in Europe the latter system in general
prevailed ; and it became the model for the democratic
constitutions of the new post-war States.

There was a wider difference of opinion over the question
of the "head of theState." Could a right-minded democratic
State consistently have a King or Emperor, or ought it
necessarily to be a Republic ? Most of the new States of
Europe had little choice in this matter ; for, with the Haps-
burgs and the Hohenzollerns ruled out, as well as dis-
credited, there was something of a famine in eligible
monarchs. Germany, from among her princelings and their
families, had been willing enough to provide when she was
planning in advance her distribution of the fruits of victory.
But in the actual post-war constitution-making the question
of monarchy hardly arose. Only Hungary, after expelling
her Bolsheviks, equipped herself with a Regent in lieu of
the Hapsburg monarch she was not allowed to have. Else-
where the problem was settled on republican lines, but
as a matter of convenience rather than principle. The new
Republics had Presidents ; but in most cases they were
meant to be rather ceremonial figure-heads than actual
governors, and in some the Prime Minister was allowed to
double the parts. There was no imitation of the American
system of a President independent of the legislature and
at the head of the executive. Where President and Prime
Minister are united in the same person, as they are in
Estonia and the Irish Free State, the latter position is the
source of power, and the holder of the office gets it as the
leader of a parliamentary majority or working coalition,
and not by direct election at the hands of the people.

The problem of Constitutional Monarchy versus Republic

572 EUROPEAN POLITICAL SYSTEMS

was, however, commonly regarded as of secondary im-
portance, and as not affecting the real character of the
State's government. For in theory, though the surviving
monarchs in democratic countries still had very wide
powers according to the letter of the constitution, they were
to exercise these powers only at the will and under the
orders of the Government. The Ministers might be, accord-
ing to the letter of the law, "the King's Ministers" ; but
in practice the King was to be "the Ministers' King. "His
functions, apart from his duty of getting himself revered
and loved by his people, were to be mainly those of a
mannequin combined with a ventriloquist's dummy. This
theory of the functions of constitutional monarchy was
naturally nowhere fully operative — for, after all, Kings are
men — but it is hardly an overstatement to say that it
represents accurately the attempt of democratic theorists
to reconcile to themselves the inconsistency of remaining
monarchists. They defended monarchy on the ground that
it did not exist, save only as a harmless and convenient
fiction useful for cementing the bonds of Empire, upholding
the respect of common democrats for their betters, and
above all avoiding the danger of a too powerful President.
The State, it was said, must have a head ; so, in the name
of democracy, let that head be empty.

The accepted pre-war view of the right constitution
for a right-minded State thus left aside the secondary
question of Monarchy versus Republic, and concentrated on
what were regarded as the essential political institutions.
The core of the problem was the form to be given to the
institution of Parliament. The new States were thought of
as coining into existence by virtue of the will of their in-
habitants ; and this will must be provided with the means
of making itself effective, first in setting up the formal
institutions of the nascent communities, and then in en-
suring the continued conformity of these institutions to
their will. There must be some sort of Constituent Assembly;
and by fiat of this Assembly must arise a Parliament and
the means of periodically renewing its life. For both

NEW CONSTITUTIONS OF POST-WAR EUROPE 573

Assembly and Parliament the franchise ought to be wide ;
for all citizens not excluded by some special disqualification
ought to have their share in making and working the new
State. There remained open the question whether women
ought to have votes ; for, in face of a difference of opinion
between Great Britain and France on the problem whether
women are political beings, the world was unable to dog-
matise on so grave a matter. But at any rate all adult men,
save for very special reasons shown, ought to vote ; and in
fact women at once got votes under all the new constitu-
tions except that of Yugoslavia, where the question was
left over to be settled later by ordinary legislation. Finland,
the first country to grant woman suffrage (in 1906),
Denmark, Holland, and Norway had given women votes
before the war ; and Great Britain had followed their
example before the war was over. In this matter, the new
States took Great Britain rather than France as their
model.

Even woman suffrage, however, was commonly regarded
as a secondary issue. The democratic theory plainly in-
volved that everybody had the right to vote, unless some
very special reason for exclusion could be advanced. The
sole question was whether women were persons capable of
citizenship. France, under no compulsion to change her
constitution, might continue to ignore the obvious answer ;
but new States engaged in constitution-making could not,
unless they were prepared to depart consciously and mani-
festly from the democratic principle. Accordingly, almost
everywhere women got the vote.

The gospel of the new democracies can therefore be said
to begin with Universal Suffrage — since the latter days of
the eighteenth century the first article in the international
democratic creed. The second part of the gospel is Parlia-
mentarism, based on the idea of popular representation.
The people, having votes, are to use them primarily for
the choice of a representative Chamber, which is to be the
chief source of all legislation. In some cases there were to
be two Chambers ; but let us confine ourselves in the first

574 EUROPEAN POLITICAL SYSTEMS

instance to the more directly popular of the two. For on the
attitude of this Chamber the complexion of the Govern-
ment was to depend ; and it was meant to embody the idea
of popular sovereignty.

In the pre-war systems of the leading countries, two
broadly differing ways of organising parliamentary, or
congressional, government were in evidence. In Great
Britain and in the United States, the political forces strong
enough to count in determining the complexion of the
Government were organised mainly in two great rival
parties, so that one or other of these two was always in a
position of dominance. It was indeed possible under the
American system for the executive to be in the hands of
one party and the legislature of the other ; but this " lame-
duck" situation was exceptional, and seldom of long con-
tinuance. Such a paralysis of the working of the State
machine was not possible where, as in France and Great
Britain, there was no application of the principle of the
"separation of powers"; for in these countries the execu-
tive could remain in office only as long as it could command
a parliamentary majority. In Great Britain, despite the
dominant position of the two traditional parties — Liberals
and Conservatives — it was possible for a Government to
hold office without having an independent majority at
its back ; for the Irish Nationalists formed a powerful
minority party, which could sometimes either keep a
Government in office or turn it out, and after 1900 the
Labour Party appeared as a second rrtinority group.
Actually, between 1910 and 1914 the Liberal Government
owed its continuance in office to the support of these two
smaller parties. But there was never, before 1914, any
question of a Government being formed by any party
except the two traditional antagonists ; and Great Britain
alternated between Liberals and Conservatives as the
United States alternated between Democrats and Repub-
licans— with the difference that there was a sharper, though
still narrow, cleavage of policies, along well-known lines,
between the British than between the American parties.

NEW CONSTITUTIONS OF POST-WAR EUROPE 575

In France the situation was very different ; for there
panics were far more numerous and loosely organised, so
that Governments had always to be formed on the basis
of coalitions among a number of distinct political groups.
It was easier for groups to dissolve, and for new groups to
appear, as situations changed ; and there were always a
number of individual deputies whose allegiance was doubt-
ful, and a number of middle parties capable of entering
into temporary combinations either to the Right or to the
Left. Moreover, the arrangement of parties in the Senate —
the Second Chamber — did not necessarily coincide with
that in the Chamber of Deputies ; and it was far more
possible than in Great Britain or the United States for a
particular deputy to ally himself with the Government of
the day without necessarily either committing his party
or leaving it. The French system was thus far more flexible
and easily changeable than the British.

The different practice of the two countries about disso-
lutions and General Elections was — and is — closely con-
nected with this difference of party systems. Where a
Government can hold office only as long as it has the support
of Parliament, and most of the Members of Parliament
belong to one or other of the two great parties, it follows
that, given the composition of Parliament, there is only
one possible Government. What, then, is to happen if
this Government, owing either to differences in its own
ranks or to the manifest unpopularity of its policy in the
country, is unable to carry on ? Clearly there must be a
dissolution of Parliament, followed by a General Election
designed to resolve the difficulty by declaring the will of
the electorate. Under the French system, on the other hand,
no such necessity exists. For, when the Parliament is split
up among a number of groups, and varying combinations
are possible among these groups and their members, it
is not the case that there is only one possible Government.
If one group of Ministers cannot carry on, it may be quite
practicable to find another group that can, without any
necessity for an appeal to the electors. Consequently,

576 EUROPEAN POLITICAL SYSTEMS

whereas the British Parliament is practically always dis-
solved in connection with a change of Government, the
French Chamber nearly always remains in being for the
full term for which it was first elected, and usually outlives
in the course of this term a whole succession of different
Governments. Of course, the distribution of seats may be
such that, in a particular Chamber, any possible Govern-
ment must have either a "Right "or a "Left" inclination,
as the case may be. But within this condition many varia-
tions are possible.

It is out of the question, in this matter, to disentangle
cause and effect. If pre-war France had been politically
dominated by two big parties, like Great Britain, she would
have been compelled to provide for the " right of disso-
lution " — that is to say, to allow a change of Government,
actual or prospective, to be accompanied by an " appeal
to the country." But was it because France had not two
big parties, but many groups, that she did not recognise in
her constitution this " right of dissolution " ? Or was her
group system, at least in part, the result of the " right
of dissolution " not being recognised ? If Great Britain had
possessed, instead of two big parties, numerous small and
far less coherent groups, she could not have allowed a
General Election every time she needed a change of
Government ; for General Elections are expensive and
unpopular if they come too close together. But is the two-
party system cause or consequence of the recognition of
the Prime Minister's right to demand a dissolution ?

At any rate, the two systems existed ; and there can be no
doubt what, in general terms, the consequences were. The
British system tended to make Governments strong, and the
French tended to make them weak. For under British
conditions the Government not only had as a rule a clear
majority of its own supporters behind it, but was also able
to mitigate the ardours of the critics within its own ranks,
or of allied smaller parties, by threatening a dissolution
which would cost the individual Member of Parliament
money, and might lose him his seat. The French deputy,

NEW CONSTITUTIONS OF POST-WAR EUROPE 577

on the other hand, stood in far less fear of the Government,
because it had not the right to appeal to the electorate ;
and the French Ministry had always to be conciliating the
divergent groups on which it depended for support, and
was apt to find in inactivity the line of least resistance.
Moreover, the life of a French Cabinet was very often too
short to make possible the following of any consecutive or
constructive policy.

Accordingly, the case for the British and French systems
could almost be re-stated as the case for strong and weak
parliamentary institutions. The advocates of strong govern-
ment and of vigorous party policies upheld the British
arrangement, while those who believed that the best guar-
antee of individual freedom is weak government greatly
preferred the French. It is true that the government of
France was — and is — a great deal more bureaucratic than
that of Great Britain ; but that is a matter of the adminis-
trative rather than the legislative system, and it is with
legislation alone that we are at present concerned.

If the new States of post-war Europe had been able to
choose freely between the British and French parliamentary
systems, it is not easy to say which they would have chosen.
Actually, their choice went everywhere in favour of methods
which resulted in reproducing something far more akin
to French than to British parliamentary conditions. For,
in deciding in favour of proportional representation,* as
they did with singular unanimity, they were adopting an
electoral arrangement clearly calculated to lead to the
multiplication of parties, and therefore to the group basis
of French politics rather than the strong party government
of Great Britain.

But they had not, in reality, an open choice on the main
issue. For the British system implies the prior existence,
or immediate potentiality, of two parliamentary parties
capable of forming a Government and a major Opposition.
But nowhere in Europe did such parties exist, nor could they
be called into existence under the prevailing conditions.
There were, and there were bound to be at least for some

TR

578 EUROPEAN POLITICAL SYSTEMS

time to come, a considerable number of separate groups in
the Parliaments of the new States. Governments were bound
to depend for their majorities on coalitions among these
groups ; and it was impossible to give such coalitions the
stability of consolidated parties. A close approximation to
the French system therefore arose naturally out of the
circumstances ; and the new Chambers, while they tried
sometimes to model their behaviour on the " Mother of
Parliaments," operated in fact far more like the French
Chambre des Deputes.

This situation was due in part to the development of
Socialism. For in most of the new countries the Socialists
formed, if not the largest, at least one of the two largest
parties in the first post-war Parliaments. They were not,
however, strong enough to win a clear majority ; and
accordingly they either constituted the main opposition
to a broad alliance of bourgeois and other non-Socialist
groups which together formed the Government, or they
themselves entered into coalitions with the more " progres-
sive " of the non-Socialist parties. These other parties were
never closely enough agreed to form a solid combination ;
for they ranged from representatives of landowning
interests, large capitalist interests, clerical interests, petty
bourgeois interests, peasant interests, and so on, to still more
sectionalised groups standing for the rights and claims of
the 'racial arid national minorities scattered plentifully over
the territories of most of the new States. This situation, in
which everything had to be settled de novo^and there were
no clear precedents to go by, was one which made every
sectional interest exceedingly anxious to secure direct
representation, as a source of bargaining strength. It there-
fore made for the vitality of a large number of small parties,
each identified with some sectional point of view. Some-
times, as in Czechoslovakia, the series of parties based on
conflicting class interests was duplicated for the distinct
nationalities ; and in other cases party divisions were based
on religious as well as political or class groups. But more
often there was one series of class-interest parties drawn

NEW CONSTITUTIONS OF POST-WAR EUROPE 579

mainly from the national elements forming the majority
of the population, and a second series of nationalist groups,
each representing a confusing medley of class interests.
Moreover, this clamjamfry of parties was perpetuated and
reinforced by the adoption of P.R., which was adopted by
the new States less as a matter of democratic principle
according to John Stuart Mill than because each sectional
group saw in it the assurance of its own representation and
survival.

Stable Governments were, under these circumstances,
exceedingly hard to form ; and the democratic Govern-
ments of post-war Europe have been for the most part very
unstable. The new States have carried on somehow ; and
most of them have not substantially altered, though several
of them have in fact suspended, the constitutions drawn
up on the morrow of the war. But it will hardly be main-
tained that these constitutions have worked well, or bid
fair to serve as permanently satisfactory instruments of
government. The most that can be said for them is that, in
the circumstances which existed in 1919 and 1920, there
was practically no choice. The local Communists lacked
the strength to take control, the Socialists were unable to
gain a clear majority, and the sectional interests were too
sharply divided for a firm anti-Socialist combination to
be created ; and accordingly the only possible course was
to recognise the group system. At least until the new States
had had plenty of time to settle down, and to deal with the
vast number of conflicting claims which faced them, the
claims of minorities \\erc certain to play a major part in
shaping the political system. Proportional representation
won the day because it was the most thorough embodi-
ment of the " minority " spirit.

What has been said above applies fully as much to
Germany as to new States such as Czechoslovakia or Poland.
For post-war Germany seemed to most Germans virtually
a new State, or at any rate one in which there had to be a
new fundamental settlement of the claims of conflicting
classes and sections. Germany, more than any other State,

580 EUROPEAN POLITICAL SYSTEMS

because her combined difficulties in domestic and external
politics were greater, felt during the post-war years the
repercussions of a political system designed to make difficult
the creation of a solid parliamentary majority. The German
political situation is discussed in detail elsewhere ; here
we are only pointing out that P.R. exaggerated the diffi-
culties inheient in the political situation.

For P.R. amounts, above all else, to the giving of con-
stitutional sanction to the representation of sectional
interests. The case put forward on its behalf is that it follows
logically from the conception of representative government ;
for if the voters are to be represented, each of them ought
to be given the largest possible chance of helping to elect
someone who really represents his point of view. The
system of single-member constituencies and that of the
scrutin de lisle without P.R. — i.e. the method of voting in
larger constituencies for party lists of candidates en bloc —
are alike in ruling out the representation of such minorities
as live scattered among the rest of the population, so that
their votes are not numerous enough to cany the day
in any particular constituency. The second ballot and the
alternative vote are further means of wiping out the minority
parties. Under these systems, say the advocates of P.R.,
many votes are wasted ; for the minority groups must either
vote for their own men without hope of securing their
election, or vote for someone who does not represent them,
or not vote at all. P.R., properly worked, ensures that no
vote is wasted, and gives each group, lar^e or small, a
representation corresponding to the number of votes cast
on its behalf. A P.R. Parliament, and no other, therefore
really represents the nation. It is, or should be, a perfect
mirror of the national consciousness.

So far, so good ; and if the aim of Parliaments were simply
to hold the mirror up to national divisions of opinion the
case for P.R. would be unanswerable. But one object — not
the least important — in electing a Parliament is to provide
the community with a workable and effective legislative
machine. What if the two aims prove to be inconsistent ?

NEW CONSTITUTIONS OF POST-WAR EUROPE 581

Which is to be given up ? Is Parliament to become
less a legislative instrument in order to be a better mirror,
or a worse mirror in order to legislate more efficiently ?
The " perfect mirror " theory is tenable only by those who
believe that, on the whole, individuals and smaller groups
within the State are best left to manage their own affairs,
and that the concentration of power in the hands of the
central State authority is an evil. Anyone who holds that
the State has wide functions of intervention, and that it is
necessary for men to be strongly governed, is bound to
aim at securing an effective instrument of legislation, even
at some cost in its reflecting quality.

In other words, the mirror theory might do well enough
in a society so settled in the general character of its social
and economic life, and so unvexed by major problems, that it
could get on comfortably enough without much controversial
legislation, and under the aegis of a weak and unstable
Government. Pre-war France was on the whole in this
condition ; and perhaps Holland is in it now. But a mirror
is essentially passive : it reflects, but it does not originate
or decide. A Parliament which mirrors the kaleidoscopic
opinions of a diversified community is most unlikely to be
good at settling major conflicts of interest among the diver-
gent groups which it represents. But, unhappily, these
groups are most likely to be insistent on separate repre-
sentation at times when their divergencies are most acute,
and the problems raised by their conflicts most difficult
and fundamental.

These conditions go far towards explaining the almost
general dissatisfaction of to-day with the working of the
parliamentary system. The strength of Parliamentarism —
above all of British and French Parliamentarism — in the
latter part of the nineteenth century lay pre-eminently in
the fact that it was being used to work a securely established
system, on the fundamentals of which nearly all articulate
opinion was in agreement. The differences between the
recognised parties did not go down to first principles : and
therefore a broad continuity of aims and policy was possible

582 EUROPEAN POLITICAL SYSTEMS

between the rival parties. Neither Conservatives nor
Liberals in Great Britain, neither Republicans nor Demo-
crats in the United States, wanted or proposed to do any-
thing which seemed to their rivals so dreadful as to threaten
the disruption of the body politic, or the dissolution of the
social contract. The battle of words might wax fast and
furious, and politicians might call one another the most
dreadful names ; but all the same the amount of common
ground between them was far more extensive than their
areas of dispute.

Nor was this all. In the pre-\\ar democratic countries,
men were working on the basis of an existing system of
settled rights and claims. They might wish to modify these
in one or another particular ; but apart from the particular
projects of reform over which they wrangled they took the
existing conditions for granted. This greatly reduced the
pressure from organised sectional interests, and made it
possible for each of the great rival parties to put up a
plausible claim that it stood for the totality of the national
interests. But in post-war Europe nothing could be taken
for granted, because there was nothing securely established.
Everything had to be affirmed or denied afresh ; and a
thousand problems were demanding immediate settlement.
Were the old landowners or the peasants to have the land ?
Was the State to base its policy on Economic Nationalism,
or on Internationalism ? Was it to go Socialist, or at any
rate how much of State Socialism was it to embody in its
new economic system ? Was it to have an established
Church, or to treat all religions alike ; and, if the latter,
how was it to treat them ? Was it to compensate those who
had lost their savings through the inflation of the currency ?
Was it to grant political autonomy to provinces possessing
a distinct racial, cultural, economic, or religious character
of their own ? Was it to allow racial minorities their own
languages, schools, cultural conditions ? These and a host
of other questions buzzed like flies round the heads of the
statesmen of the new Republics ; and every question
furnished a reason for the existence of a fresh political party.

NEW CONSTITUTIONS OF POST-WAR EUROPE 583

Parliamentarism, then, could not be expected to work in
post-war Europe as it had worked in Great Britain when
the British social system had the solidity of Victorian
mahogany, or in France when the life of peasant and small-
scale industrialist went on almost unaffected by the doings
of the politicians in Paris. In the post-war period, politics
were bound to affect everybody ; and in every community
there were political differences too deep for easy recon-
ciliation. This applied even in the States which were not
compelled to build up their political institutions afresh from
the bottom. British Parliamentarism could no longer be the
same with three parties, instead of two, contending for
office, and one of these challenging, at least in words, the
ark of the capitalist covenant. The oft-expressed desire for
the final elimination of the Liberals was based far less on
a desire to clear the ground for a straight fight between
Capitalism and Socialism — which was not at all desired by
most people — than on a hankering to get back to the old
simplicity of the two-party system. For, with only two major
parties, each capable of securing an independent majority,
British people both knew how their political system worked
and believed in its efficiency for the limited tasks it had
been called upon to perform before the war. They did not
like at all the prospect of a succession of Parliaments in
which no party would be able to command a majority.
But in fact the old conditions could not be recalled ; and
the creakings and groanings of the old parliamentary
system, now called upon to adapt itself to a new situation,
were soon plainly audible.

Great Britain, howrever, like France, could in the short
run carry on with relatively little difficulty, because she
did not have to settle everything at once, and also because
British Socialism remained Socialism on paper, but was
only social reform in practice — a continuation and extension
of, rather than a rupture with, the Liberal tradition. Though
the cleavage between the parties raised more fundamental
questions than before, it did not raise them in forms im-
peratively demanding immediate solutions. Very slowly,

584 EUROPEAN POLITICAL SYSTEMS

the old British economic and social system was beginning
to disintegrate ; but for the time being it was perfectly
possible to carry on without any deep disturbance of class
relationships or established ways of life. The " Mother of
Parliaments " lost much of her glamour ; but she did not
lose her ability to survive and " manage " somehow. Even
less was French Parliamentarism shaken by the war — that
is, shaken visibly and at once. And the American political
system remained, to all outward seeming, totally unaffected.
Where, as in Italy, Parliamentarism was a plant of
tenderer and more exotic growth, things fell out differently.
United Italy, poor and industrially undeveloped, provided
herself with a Parliament as the symbol of national unity
and respectable Statehood far more than because her
citizens had any faith in, or understanding of, the working
of parliamentary institutions. Cavour had no successors :
Italy developed neither strong and coherent political
parties on the British model, nor the power to make a
group system in the image of the national character, as it
came to be in France. Italian politics remained an affair
of superficial dexterities and manipulations, such as
Giolitti was adept in, with little relation to the real currents
of public opinion or to the real forces shaping the national
life. Socialism in Italy became an important political
force far less because it was strong than because the rest
were weak ; and it never became confident enough of its
hold to master the country. After the war, Don Sturzo,
with his Popolari, challenged it in the field of social reform,
and made a real attempt to build up, in face of Papal
suspicion, a closely knit Catholic Party transcending class-
differences. But Italian Parliamentarism was of too weak
and imitative a growth to stand up against the storms and
stresses of the post-war years. Confronted for the first time
with fundamental cleavages of opinion in the country,
it could not make itself the arbiter of these differences.
The rival factions did battle outside Parliament, in the
streets and in the factories, and not in orderly debates or
election meetings ; and the Government, having no idea

NEW CONSTITUTIONS OF POST-WAR EUROPE 585

how to hold the contending forces in cheqjc, before long
simply gave up trying to govern at all. For some time before
the Fascists marched on Rome, Italy had been in effect
a country without government.

The demonstrated failure of Italian Parliamentarism,
and its fate, served as a salutary warning against the facile
optimism of post-war Liberal-Democratic theory. For
though the Fascists were ostensibly making war upon
Communism and Internationalism, it was the Liberal-
Democratic State that they actually overthrew. Their
antagonist was, no doubt, this form of State at its weakest
and least successful in realising the principles of Liberal
Democracy. But the warning was none the less salutary ;
for it was a warning against the danger of assuming that
parliamentary institutions, set up in the less economically
developed countries, would work out as they had worked
out in Great Britain or France, or would be in fact either
liberal or democratic in practice. It was a warning against
the fallacy of generalising about the right forms of govern-
ment, and against constitutions made by imitative eclec-
ticism instead of the creative impulse of an original and
appropriate creed. It was an ironic fortune that equipped
the new States of Eastern Europe with the complete para-
phernalia of a political system of which its originators in
Western Europe were growing more sceptical every year.

§ 2. POLITICS IN GREAT BRITAIN

SOMETHING has been said both of the greater strength
of Parliamentary institutions in those countries in which
the idea of responsible Parliamentary Government was
already well established in the nineteenth century and of
the difficulties which Parliamentarism has encountered
even in those countries since the war. It was pointed out
that countries such as Great Britain and France had been
able to carry on without any serious challenge to their

'586 EUROPEAN POLITICAL SYSTEMS

Parliamentary systems despite the growing creakiness of
the Parliamentary machine because of two things — first
because in these countries economic problems, though
pressing, were nothing like so insistent as they were in the
new States of Central and Eastern Europe, and secondly,
because the Parliamentary system was far more deeply
rooted in the habits and ideas of the people. There has
been since the war much grumbling at the ineffectiveness
of parliamentary government in both Great Britain and
France ; but there has been no widespread desire hitherto
to tear up Parliamentarism by the roots in order to sub-
stitute for it some quite different form of government. In
France, indeed, the Parliamentary State has been subjected
to a growing fire of criticism from both Right and Left. The
Communists have been able to build up a party of some
size, and there has been a revival of anti-republican and
anti-democratic agitation on the extreme Right. But neither
the Communists nor the Camel ots du Rot and the Action
Franfaise have been able to shake the solid mass of support
behind the Parliamentary parties, ranging from Conserva-
tive Republicans to orthodox Socialists. In England there
has been even less of a challenge from either side to the
established institutions of the Parliamentary State. Com-
munism has so far never risen higher than the return of one
solitary member to the House of Commons, and Fascism
has made its appearance only in a succession of movements
more suggestive of opera boujfe than of serious counter-
revolutionary activity.

Nevertheless, even in the countries most used to trad-
itional democratic institutions and to the Parliamentary
system, there has been a growing recognition that this
system is on the defensive. In the United States, for example,
while no third party has succeeded in challenging effectively
the far-reaching machinery of the two traditional parties,
much less in rallying any large measure of support behind
a proposal to change the character of the State, there has
been a very great increase of discontent with the working
of the party system in both Federal and State affairs, and

POLITICS IN GREAT BRITAIN 587

a marked tendency to dispense with the institutions of
nineteenth century democracy in the running of the local
government machine. The vastness of the territory and
population of the United States, and the existence of a host
of separate centres each possessed by a strong spirit of
localism, have stood powerfully in the way of the national
self-expression of the forces of criticism which have been
growing up, and there has been something of a temptation
for Americans radically discontented with the existing
political institutions of their country to turn their backs
on political affairs with a despairing shrug of the shoulders,
and give themselves up to the collection of Americana in a
spirit of purely unconstructive satire. There has been much
" muck-raking " and much denunciation of the unfettered
authority of big business on the one hand, and on the other,
much outcry at the activities of Communists, " criminal
Syndicalists " and agitators of foreign origin. But in terms
of the constructive rebuilding of political and economic
policy all the criticism had amounted to very little up to the
moment of President Roosevelt's assumption of office in
1933. Then, indeed, the American political system under-
went changes as start line; and sudden as any country has
ever yet experienced without a revolution ; but it falls out-
side the scope of this book to attempt even such evaluation
of these changes as is possible at the present stage.

Let us begin with an attempt to evaluate the development
of the political situation in post-war Britain. As we have
seen, right up to 1914 British politics were still being con-
ducted in effect on the basis of a two-party system. There
were, indeed, in the House of Commons four parties and
not two ; but only the two great traditional parties, Liberals
and Conservatives, were in a position to aspire to the right
of forming either His Majesty's Government or His Majesty's
Opposition. The Labour Party, though it had proclaimed
its complete independence, was still in effect little more
than a group on the left of the Liberals, and aimed necessarily
at using them as the instrument for satisfying its immediate
aspirations. The Irish, following a more independent

588 EUROPEAN POLITICAL SYSTEMS

line in some respects, were also tied to the Liberal Party
as the only instrument through which they could hope
to achieve Home Rule. Neither Labour nor Irish Nation-
alism offered any challenge to the basis of the Liberal-
Democratic State, and even the theoretical Socialism of the
Labour Party was still doubtful. Labour was only beginning
to emerge from its swaddling clothes as an independent party.

It is obvious that this arrangement presented from the
merely administrative point of view very considerable
advantages. For it is much easier to manage a Parliamen-
tary machine when all changes of sentiment can be made
effective merely by the Government and the Opposition
changing places. But, as we have seen, the smooth working
of this two-party arrangement depends on the existence
between the contending parties of a large amount of
common ground. If Government is to succeed Government
with a smooth alternation between party and party, both
the rival parties must be in agreement on the fundamental
nature of the State and the leading institutions which it is
to sustain and develop. Where such agreement exists a
change of Government, or the election of a new Parlia-
ment with a different party complexion, will not involve
to any considerable extent the tearing up of the legislation
enacted under the authority of the preceding Govern-
ment. Both sides will be prepared for the most part to accept
accomplished facts, and changes will go on by the method
of small deviations to the right or to the left rather than by
sharp and sudden jerks of policy. If each incoming Govern-
ment is really determined to undo most of the things that
its predecessor has done, and does really regard its rival's
policy as threatening the destruction of the country, the
Parliamentary system at once ceases to be workable.
Parliamentary Democracy is in fact a workable system
only on the assumption that the great majority of those who
are actually in a position to influence the march of events
find themselves in substantial agreement about the matters
which lie at the root of political and economic activity.

In Great Britain, as in all other belligerent countries

POLITICS IN GREAT BRITAIN 589

except the United States, the war seriously upset the old
arrangement of parties. There were national coalitions
claiming to represent the country as a whole, and these
coalitions were the easier to arrange because on the main
issues most of the representatives of all the parties did find
themselves in agreement. In view of this fundamental
agreement, there was little difficulty in arranging for the
temporary suspension of party strife, and concentrating
upon the measures necessary for the prosecution of the war.
A tiny handful of Liberals, including one or two Liberal
Ministers, dropped out in 1914 when war was declared,
and a small minority of the Labour Party, basing itself
on the definitely Socialist Independent Labour Party,
took up an ant i- war attitude and passed into opposition.
But even the I.L.P. did not sever its formal affiliation to
the Labour Party despite its disagreement on policy. Apart
from these defections, up to the end of 1916 Great Britain
was governed on non-party lines — that is to say, on the
basis of a suspension of all changes not rendered necessary
by the exigencies of war. This solid front of the constitu-
tional parties was broken up at the end of 1916, when Mr.
Lloyd George drove Mr. Asquith from office and replaced
him at the head of a new coalition from which some of the
old Liberal politicians were excluded ; and there was a
further rift from 1917 onwards as a larger section of the
Labour Party passed into opposition on account of the
refusal of the Government to enter into negotiations for
a peace based on compromise. Moreover, in the last year
of the war, anti-war sentiment was spreading rapidly among
the industrial workers in Great Britain, as well as in other
countries, as the pressure of the long struggle came to be
more acutely felt and the " combing out " of more and more
men from the factories provided a stream of increasingly
reluctant and unwarlike recruits to the armed forces.
Nevertheless Great Britain finished the war under a
coalition from which the Labour Party had not even at that
stage officially withdrawn ; and although the Labour Party
did withdraw and pass into formal opposition as soon as the

5QO EUROPEAN POLITICAL SYSTEMS

Armistice was signed, the " Coupon " election of 1918 was
fought on the basis of a continued coalition between the
Conservatives and Mr. Lloyd George's Liberal followers.

After the election of 1918 two things were apparent.
First, it was clear that the Liberal Party had been damaged,
if not irretrievably, at any rate very severely indeed, by the
rift between Mr. Lloyd George's followers and the
Asquithites. Secondly, the Labour Party, despite its un-
preparedness and the big differences which existed within
its ranks, found itself called upon to assume the role of His
Majesty's Opposition in face of the cleavage in the Liberal
ranks, and began for the first time to look forward to the
day when it would be in a position to take over the govern-
ment of the country. Henceforth there were three claimants
for the two positions of Government and Opposition. The
old simplicity of the two-party system was for the time
irretrievably lost,

For Liberalism, divided in counsel and impotent in
action as it was during the post-war years, was still an
electoral force to be reckoned with. If, indeed, the Liberals
associated with the Government had been prepared to
merge themselves completely with the Conservatives into
a single national party based on the defence of the capitalist
system, the two-party arrangement might have been
restored ; for the independent Liberals would in that event
almost certainly have either disappeared or at least been
reduced to an impotent fraction. But this was desired neither
by the Liberals nor by a great many of the Conservatives.
The Conservatives wanted the spoils of office for themselves,
were fully conscious of the superiority of their strategic
position, and had no intention of accepting permanently
the leadership of Mr. Lloyd George, convenient as they
found it in the immediate post-war emergency. The Liberals
still cherished the hope that when the immediate turmoils
of the post-war period were over they would be able to
regain their position as a united party and oust Labour
from its status as the official Opposition. Indeed, the leaders
of both the old parties for the most part agreed in desiring

POLITICS IN GREAT BRITAIN 591*

the return of pre-war political conditions. They much
preferred the prospect of a continuation of the gentlemanly
battle between rival capitalist parties to the prospect of a
struggle between two great parties standing, in theory at
least, for radically different forms of economic organisation.
Nothing was more likely to turn the Labour Party com-
pletely into a Socialist Party than the formation of a united
capitalist bloc against it.

Moreover, the Labour Party, as it emerged from the
war with its new Constitution and programme of 1918, had
become a good deal more Socialist, though it was by no
means yet Socialist in a thorough-going sense. Labour had
first become an independent party in any real sense in 1900,
when the tiny group of Socialists organised under Keir
Hardie's leadership in the Independent Labour Party
induced the Trade Unions to join with them in forming
the Labour Representation Committee. This body, which
adopted the name " Labour Party " in 1906, was at the
outset far more a Trade Union than a Socialist Party ;
and right up to 1918 it had made no formal declaration
of its Socialist faith, though its driving force came largely
from the Socialist — but for the most part non-Marxian —
minority within its ranks. But in 1918, under the stimulus
of war conditions, the Labour Party radically amended
its constitution, so as to base itself on individual members
as well as on Trade Union and other collective affiliations ;
and at the same time it produced, in Labour and the New
Social Order, a clearly Socialist programme, though its
Socialism remained evolutionary and gradualist, and was
far more under the influence of Fabian than of Marxian
ideas.

In the excited atmosphere of the period immediately
after the war, when men were looking for the new Heaven
and the new Earth which Mr. Lloyd George had been
foremost in promising them as the fruit of victory, the basic
institutions of the capitalist State no longer seemed so firm
and so sacred as they had seemed up to 1914. The Bol-
shevik Revolution in Russia, while it had by no means

'592 EUROPEAN POLITICAL SYSTEMS

converted the British workers to Communism, had to a
substantial extent influenced their attitude so as to make
them doubt the stability of the capitalist State. There were
times in 1919 and 1920 when the British Labour Party
even began to look like a revolutionary Socialist Party —
for example, at the moment when a General Strike was
threatened against the danger of British intervention in the
war between Poland and Soviet Russia. No doubt the
leaders of British Labour remained in their fundamental
attitude thoroughly gradualist ; but for the time being
the situation made them look a good deal less constitu-
tionalist than of old. They returned speedily enough to a
strictly constitutional attitude as the post-war excitement
died down and Great Britain succeeded in rebuilding at
any rate the fagade of her pre-war system. But even so the
attitude of the Labour Party was radically changed, in
that it thought of itself no longer as a third-party group but
definitely as a force aiming within a measurable space of
time at taking over the government of the country.

Actually the Labour Party's chance came far sooner than
it had expected, and long before it was at all ready for the
responsibilities which it was called upon to assume. Mr.
Lloyd George's coalition broke down in 1922 and \\as
replaced by a purely Conservative Government. With the
Liberals still divided into two contending fractions, the
Labour Party was able to maintain its status as the official
Opposition. Two years later, Mr. Baldwin, who had
succeeded Mr. Bonar Law as the Conservative leader,
presented Labour with the opportunity to become a Govern-
ment by fighting a General Election on the still unpopular
issue of Tariff Reform. Labour, in a considerable minority
in the House of Commons, could form a Government only
if it consented to be kept in office by the votes of the Liberals.
But the Liberals were by no means prepared to serve as
docile allies to the extent to which the Labour Party had
so served them in the years immediately before the war.
The Labour Party could therefore govern at all only on
condition that it did not attempt to put into effect any of

POLITICS IN GREAT BRITAIN 593

the major proposals included in its official programme. It
was in the anomalous position of a nominally Socialist
Party taking office on the strict understanding that it would
take no step towards the institution of Socialism. Its tenure
of office was precarious even from day to day ; and its
presence in office under these highly restrictive conditions
could have no real effect in interrupting the continuity of
British political development. All it could do, if it wished
to remain in office, was to carry out a Liberal programme
within the assumptions and limitations of the capitalist
system.

It is of course a moot point whether under these conditions
the Labour Party was right in assuming office at all, or
whether, if it had decided to assume office, it should not
have courted immediate and certain defeat by putting up
at once a challenging Socialist programme which it could
have had no prospect of carrying into effect, or even of
getting accepted in the House of Commons. In fact neither
of these alternatives seems to have been seriously considered.
The Party grasped the chance of office both because it
wanted office and because it felt that the holding of office
as a minority was an indispensable step towards becoming
a majority Government — and also, no doubt, because it
hoped, even as a minority Government, to carry through
certain secondary social reforms which would do something
to ameliorate the economic conditions of the workers.

The " gradualism " which the Labour leaders accepted
in 1924 and again in 1929 was in effect only another name
for the continuity characteristic of British political develop-
ment for a century past. It implied that, if Socialism was
to come, it was to be brought into existence by means of
a slow accretion of piecemeal changes in the social and
economic structure of society, and not by any sudden
reversal of the fundamental assumptions of Capitalism.
Even in the long run it did not, in the minds of most of the
Socialist leaders, involve any radical change in the form
and working of the Liberal-Democratic State.

After the enactment of a few useful but secondary reforms

594 EUROPEAN POLITICAL SYSTEMS

the Labour Government of 1924 ended in inglorious fiasco.
Symbolically, it was brought to disaster by the problem of
its handling of Anglo-Russian relations ; for its attempt on
the one hand to negotiate a working economic arrangement
with the Russians and on the other to present an appearance
of firmness in the handling of Communist agitation in Great
Britain resulted in practice in placing it in a strategic
position difficult for a Socialist Party without a majority
behind it. Mr. MacDonald mishandled the incident of the
Zinoviev letter not out of sheer muddleheadedness, but
because he and his Party \\ere really trying to behave
simultaneously in two divergent ways in their handling
of the Russian situation. They reaped their reward in the
Labour debdcle of 1924 ; but even in this dc'tdclc it was re-
markable to what an extent the Labour Mt e^ stood firm.
The Labour Government went down noty cfcause its own
supporters turned against it, but because^ me fear of " red
revolution " brought the vast reserves of non-political voters
to the poll.

Thereafter Great Britain experienced five years of Con-
servative Government, with Labour ranking still as the
major Opposition, and the Liberals, despite the galvanic
efforts of Mr. Lloyd George, still hopelessly divided and
unable to frame any coherent policy on which more than a
fraction of the Party could agree.

The General Election of 1929 reproduced the situation
which had arisen in 1924. Once more the Labour Party,
though stronger than it had been at its first venture into
office, was only in a position to form a minority Govern-
ment, and needed the support of the Liberals in order to
make its measures effective. It was therefore again pre-
cluded from making, even had it desired to make, any
attempt at the enactment of really Socialist measures.
Once again the Labour Party under Mr. MacDonald's
leadership accepted these conditions. Now, in the light of
after events, it seems clear that the limitations imposed on
Labour policy in 1929 were to its leader and to many of his
colleagues positively welcome. For in their view Great

POLITICS IN GREAT BRITAIN 595

Britain was not ripe for Socialism, but only for some further
instalment of social reform. Indeed, in the minds of Mr.
MacDonald and quite a number of the other leaders of the
Party, Socialism evidently held a place not as something
to be fought for, or established speedily by the political
action of the workers, but only as a vague Utopian pattern
for some future society to be realised either at some distant
epoch or perhaps not at all. Socialism remained theoreti-
cally an aspiration and an inspiration ; but it did not take
shape as a practical political policy.

Under these circumstances, even if world conditions had
remained favourable to the continuance of the traditional
policy of social reform, it is doubtful if the Labour Govern-
ment could have made much of a showing. For even before
the world slump a situation had been reached in Great
Britain which made further instalments of social reform
very difficult to carry through in face of the increasing
embarrassment of British capitalist industry ; and this
difficulty had been seriously aggravated by the unfortunate
and disastrous decision to return to the gold standard at the
pre-war value of the pound sterling, a step which had seri-
ously embarrassed the British export trades and narrowed
the scope for the further redistribution of incomes by means
of the social services. But in fact the coming of the world
slump soon after the Government had assumed office added
enormously to the difficulties in its way. Any Government
in Great Britain would have found itself seriously em-
barrassed, and would have been bound to incur a good deal
of unpopularity in consequence of the adverse effects of the
depression. But these conditions were especially unfavour-
able to a Government which, in as far as it had a policy
at all, based this policy on redistributing some of the surplus
incomes of the rich among the poorer sections of the com-
munity without disturbing the fundamental institutions
which permitted the rich to acquire their wealth. Even so,
the Labour Government managed to add to its difficulties
by putting at the Exchequer a Minister even more fanati-
cally devoted to the maintenance of the gold standard

EUROPEAN POLITICAL SYSTEMS

than the bankers themselves. Thus the one measure of
alleviation that might have been applied within the limi-
tations of the Government's changed attitude was excluded
from consideration. The second Labour Government ended
accordingly in an even more inglorious debdcle than that of
1924 ; and on this second occasion the real contradictions and
inhibitions inherent in its attitude were openly admitted
by the secession of three of its best known leaders and by
the reappearance of the Labour Prime Minister at the head
of a Coalition Government consisting predominantly of
Conservatives and Conservative-minded Liberals.

Abandoned by its best known leaders and thoroughly
handicapped by the lack of a constructive policy — for which
the rapidly improvised programme of 1931 was but a poor
and ineffective substitute — Labour went down in the
ensuing General Election to a defeat far more thorough than
that of 1924. Even on this occasion the bulk of its working-
class supporters still stood firm, despite the be\\ ilderment
caused by the defection of Mr. MacDonald and his col-
leagues. But once more the non-political voters were drawn
by panic to the polling booths, and on this occasion a
substantial fraction of the better paid workers and a much
larger proportion of the black-coated element which had
rallied to the Labour Party abandoned its cause and gave
their support to the so-called " National " Government.
The Labour Party was left after 1931 with but a handful
of supporters in the House of Commons, and with the task
of policy-building to be done all over again under new
leadership. For it was manifest, if not to some of the leaders
of the Party at any rate to almost everyone else, that it
was necessary at long last to face realities, to recognise the
failure of the traditional methods of gradualist social
reform, and to devise a totally new policy in the light of the
changed economic and political conditions of 1931.

Meanwhile, what of the machinery of Parliamentary
Government ? As a machine Parliament remained intact,
unchanged since pre-war days save for the great enlarge-
ment of the electorate under the Representation of the

POLITICS IN GREAT BRITAIN 597

People Act of 1918. But the reality behind the form had
been radically altered. For this reality consisted far less in
the formal structure of Parliament than in the old party
system which sustained its practical working. This old
system of two parties, agreed upon fundamentals and differ-
ing only upon secondary issues, had gone past recall. The
eclipse of the Liberals had indeed created a situation in
which ever since the war there had been only two possible
Governments — on the assumption that Governments were
still to be constituted on party lines. But this assumption
could not be completely fulfilled when one of the two
claimants to office was only in a position to govern with
the support of a third party far more closely allied in
attitude and policy to its opponents than to itself. Under
these conditions the traditional method of working Parlia-
ment could be maintained only as long as the Labour
Party consented to behave as if it were a direct successor of
the pre-war Liberal Party, and to remain within the tradi-
tional assumptions of the old party system — that is to say,
as long as it refrained from making any attack on the
fundamental institutions of British Capitalism.

What has been said is not that Parliament cannot be used
as an instrument of radical reorganisation, but only that
it cannot be so used without a fundamental change in
its character. The present Parliamentary machine is so
constructed as to be wholly unsuited in its working to the
requirements of a party which sets out to achieve a radical
change in the social and economic system. For any such
change is bound to involve simultaneous action over a
very wide field. It cannot be a question merely of national-
ising one or two particular industries, or of passing one or
two measures dealing with specific issues, while leaving
the rest of the capitalist system to go on working as before.
For the passing of a few measures applying Socialist
principles to a limited part of the economic life of the
country is bound in fact so to dislocate the working of the
capitalist machine, with its reliance on automatic adjust-
ments of part to part and its delicately poised equilibrium

EUROPEAN POLITICAL SYSTEMS

of economic forces, as to throw the machine out of gear at
many points not directly affected by the immediate measures
introduced by a Socialist Government. Socialism and Capi-
talism are not two systems, each dominating its own distinct
sphere of economic activity. If Socialism is introduced even
at one point on any significant scale it will have to be intro-
duced at many other points in order to keep the system as
a whole working at all. Moreover, the transition to
Socialism, if it is to be made at all, ought to be made swiftly.
For the period which intervenes between the first construc-
tive steps towards the establishment of Socialism and the
creation of a Socialist system complete enough to dominate
all the major activities of society is bound to be a period of
considerable economic dislocation, and to involve a tem-
porary inefficiency which will be able to make the best
neither of the old system nor of the new. The case for
Socialism speedily if at all is not based merely on being in a
hurry. It arises out of the inherent necessities of the transition.
It is obvious that the Parliamentary machine, as it now
exists, is an impossible instrument for any such speedy
change from one system to another. Even if we leave out of
account the obstructive potentialities of the House of
Lords and of the Crown, which are both certain to be
opposed to the projected change of system, and confine
our attention merely to the working of the House of
Commons as a legislative instrument, the difficulty re-
mains. Parliament is a body which works onUhe assumption
that the measures placed before it are to be debated line
by line with the fullest freedom of criticism on points of
detail as well as of principle ; and this involves the further
assumption that the body of legislation placed before it
will be sufficiently small to enable this democratic condition
to be effectively observed. A Government working within
the limitations of traditional constitutional practices cannot
possibly hope to carry through more than two or three
major measures in the course of a Parliamentary session,
whereas a Government setting out to establish Socialism
may want to carry through in that space of time changes

POLITICS IN GREAT BRITAIN 599

which, if constitutional forms are to be observed, will need
to be embodied in as many as a hundred separate Parlia-
mentary bills. Of course, if all discussion were ruthlessly
stifled and a Socialist majority made the fullest use of its
sheer voting strength to pass through bill after bill prac-
tically without discussion in the forms proposed by the
executive, the required output might be secured from the
House of Commons. But this, as the opposition parties
would at once point out, would mean an entire break with
the constitutional practice of Parliamentary legislation.
It would be to do with the House of Commons what
Mussolini has in fact done with the Italian and Hitler
with the German Parliament — to turn it into a mere
registering machine for decisions made elsewhere, and to
remove from it altogether its function of representing
divergent views and of ventilating grievances as the
guardian of articulate interests.

Yet it is clear that, if Parliamentary forms are to be
retained at all, something \\idely different from this, maybe,
but still involving a very great departure from past consti-
tutional practice, will have to be done by any party which
sets out to make the dilHcult voyage from Capitalism to
Socialism without actual revolution. This would involve
the creation of extra-Parliamentary machinery for the
working out and application of Socialist schemes. It would
mean that the executive would be clothed with very much
wider and more authoritative powers than have been con-
ferred on it within the existing Parliamentary system ; but
the executive could in practice delegate these powers to a
large extent to the functional organisations based on the
organised bodies — Trade Unions, Co-operative Societies,
local authorities, and so on — which would be used as its
agents in the actual execution of its schemes. In this way it is
conceivable that the transition to Socialism might be ac-
complished under the crgis of a reorganised Parliamentary
system ; but this Parliamentary system would have to be
as radically different from the nineteenth century Parlia-
ment as chalk from cheese.

GOO EUROPEAN POLITICAL SYSTEMS

Nor must it be forgotten that even this use of the Par-
liamentary machine for the establishment of Socialism
would be practicable only if that machine could be for all
practical purposes identified with the House of Commons.
For it is utterly out of the question to envisage the House of
Lords acquiescing in the adoption of a policy designed to
facilitate the institution of a Socialist system by adminis-
trative means. This is true of the House of Lords as it
stands to-day. And if, as may yet happen, the Conservatives
were to use the opportunity of their present tenure of power
so to amend the constitution of the House of Lords as to
make it irremovable save with its own consent, the last
avenue for the attainment of Socialism within the forms of
constitutional action would be definitely closed, and any
party which set out conscientiously to establish Socialism
would have to become definitely unconstitutional in its
attitude, however loath it might be to do so.

It is not, however, proposed to follow up further these
implications of the advent of Socialism as a practical and
immediate policy upon the field of Parliamentary activity.
We are here concerned only with the fact that the basic
assumptions on which the British Parliamentary system
has hitherto rested could certainly not be sustained if the
Labour Party set out seriously to establish a Socialist
system. British Parliamentarism has continued to work with
nothing worse than creakings and groanings of the machine
during the past dozen years only because thi British Labour
Party has not been a Socialist Party in the sense of aiming
at the immediate establishment of Socialism. It has not
been a Socialist Party in this sense not so much because of
the attitude of its leaders, though this has counted for
something, as because there has been among its rank and
file supporters no insistent pressure upon it to become
immediately Socialist.

The British capitalist system has not, indeed, succeeded
in re-establishing its old position in the world of Capitalism.
Britain's economic supremacy and her prospects of main-
taining herself in the future as a great capitalist industrial

POLITICS IN GREAT BRITAIN 6oi*

State have been seriously undermined. But, although
British Capitalism has been on the decline, it has not been
overwhelmed by any catastrophe sufficiently far-reaching
to make the drastic reorganisation of the economic system
an immediately imperative task. British Capitalism, with
diminished prestige and prosperity, has been able somehow
to carry on ; and it is even true that Great Britain has been
affected less than any other great country, with the possible
exception of France, by the adversities of the past few
years. The British unemployed have felt the pinch of
" National Economy," and there has been some wage-
cutting and a good deal of piecemeal worsening of condi-
tions. The British rich are not so rich as they were, and the
tribute levied by the British investors on the inhabitants
of less developed countries has substantially fallen off.
But according to the standards of to-day Great Britain
remains a relatively prosperous country ; and accordingly
the mood of her people is not one of desperation such as
would encourage the growth of extreme political views.
British Communism is insignificant in the amount of
support which it commands for precisely the same reason
as has prevented the growth of any substantial Fascist
movement. For both these movements are products of an
advanced stage in the decay of capitalist civilisation. They
do not spring up, or at any rate attain to any considerable
influence, where the mass of the people continue to be
fairly well fed and to face life with a reasonable degree of
equanimity. There are Fascist potentialities not only among
the supporters of Sir Oswald Mosley, but to a far more
menacing extent on the right wing of the Conservative
Party, among those who rally round Mr. Churchill. There
are potential Communist elements within the ranks of the
Labour Party as well as among the followers of Mr. Pollitt
and Mr. Maxton. But neither of these extremes is likely to
become really powerful unless and until the disintegration
of British Capitalism has gone a great deal further than it
seems in the immediate future likely to go, save as the out-
come of the plunging of Western Europe into another war.

602 EUROPEAN POLITICAL SYSTEMS

§ 3. POLITICS IN FRANCE

SINCE the conclusion of the Great War in 1918 seven
Governments have held office in Great Britain. Germany,
up to and including the Chancellorship of Hitler, has had
fifteen ; and France, up to and including the Radical
Ministry of Daladier, no less than twenty-three — all within
a period of less than fifteen years. Several of these short-
lived French Governments have survived for only a few
days ; and not one of them has held office for anything like
so long as the Baldwin Ministry formed after the General
Election of 1924. Glemenccau remained in office from
1917 to the beginning of 1920. Poincare's second and third
Ministries, which were consecutive, lasted from the middle
of 1926 to the middle of 1929 ; and Briand was in office
from 1921 to 1923 without a break. But otherwise no single
Ministry has been of any considerable duration. As far as
Governments are concerned, the administration of France
has been even more discontinuous than those of most of
the new countries which equipped themselves with brand-
new constitutions on the morrow of the war.

Nevertheless there has been, despite all the instability
of French Cabinets, a considerable degree of continuity
in the conduct of French affairs. For many of the changes
of Ministry have not carried with them am large shift of
policy. This applies most of all in the sphere of foreign
affairs ; for after Poiricare's Ruhr adventiire of 1923-24
Briand successfully and with only occasional set-backs and
interruptions dominated the foreign policy of the French
Republic almost up to the time of his death. Nor has there
been in home affairs so much instability as the frequent
changes of Government would suggest, for many of the
changed combinations of the post-war period have been
shifts of personnel rather than of policy, and have involved
no more than a slight edging of the Government to right
or left. There have been in France since the war Govern-
ments of the Right and Governments of the Left ; and the
distinction between the two is at the extremcr points

POLITICS IN FRANCE 603

sufficiently marked. But no Government has been able to
exist unless it could command the support not only of the
Left or Right, but also of a substantial part of the Centre,
and this necessity has been an important factor in pre-
serving continuity of attitude even between Governments
representing predominantly right or left tendencies.

This situation arises from the fact that France carries on
her political life not under a two- or three- or four-party
system but on the basis of a large number of distinct but to
some extent shifting groups. There are, indeed, on the left
clear-cut fairly well organised parties, the Socialists and
the Radical-Socialists ; and on the support of these two
any Government of the Left is bound chiefly to rest. The
extreme Right is far less clearly organised and far less
important from a numerical point of view. It ranges from
the anti-Republican extremists, divided into a number of
separate groups, Bonapartists, Constitutional Monarchists,
U Action F'ranfaise and Les Camelots du Roi, to so-called
Moderate Republicans \\lio are themselves divided into
a number of separate giuups of varying degrees of Con-
servatism. Between these parties far to the right and the
left-wing parties which have constituted, sometimes form-
ally but more often in effect, a " Cartel des Gauches" lie a
number of middle groups and parties. In face of the
weakness and impracticability of the extreme Right these
centre groups are bound to provide the main body of sup-
port for any Government of conservative tendencies. For
the parties of the extreme Right cannot conceivably in the
existing condition of French political opinion become
strong enough to provide the necessary support for a Gov-
ernment of their own. Most of these centre groups are in
effect Conservative and strongly nationalistic in their out-
look ; and mainly from among them were recruited the
forces which rallied behind Poincare immediately after the
war and behind Tardieu and Laval between 1929 and
1932. But they also include elements which are prepared
on occasion to support, at any rate for a short time, a Gov-
ernment inclining more definitely towards the left ; and in

604 EUROPEAN POLITICAL SYSTEMS

the uncertain poise of French political opinion during most
of the post-war period the swing to and fro of these middle
elements has been the chief feature in the making and un-
making of Governments. Not until the General Elections
of 1932 gave the Left parties a clear and decisive majority
in the Chamber was it possible for a Government of the
Left to exist without the sufferance of some at least of
the deputies drawn from the centre groups ; and even to-
day this is only possible provided that the Radical-Socialists,
as the largest bourgeois party of the Left, are able to keep on
terms with the Socialist Party. They are in fact always un-
easy bedfellows ; for it must be clearly understood that
there is nothing Socialist about the Radical-Socialist Party
except its name. It is in effect a left-wing bourgeois party
with the traditional policy of anti-clericalism and individu-
alist liberalism, and in no sense a Socialist Party as the term
is ordinarily understood.

The Ministry which holds office in France in 1933 is a
Radical-Socialist Ministry drawing some of its support
from the other groups and parties of the Left, but dependent
for its continuance in office on the toleration of the Social-
ists. The policy of the Socialist Party has been since the
war that of refusing to take part in any Coalition Govern-
ment, but of giving its support on terms to any left-wing
Government that is prepared to follow a reasonably ad-
vanced policy. There is, however, no promise that this sup-
port will be maintained, and no pact between the Socialists
and the Radicals save at election times. Again and again
overtures have been made by the Radicals to the Socialists
either for the formation of a Coalition Government which
would involve the Socialists in the responsibility for Radical
measures, or at least for definite pledges of support from the
Socialists to a purely Radical Ministry. But the Socialist
terms for any pledge of support have always been higher
than the Radicals have been prepared to concede ; and this
situation has made the tenure of Radical Governments
continually uncertain. When Herriot, the Radical-Socialist
leader, assumed office after the fall of Laval and the sweeping

POLITICS IN FRANCE 605

left-wing successes in the General Election of 1932, his
failure to come to terms with the Socialists was followed
by some attempt to lean on the Centre for support, and so
to dispense with the aid of the Socialists' voting strength.
But there has been ample evidence in the past of the un-
satisfactory position of any left bourgeois Ministry which
relies on the Centre for support ; and the Daladier Govern-
ment at present in office has swung back further to the Left
and is again relying on the voting strength of the Socialists
to keep it in office.

The Socialists, for their part, despite their objection to
some of the Government's economy measures, have been
induced to support it because there is clearly no alternative
combination on the Left, and the fall of Daladier would
inevitably mean his replacement by a new combination
resting upon the Centre, which would be likely to take
advantage of the world economic depression for an attack
on the social services and the working-class standard of
life. Nevertheless, the Daladier Ministry, no less than its
predecessors, is essentially unstable, as any Ministry formed
in the present condition of French party politics is bound to
be. There is no continuity in the Governments of the French
Republic because there are no parties powerful enough to
keep a Ministry of their own in office, and no alliances
sufficiently homogeneous to have any certainty of lasting.

The Governments of France aie in consequence of their
instability necessarily weak, especially in matters of finance,
which most of all require continuous strong administration.
Finance wrecked the Radicals in 1 924-25 and again in 1 926 ;
and it was left to Poincare to carry through, by the strength
of his own personality and with the aid of a Ministry
supported chiefly by the Right and Centre, the long delayed
stabilisation of the franc. While this was doing, and while
Poincare was there with a strong personality to take charge
of affairs, the French political situation appeared for a time
unwontedly stable ; but after Poincare's withdrawal the
instability returned. Between 1929 and 1932 there were
seven distinct Ministries, including two attempts, which

606 EUROPEAN POLITICAL SYSTEMS

both failed at the very outset, to reconstitute Governments
based mainly on the Left. The Ministries of Tardieu and
Laval during this period did indeed attempt to carry on
Poincare*'s work in home affairs ; but they were never sure
of the support of the Chamber for any length of time, and
their somewhat aggressive foreign policy came to be more
and more out of tune with the growingly pacific temper of
national opinion.

While, ho\v ever, France changes her Government oftener
than any other important country, there is, as has been
suggested, an underlying stability in the French Parlia-
mentary7 system. Weak government does not necessarily
imply the weakness of the Parliamentary system itself, and
no more than in Great Britain has the system been menaced
since the war by any fundamental threat to its continuance.
The French Parliament itself is less probably deeply rooted
in the life of the nation than the Parliament of Great
Britain ; and there are larger elements in France which
object fundamentally to the whole constitution of the State.
France has her Royalists on the one side and her Com-
munists on the other, whereas Great Britain has but the
barest handful of out and out opponents of the constitutional
system. But the body of support behind the French Parlia-
mentary system is nevertheless solid and imposing ; and
the weakness of the Cabinet system, so far from being re-
garded by public opinion in France as an argument against
a Parliamentary regime, is often counted in its favour.
For France is still pre-eminently a nation of small-scale
producers, peasants, small employers, independent crafts-
men, and traders, with a very influential middle class of
rentiers living in retirement at a relatively low standard of
life. These classes do not want strong government, as long
as weak government manages somehow to carry on without
taxing them too highly and without chivvying them too
much — and, of course, provided that the economic system
continues to function without positive breakdown. They
take no great account of the doings away at Paris, and they
are not even particularly keen on the control of their own

POLITICS IN FRANCE 607*

local administrations, which are in fact far more dominated
from the Centre than the local government of Great Britain.
The French are a political people, but their politics still
consists very largely in a demand to be let alone ; they have,
for example, a quite astonishing power of simply refusing
to do things, including, unfortunately for the finances of the
French Republic, a remarkable capacity for evading the
payment of taxes.

This description of the predominant temper of French
political life remains true even in face of the enlargement
of the area of France under the Treaty of Versailles and of
the rapid development of heavy industry which has taken
place in recent years. The Comite des Forges has sometimes
been regarded as the arbiter of French economic policy ;
and its attitude has undoubtedly exerted a strong influence
on those Governments which have drawn their support
mainly from the Right and Centre. But the bourgeois Left
and some of the Centre still represent predominantly the
point of view of the small-scale producers and traders
hostile to large-scale industry and in the last resort to
imperialist and militarist policies. The strengthening of the
Left at the General Election of 1932 represented the victory
of these home-keeping and relatively pacific tendencies over
the more aggressive militarism of the Conservative groups.
As long as the French are not unduly frightened, their
political life tends to incline towards the bourgeois Left. If,
however, they become nationally frightened, as they did in
1923 and as they have considerable cause to do again just
now, the balance is apt to tilt over towards the Right with
its greater stress on the military requirements of national
defence and its more aggressive policy in external affairs.
The danger is that the revival of militarism in Germany
under Nazi rule may cause just such a swing back of
opinion, and so upset the comparatively internationalist
policies followed by the French Governments during the
past year.

This strength of the bourgeois Radical parties, which get
the main bulk of their support from the petite bourgeoisiey

*6o8 EUROPEAN POLITICAL SYSTEMS

serves in France as a powerful insurance against the growth
of anything in the nature of an influential Fascist movement.
For the Radical-Socialists and the parties closely allied to
them draw the main body of their support from precisely
those elements in the community which Mussolini in Italy
and Hitler in Germany succeeded in rallying to Fascism.
In both these countries this conversion of the petite bour-
geoisie to a policy of revolution arose out of the dissolution
of bourgeois society and the rapid rise of Socialism and
Communism among the working classes. Fascism developed
first of all as a movement of petit bourgeois and peasant self-
defence, based on economic and political desperation. But
in France the petite bourgeoisie has as yet no cause for despair.
It has been hit no doubt by the world slump ; but the
comparative self-dependence of the French national
economy and the pursuance of a policy of protection for
French agriculture have combined to maintain relatively
well the position of the French peasants and small-scale
industrial producers. Large-scale industry has suffered as a
result of the slump, and manual workers have begun to
suffer seriously in terms both of unemployment and of
reduced wages. But there has been no suffering in France
at all comparable to the economic distress which has been
the regular accompaniment of German political life ever
since 1929 ; and accordingly the middle parties between
Socialism and revolutionary reaction have been able to
maintain their position without any serioVis difficulty, and
to carry on without any immediate threat to the continu-
ance of the Parliamentary system.

Fascism in France will become a dangerous force only
if economic depression goes so far as to destroy the basis of
life for the French peasantry and the petite bourgeoisie of the
towns. What has been said of the conditions of French
economic life also explains, though to a less extent, the
position of the French Socialist and Communist movements.
The French worker is feeling the pinch of the depression,
for unemployment has risen during the last year at an
alarming rate ; but the workers in large-scale industry

POLITICS IN FRANCE 609

form a comparatively small section of the French popula-
tion, and are hardly powerful enough by themselves to
upset the stability of French political institutions or to win
a majority for constitutional Socialism. French Socialism
possesses a considerable degree of strength and has grown
substantially in recent years ; but there seems to be no
prospect under present conditions of the French Socialist
Party being able, either by itself or jointly with the Com-
munists, to win a majority in the Chamber of Deputies.
French Socialists are even to-day only one-fifth of the
French Chamber, and Socialists and Communists together
not much more than one-fourth.

Nor does French Communism show any sign of becoming
a really powerful force. In the period of excitement im-
mediately after the war, the majority of the French Socialists
actually went Communist. But many of those who declared
for Communism at this stage could hardly be regarded as
full Communists in the Moscow sense of the term, and the
minority which rejected Communism carried with it a
majority of the Socialist members in Parliament, and speed-
ily regained its strength as the premier working-class party
in the country as well. This is natural enough, for Com-
munism, like Fascism, is only likely to develop as a really
powerful force where the capitalist institutions of a country
have reached an advanced stage of decay, or under the
influence of war as a powerful solvent of established in-
stitutions. France, despite her revolutionary history in the
nineteenth century, is to-day, with Great Britain, the least
revolutionary of countries, and therefore the least favour-
able ground for the growth of extremist movements on
either the right or the left. It is easy enough to criticise the
inadequacy of the French Parliamentary system from a
constructive point of view. French politics are unconstruc-
tive, and French public finance is almost always in a mess.
But that is fundamentally because a large section of the
French public- does not want its politics to be constructive.
In home affairs it prefers the relative security it knows to
doubtful and dangerous experiments in either a right or a

UR

6lO EUROPEAN POLITICAL SYSTEMS

left direction. And it is not likely to be converted from this
point of view until either large-scale industrialism has
advanced a good deal further, or the European anarchy
so infects the relatively self-contained French economic
system as to make the continuance of the existing situation
plainly impossible.

§ 4. FASCISM IN ITALY

EVEN WHILE the new States of post-war Europe were be-
ginning to build up their constitutions on the basis of sup-
posedly democratic principles derived from the experience
of Western Europe and the United States, the fundamental
principles on which they were working were being aggres-
sively challenged in Russia by Lenin and his fellow-Com-
munists, who were working upon a radically different set of
underlying assumptions and with a radically different
conception of true democracy in their minds. The crumb-
ling of the old feudal autocracies of Central and Eastern
Europe was accompanied not only by an extension of the
methods and policies of Parliamentary democracy to new
areas in Europe, but at the same time by the emergence
into the realm of practice of new theories of Government,
which challenged the entire basis on which these post-\\ar
constitutions were being built. The Russian challenge will
be discussed further in a later section of this book. It is
mentioned here only because it was in fact prior in time to
the other rival which Parliamentary democracy has en-
countered in its attempt to take charge of European affairs.
Fascism, though it emerged later, is treated first because it
involves a far less fundamental cleavage with the past than
Communism and seeks to alter rather the political structure
of society than the underlying economic structure on
which, in the view of Marx's Communist followers, political
institutions are bound to rest. Fascism is in effect an attempt
to change the political organisation of society without
radically altering the economic system ; and accordingly

FASCISM IN ITALY 6l I

the transition from Parliamentarism to Fascism can be
made far more easily and with far less disturbance to the
working of the social system than the infinitely more drastic
purge of economic institutions demanded by the Com-
munists wrould involve.

Marxism in its Communist form — it is a matter of dis-
pute how far any other form of it can claim to be really
Marxism at all — is essentially a cosmopolitan doctrine. It
aims at transcending all political and racial frontiers, not
merely in the sense of wishing to link up the various
nations of the world into a federal unity of free workers'
republics, but also in setting out to abolish these frontiers
altogether save as purely administrative divisions in a world
too large to be managed successfully under a system of
unitary government. Against the division of the world into
separate political units — nation from nation — Communism
sets up the division of men into economic classes based on
their differing relations to the powers of production and to
the productive system. " Workers of the World, Unite "
is its slogan, and it aims at bringing together the whole
working-class movement as a cosmopolitan force abjuring
all ideas of patriotism and national loyalty and seeking by
its united action to establish everywhere a social system
based on the abolition of class distinctions. The classless
society is its ideal ; and this classless society is to be, not a
national society related to other classless societies as the
capitalist States of the world are related to one another to-
day, but a world society cut up into autonomous groups
merely for purposes of administrative convenience.

Parliamentarism, on the other hand, is at most inter-
nationalist and not cosmopolitan. The League of Nations
is an attempt to group the sovereign States of the world
into a loose federation of co-operating nations without any
sacrifice of sovereign independence by the member States,
save upon a few clearly defined issues. It assumes that the
various States which make up the federation can be re-
garded as possessing Governments whose views can be
taken as in some real sense expressing the national will of

6l2 EUROPEAN POLITICAL SYSTEMS

each country ; and its theory, if not its practice, therefore
'assumes that each country will possess some form of Gov-
ernment that can be accepted as fulfilling the requirements
of democracy. The League itself, with its Council and its
Assembly, attempts to reproduce the structure of Parlia-
mentarism on an international scale. Its Council aims at
being something like an international Cabinet, and its
Assembly something like an international Legislature ;
and its affiliated complement, the International Labour
Organisation, has been created mainly in accordance
with the same set of ideas. If Parliamentarism, basing itself
on the recognition of national sovereignty, can become an
international force, the League of Nations is its natural
instrument. But a federal body formed upon this basis of
co-operation between sovereign Governments can clearly
never pass over from the international to the cosmopolitan
ideal. It is a linking of nations and not in any sense a denial
of the ultimate validity of national or racial divisions.

Even so, the League has far too internationalist a tone
to please the Nationalists of post-war Europe. They may
be able to dominate the League Council or the League
Assembly, or at all events to prevent the League from taking
any effective action that might menace the absolute self-
determination of each individual sovereign State ; but
they are well aware that much of the public sentiment in
each country which supports the League goes* much further
than the governing organs of the League are able to go
in an internationalist and pacifist direction. For many of
the League's unofficial supporters, organised in bodies like
the League of Nations Union in Great Britain and the cor-
responding societies in the Continental countries, do not
recognise how thoroughly the structure of the League rests
upon an assumption of the absolute sovereignty of each
national State. They are trying to edge it towards a more
far-reaching internationalism, based not indeed on a
denial of the reality or value of national divisions, but at
least upon 3. drastic limitation of sovereign independence
in such matters as the making of war and peace. They want

FASCISM IN ITALY 613

to limit armaments, to promote international treaties and
arbitration, and to build up on the foundation of the League
an international public opinion which shall be effective in
checking nationalist or imperialist aggression wherever it
makes itself felt. The League, in aspiration if not in fact,
embodies the philosophy of liberal Parliamentarism ex-
tended from the national to the international scale.

Fascism, however, while it may be consistent with
affiliation to the League, as long as the League does nothing
to limit ultimate national sovereignty, is by no means pre-
pared to endorse this underlying liberal philosophy of the
League's rank and file supporters. For, in as far as Fascism
can be regarded as having a philosophy at all, that philos-
ophy is ultimately and aggressively nationalist. It is hostile
both to the pacifist internationalism which underlies the
attempt to build up the authority of the League of Nations
and by that means to put limits to the national self-expres-
sion of the member States and, even more thoroughly and
fundamentally, to the whole attitude of Communism, which
aims at nothing less than the complete sweeping away of the
solidarities and loyalties upon which Fascism rests. Fascists
have everywhere declared war on internationalism in all
its forms ; but their deepest hatred has been reserved for
the Communists and for such Socialists as share in the
cosmopolitan outlook dictated by the Marxian philosophy.
Thus, while, as we saw earlier, Fascism has in practice
been the destroyer of the Liberal Parliamentary State, it has
really been for the most part marching over the prostrate
body of Parliamentarism in order to get at its real enemy,
the cosmopolitan philosophy of Communism and Socialism.

The New Nationalism. Nationalism has thus become
in the twentieth century the philosophy of new authori-
tarian groups aiming at the destruction of the Parliamentary
system. This is of course a complete reversal of the position
which existed in the earlier part of the nineteenth century,
when nationalism developed as the ally and inspiration of
the very liberal-democratic movements whose destruction

614 EUROPEAN POLITICAL SYSTEMS

it is compassing to-day. Nineteenth century nationalism is
associated in our minds with the German Revolution of
1848, with the unification of Italy, and with the building
up of Parliamentary institutions based on the idea of respon-
sible government over a large part of Europe. It was the
enemy of the old autocracies ; and its constant demand
was for the granting by the absolute monarchies upon which
it waged war of constitutions embodying the principles of
democratic self-government. There were indeed in
Mazzini's nationalism large elements of internationalism
already present ; and Mazzini can fairly be regarded as the
forerunner of the ideas which the more advanced adherents
of the League are now attempting to embody in its collec-
tive institutions. But Cavour was a very different person
from Mazzini ; and the liberal nationalism of the nine-
teenth century was in practice far more a la Cavour than
d la Mazzini. For, wherever nationalism established itself
and succeeded in equipping a country with responsible
Parliamentary institutions, it easily became expansionist
and imperialist as well as merely nationalist.

Up to the Great War these tendencies were able to
develop without requiring any further change in the
structure of the State. For it was found that Parliaments
were fully as amenable as autocracies to the new philosophy
of economic imperialism. But there were in the expansionist
and imperialist phase of nationalism \\hich /set in in the
later part of the nineteenth century already latent the
elements which were in due course to prove fatal to the
liberalism of the Nation-State. The more successful nation-
alism was in consolidating the institutions of the States in
which it developed, the less liberal it grew and the more
it tended to ally itself with the aristocratic and authoritarian
elements in society which it had originally set out to fight.
Side by side with this gradual conversion of the liberals to
authoritarianism and imperialism, there had been going
on an opposite conversion of the older aristocracy to nation-
alism. The Junkers and militarists, the great landed pro-
prietors and aristocrats of the old order, having lost their

FASCISM IN ITALY 615

power to govern society autocratically by their own class
authority, set to work to master and turn to their own ends
the institutions of the new Parliamentary States. In order
to do this they had to find allies ; and these were soon dis-
covered in the great industrialists and bankers and traders,
who had appeared as a liberalising influence as long as they
continued to be excluded from an effective share in political
power. The new nationalism brought together, if not into
unified parties, at least into alliances of co-operating poli-
tical groups, the 'aristocrats of the old order and the pluto-
crats of the new. And this process, which had been going on
for a long time before 1914, but was still incomplete and
largely unrecognised when the war broke out, was speedily
completed after the war, when both aristocrats and pluto-
crats were confronted with the fait accompli of the demo-
cratic Parliamentary State. Nationalism, which had been
in the early nineteenth century a force on the left in Euro-
pean politics, was quite definitely after 1918, and to a
considerable extent had become even before 1914, a force
standing on the extreme right.

This is not to say that the Junkers and militarists felt any
affection for their new allies. At any rate in Germany and
Austria-Hungary, where State constitutions had retained
large elements of autocracy and aristocracy right up to
1918, the old governing classes retained their traditional
ideals and continued to hold that the only appropriate way
for men to be governed was by a powerful monarchy up-
held by the recognised authority of a privileged aristo-
cratic class. This Junker attitude was at bottom a class and
racial attitude even more than a nationalist attitude ; it
stood for the national State not so much because it was
national as because it embodied a system of class and race
privilege, and it withheld any real feeling of loyalty from
the new Republics established in the defeated countries
on the ruins of the pre-war Empires of Central Europe. It
was nationalist only in the sense that it resented external
interference with its right to struggle for the regaining of
its old exclusive authority, and in the sense that it saw in

' 6l6 EUROPEAN POLITICAL SYSTEMS

militant nationalism the best hope of re-establishing autoc-
racy and aristocracy as the pillars of the State. But, while
there was no change in the mental attitude of the tradi-
tional upholders of class privilege, there was a great change
for the time being in their power. They could not hope to
regain control by their own unaided efforts, and they had
accordingly to ally themselves with any forces which they
thought themselves capable of turning to their own ends.
This meant at first an alliance with industrial magnates,
bankers and merchants, fearful of the rise of Socialism within
the post-war Republics. But it came to mean later a
willingness to join forces with any movement which seemed
to promise the overthrow of democratic institutions with-
out, at the same time, involving any attack on the central
position of economic privilege.

Fascism, though in both Italy and Germany it has
appeared at a certain stage of its development in alliance
with the older nationalism, rests in reality on very different
foundations. In Italy Mussolini and his Fascists took over
and used for their own purposes in the early stages of build-
ing up the new Fascist State the remnants of Conservative
nationalism ; but they never allowed their policy to be in
any way governed or deflected by the wishes of their con-
servative allies. In the same way the German Nazis made
their Government in coalition with Herr von Papen and
Herr Hugenberg ; but even the first few weeks of Herr
Hitler's Government showed conclusively that in this alli-
ance the Nazis meant to secure exclusive domination for
themselves. Captain Goring, and not his titular chief vori
Papen, took over the government of Prussia ; and excluded
Republican officials and administrators were everywhere
replaced by Nazis and not by Nationalists. Moreover in
Germany, as in Italy, the nationalists were speedily dis-
solved as a separate party, and merged in the new move-
ment which they had helped to power. Fascism may be
able successfully to absorb into itself in Germany, as it has
done to a large extent in Italy, the articulate remnants of
the old feudal nationalism ; but it is a great mistake to

FASCISM IN ITALY 617

confuse the two, or to regard them has having anything more
than an incidental and temporary community of outlook.

Fascist Philosophy. What, then, is the underlying
philosophy of Fascism in post-war Europe ? The question is
extraordinarily hard to answer ; for, while there has been
no dearth of theorists willing to equip the new movement
with an appropriate philosophy, it is clear that the move-
ment came into being first and its philosophy was developed
afterwards as an explanation and a justification of its posi-
tive doings. There is of course nothing unnatural in this.
It is indeed the logical order of development that forces
should arise in the world before theoretical explanations
of these forces can be put forward. Theory interprets facts as
they arise. It is only creative in the secondary sense that
the possession of an articulate theory can give added
strength and coherence to a force already in independent
being. If Fascism had started as a philosophy it might never
have become a movement ; starting as a movement, and
deriving its power from the actual state of mind which
existed widely among men in the years immediately after
the war, it was bound before long to grow a philosophy in
order to give theoretical sanction to its existence.

We must, then, if we are to understand how Fascism has
developed into a powerful force in the life of post-war
Europe, begin by looking for its causes in men's state of
mind in the years immediately following the war. And we
shall have to begin with a paradox. Fascism is essentially
an outgrowth of the psychology of disillusionment and
defeat. It is perfectly true that it developed first in Italy,
and that Italy had been in the war on the victorious side.
But, while Italy was the ally of France and Great Britain
and the United States, she emerged from the Peace of
Versailles with a sense not of victory but of humiliation and
defeat. There had been strong opposition in the country
itself to participation in the war ; and the volte face which
brought Italy to change sides and, after dissociating herself
from the Triple Alliance, to abandon neutrality in favour

6l8 EUROPEAN POLITICAL SYSTEMS

of an active part on the side of the Allies, was brought aboui
by lavish promises concerning the spoils of victory. Itah
was to be allowed as the reward for her help to emerge
from the war as a great imperialist Power with a colonia]
empire comparable with those of the other great Powers
and unlimittd prospects of expansion. The disappointment
of these hopes, and the scanty rewards which could be an-
ticipated from the exploitation of her largely barren ter-
ritories in North Africa, caused after 1918 a revulsion oi
opinion so violent as to threaten the very foundations oi
a flimsy liberal-democratic State which showed no real
capacity for government, or for the handling of the difficult
economic problems which confronted the country. The
checking of emigration raised up a surplus population
seeking an outlet for its energies, and returning soldiers
found no means of fitting themselves into an economic
structure which appeared to stand in no need of their
services. Socialism waxed strong in the industrial centres ;
but Italian industry was too little developed for Socialism
to become an effective force unless it could either win the
peasants over to its side or make up its mind to dominate
them in the Communist \\ ay, and find means of creating
a sufficient mass of agrarian discontent to enable it to seize
power. Possibly the Italian Socialists, who developed
strong left-wing tendencies after the Russian Revolution,
might have succeeded in doing this had it/not been for
Don Sturzo and his Popolan^ with their progressive policy
of social reform and their wide appeal among the Catholic
peasantry. But Don Sturzo and his followers were successful
in preventing Socialism from permeating the peasants, and
accordingly in interposing barriers, which seemed to most
of the Socialist leaders to be absolute, in the way of a suc-
cessful Socialist revolution. The contest for popular support
between the Socialists and Don Sturzo's Catholics thus led
to a position of stalemate. The Socialists were too strong to
allow the bourgeois parties to govern effectively without
them ; but they were not strong enough to assume the
task of governing themselves. Consequently a hungry and

FASCISM IN ITALY 619'

disillusioned population found itself left without any govern-
ment at all, and a larger and larger number of the younger
elements within it were soon in a mood to turn to anyone
who promised them a field for immediate activity and
a prospect of ending the deadlock in political and economic
affairs.

Out of these elements of discontent the ex-Socialist
Mussolini proceeded to build up his Fascist following.
Benito Mussolini had been before the war an active
Socialist leader, belonging to the extreme wing of the party
and influenced largely by Syndicalist ideas. When the
world crisis arose in 1914 he opposed strongly the inter-
vention of Italy on the side of the Central Powers ; and he
soon came over, after a quarrel with the Socialist Party, to
the advocacy of intervention on the Allied side. On ceasing
to be editor ofAvanti, the official Socialist paper, he founded
the Popolo d'liaha for the expression of his own views ; and
this paper became one of the influential forces in driving
the Italian politicians to intervene in the war. When war
had been declared, Mussolini joined the army as a private
soldier, and remained on active service until he was
wounded in 1917. He then returned to his editorial work,
urging in the Popolo cTItaha the continued prosecution of
the war even after the disaster of Caporetto, and the
pressing to the full of Italy's claims to a large share in the
spoils of victory.

The Rise of Fascism. Soon after the Armistice, amid
the complete disorganisation which had overtaken Italian
economic life, the rapidly rising prices, the widespread
unemployment and the general discontent with the policy
of the Government at the Peace Conference, Mussolini
founded in March 1919 his first Fascio di Combattimento, the
forerunner of the Fascist Party. At this stage and for some
time longer, his policy was still in many respects aggres-
sively Socialist. The Fascist movement began as a force
relying on the support of the ex-soldiers, with an aggressive
programme of economic demands combined with the

1 62O EUROPEAN POLITICAL SYSTEMS

advocacy of an entire reconstruction of the Italian State.
It was republican, democratic, anti-clerical and even to
some extent internationalist. It demanded the convocation
of an " Italian constituent assembly conceived as the
Italian section of an international constituent authority of
the peoples, with a view to proceeding to the radical
transformation of the political and economic foundations of
social life." It proclaimed the doctrine of " popular
sovereignty exercised by the universal equal and direct
suffrage of the citizens of both sexes together with the right
of referendum and popular veto." It demanded the abo-
lition of the Senate and the institution of single chamber
government, severe limitations on the powers of the execu-
tive, and a considerable measure of decentralisation in the
affairs of local government. With these demands went
others — for complete liberty of thought, conscience, reli-
gion, association, Press and propaganda, the dissolution of
joint-stock companies, the suppression of all speculation, of
banks and of stock exchanges, the nationalisation of credit,
payment of the national debt at the exclusive expense of the
rich, redistiibution of the national wealth, including the
division of the land among the peasants, and finally, the
exploitation of industries, transport and public services
under the control of the Unions of technicians and workers.
Internationally, too, this first programme of the Fascists
reads strangely to-day. It demanded the abolition of con-
scription, general disarmament and the prohibition by all
States of the manufacture of arms, the abolition of secret
diplomacy, and similar aspirations of the political left ; and
it laid down that international policy should be " inspired
by the principle of the sovereignty of peoples and their
independence within the confederation of States."

Radical as these demands of the Fascists were, Mussolini
and his friends were throughout at loggerheads with the
orthodox leaders of the Socialist movement. Italian
Socialism immediately after the war had taken a pro-
nounced left-wing turn. In July 1919 there was a political
strike in support of the Soviet Governments of Russia,

FASCISM IN ITALY 62 l"

Bavaria and Hungary ; and throughout the latter part of
1919 and the early months of 1920 there were constant
strikes, including important stoppages on the railways and
in the Post Office in June 1 920. These movements led up to
the great dispute in the metal industry in the summer of
1920. Strikes by the workers in certain establishments were
followed by the declaration of a general lock-out by the
metal employers ; and the Trade Unions then retaliated,
as they had previously on a smaller scale, by a general
occupation of the factories. Up to this point, Mussolini and
his Fascists, while they were already at variance with the
internationalist attitude of the Socialists, were generally on
the side of the workers. The Fascists had supported the
peasant risings in 1920 in the south of Italy, and they
were prepared to support the occupation of the factories
by the workers. But the Socialist leaders would have no
dealings with Mussolini and his Fascists ; and from this
point the quarrel between the two groups became open and
bitter. The Socialists and their Trade Union allies, having
seized the factories, had to make up their minds what to do
next ; for the Government, so far from taking any step to
turn them out, merely left them in passive occupation in
the hope that the movement would collapse. This indeed it
was bound to do unless the Socialists were prepared to go
further and embark on positive revolutionary action ; for
they had no means of securing supplies of raw materials in
order to work the factories themselves, or of disposing of the
products if they had been prepared to work them.

The Socialists, however, despite their left-wing policy,
shrank from any attempt at open revolution. They had
plenty of arms, for Italy was in those days full of arms in
private hands, and large quantities of munitions had been
seized in the occupied factories. But there was a total lack of
military organisation and of military leadership, and
finally, in October 1920, the workers, unprepared to take
full control of the State, evacuated the factories and
returned to work on the basis of a compromise over wages
and conditions.

'622 EUROPEAN POLITICAL SYSTEMS

This failure to seize power in the summer of 1 920 proved
in the long run the undoing of the Italian Socialist move-
ment. It caused violent internal disputes in the party itself.
In June 1921, after the Party Congress had refused to
commit itself to a revolutionary policy, the Communist
wing broke away and formed its own organisation in
association with the Third International ; and even so the
remainder of the party continued to be split between a
right wing, following a strictly constitutional policy, and
a left, or " maximalist," wing differing from the Com-
munists only in matters of tactics and revolutionary method.
The party split again in October 1922, but long before this
its chance had gone.

Meanwhile Fascism had been growing fast. In September
1919 d'Annunzio, at the head of a small unofficial army,
had marched on Fiume and occupied the town in defiance
of the decisions of the Allied statesmen. There was deep and
widespread resentment in Italy at the treatment meted out
to the country by President Wilson and the Allied states-
men at Paris ; and a wave of nationalism swept over a large
mass of the people, especially among the upper and middle
classes. D'Annunzio's dramatic seizure of Fiume helped to
fan the flames, and his continued occupation of the city in
defiance of the Allied Governments kept the excitement at
height throughout 1920. When finally he surrendered
Fiume to Italian regulars in 1921, and his 'forces were
disbanded, most of his men speedily went over to the
Fascists, thus equipping Mussolini with a powerful rein-
forcement to the groups of ex-soldiers whom he had already
gathered round him. Thereafter Fascismo spread faster still.
Already in November 1 920 Mussolini had begun the form-
ation of armed Fascist squadre, and an intensive guerilla
warfare between the Fascists and the Socialists and Com-
munists had set in. After the occupation of the factories had
failed Fascist policy became less and less revolutionary in an
economic sense, and more and more aggressively national-
ist, though it still retained for some time its anti-clerical and
anti-monarchical tenets. In November 1921 the Fascist

FASCISM IN ITALY 623

Congress decided to create a definite political party boy-
cotting the existing Italian State and demanding its
radical reconstruction. But in forming the party the Fas-
cist Congress laid down no policy for it, merely announcing
that its policy was adequately expressed in the utterances
of its leader. Mussolini had in fact succeeded in building
on the basis of his original organisation of ex-soldiers a
powerful, disciplined and armed body of adherents pre-
pared to follow him almost blindly wherever he might
choose to lead.

The main strength of Fascism came not from the in-
dustrial workers, but from the petite bourgeoisie and the
peasants. Fascism, like the Nazi movement at a later stage
in Germany, recruited itself primarily from those elements
in the population which combined hostility to large-scale
Capitalism with an intense fear of the coming of a Socialist
and still more of a Communist regime. Its adherents,
apart from the discontented ex-soldiers, who provided its
nucleus of active members, were drawn from the classes
whose position was based on the ownership of small property
and the carrying on of small-scale industry and agri-
culture ; and as long as these forces felt Socialism rather
than large-scale Capitalism to be the chief enemy threaten-
ing their survival, they were willing to ally themselves with
large-scale Capitalism in order to overcome the Socialist
menace. Mussolini, after the failure of the occupation of
the factories, drew large subsidies from the great Italian
industrialists as a reward for the intensive warfare which he
carried on against the Socialist and Communist groups. It
was with the assent and to a large extent the positive co-
operation of the Italian industrialists, as well as of the
aristocracy, that, despite the declared anti-capitalist
attitude of the movement, Fascism actually climbed
towards power. Mussolini showed an extraordinary
talent for organising the intermediate groups under the
inspiration of an idea nazionale which often seemed to
have no real or positive content. He showed how the
middle groups in society could be organised into a force

624 EUROPEAN POLITICAL SYSTEMS

powerful enough to compass at least temporarily the
defeat of Socialism ; and similar adventurers in other
countries have not been slow to master the lessons of his
achievement.

Meanwhile the Italian State remained in the nerveless
hands of the old governing groups. Civil war between
Fascists, Communists and Socialists raged practically
unchecked in the streets of the leading cities, and nothing
was done to improve the almost desperate economic
situation of the country. More and more the old liberal-
democratic order in Italy was dissolving into chaos ; and,
since the Socialists had drawn back on the brink of revolu-
tion, Fascism remained as the sole effective claimant for
political power. The Catholic Popolari were too much
involved with the old order of Centrists, and too pacific
in their methods to deal with a situation so desperate as had
arisen in the Italy of 1922 ; for it had become plain that the
Italian State lay at the mercy of that party, and of that
party only, which was prepared to appeal to force in order
to resolve the deadlock. When finally in October 1922 the
Fascists marched on Rome, there was not even the shadow
of armed opposition, though the army, if it could have been
trusted, would have been ample to deal with Mussolini's
following. But the army made no move, and the old Minis-
try yielded up its power without a blow.

This could not indeed have happened hacKnot Fascism,
as a prelude to the assumption of power, made certain
definite renunciations of its earlier policy. In September
1922 Mussolini, on behalf of the Fascists, definitely ex-
pressed his adherence to the monarchy as the symbol of
that national unity for which Fascism stood ; and at the
same time there was a pronounced relaxation of the anti-
clerical propaganda previously associated with the move-
ment. The King was won over to the Fascist side ; and it
was largely the King's attitude that made resistance by the
old Government impossible. For, while the troops might
have obeyed the King if he had given the order to resist,
it is quite unlikely that they would have obeyed the

FASCISM IN ITALY 625*

Government against the King's will. With the King's
support Fascism was able to assume control of the State
without any active opposition. But at the outset Mussolini
and his followers did not feel strong enough to attempt to
govern alone. Setting a precedent which was followed by
Hitler and the Nazis a decade later, they assumed office as
the leading element in a coalition Government into which
they admitted representatives of the old nationalist and
bourgeois parties, trusting to their own superior unity and
to the force behind them to render these additional ele-
ments impotent in effect. In the event the old nationalists
were speedily absorbed into the Fascist Party, and the
elements which were less capable of absorption were soon
liquidated when they had served their original purpose of
easing the Fascist assumption of power. Meanwhile, Parlia-
ment, with only a tiny handful of Fascists among its mem-
bers, found itself completely dominated by the new ad-
ministration. Against the will and opinion of the great
majority of the members, it passed in 1923 the new con-
stitutional law demanded by the Government, knowing
that a refusal on its part to acquiesce would simply lead to
its forcible dissolution. It suited Mussolini to cloak his
assumption of dictatorial powers as far as possible in con-
stitutional forms ; and Parliament, rather than provoke a
more definitely revolutionary situation, meekly did what-
ever he and the Fascists ordered.

The new electoral law of 1923 was designed to ensure the
Fascists a working majority in the new Parliament, even in
face of a state of opinion in the country which would
certainly not have secured them that majority under the old
system of proportional representation. Under the new
system, the party which obtained the largest number of
votes, provided that it secured at least twenty-five per cent
of all the votes cast, was to be allotted two-thirds of the
total number of seats in the new Parliament, the remainder
being divided among the other parties in proportion
to the votes cast. Under this system the Fascists succeeded
in 1924 in securing 65 per cent of all the votes cast, and

'626 EUROPEAN POLITICAL SYSTEMS

therewith a Parliament ready to carry out their policy
without question.

But at this point the new Fascist State was almost wrecked
by the troubles which followed the murder of the Socialist
leader Matteotti, who had ventured to denounce the new
electoral system as unconstitutional, and had advocated a
refusal to recognise the decrees of the new Parliament. The
murder of Matteotti caused a great revulsion of feeling
throughout the industrial centres of North Italy ; and the
Fascists, in order to avoid a revolutionary outbreak, were
compelled to make temporary concessions. In 1925 a new
electoral law, based on universal suffrage for all citizens
over twenty-five and on single-member constituencies, was
enacted ; and there were other signs of the impending
liberalisation of the Fascist regime. But as soon as the difficul-
ties following on the Matteotti case had been successfully
overcome the Fascists once more changed their tactics. In
1926 the opposition was expelled from Parliament, at which
it had for some time attended but irregularly and in small
numbers ; and in 1928 the electoral law was again changed
and a totally new system instituted in accordance with the
principles of the " Corporative State " which the Fascists
were now setting out seriously to institute. As the electoral
law of 1928 still forms the basis of the political structure of
Fascist Italy, it will be convenient before we attempt to
describe it to say something more generally of the nature of
the new corporative society for which Fascism professes to
stand.

The Corporative State. Fascism as a theory and as
a political policy rests essentially upon its claim to embody
the " national idea." As we have seen earlier, the theory of
Fascism has grown up gradually, following its practice
rather than giving rise to it. Indeed, on the face of the
matter Italian Fascism has completely boxed the compass
of theory since it originally appeared as a political force.
There seems on the face of the matter to be nothing in com-
mon between the revolutionary and aggressive economic

FASCISM IN ITALY 627 '

and political policy advocated by the Fascists in 1919
and the programme which, with the support of the Nation-
alists and the great employers, as well as the small middle
class, they proceeded to put into force in Italy after the
march on Rome. These obvious contradictions have led
many observers to regard Fascism as essentially an oppor-
tunist movement created by Mussolini for his personal
ends, and brought to power by his personal genius for
focussing contemporary discontents. But this view, while it
possesses some substance, is fundamentally mistaken. The
Fascists have shown a great capacity for changing their
minds and adopting quite contradictory policies at different
times ; but behind their opportunism there is a real
element of continuity, and it is upon this element, rather
than upon their opportunism, that their power is funda-
mentally built.

For Fascism, even at its first appearance in 1919, was
emphatically a nationalist force. Even when it set out to
proclaim universal disarmament and the federation of free
nations, it was already thoroughly nationalist in its outlook
and stood for the independence of each sovereign nation
as an ultimate element in the constitution of an inter-
national political system. Mussolini succeeded in building
up Fascism into a force powerful enough to take over the
government of Italy because he realised the possibility of
working on emotions in the minds of men sufficiently
powerful to create an effective counter-force to the emo-
tional appeal of international Socialism. The mobilisation
of discontent with the low position held by Italy among the
nations, with her economic backwardness as the cause of
her political subjection, and with the supposedly ungener-
ous treatment meted out to her at the Peace Conference,
was the first task which Mussolini and his Fascists took in
hand. There were many other elements in their programme
at this stage ; and these other elements were important as
additional means of enlisting support. But what gave unity
to the movement from the first was its aggressive insistence
on the unity of the nation as a whole and on the utter

628 EUROPEAN POLITICAL SYSTEMS

failure of the old liberal-democratic State to achieve this
unity, or to give Italy a respected and secure status among
the nations. There was so far not much philosophical
background to this idea of national unity ; but the idea was
present and could be filled out in both theory and practice
as soon as necessity arose. Actually Fascism took over from
Gabriele d'Annunzio a great deal of the romantic national-
ism which he embodied in the new constitution which he
drew up for the Free State of Fiume during the period of
his occupation ; and Hegelian philosophers, such as Gentile,
who rallied to the movement at a later stage, soon filled up
the gaps on the theoretical side. Fascism may have begun
by being mere nationalism ; it soon took unto itself the
character of a mystical Hegelian nationalism made up of
elements taken from the Constitution of Carnaro and the
Philosophic des Rechts.

At the basis of this enlarged nationalist theory is the
conception of the totalitarian State, that is to say, of the
State as taking up into itself and unifying all the institutions
of the national life, private as well as public. The Fascists
deny, as Hegel denied a century earlier, that there can be
any social organism more ultimate and embracing than the
national State. They deny the possibility, or at least the
validity, of any real international State, or even of any
federation of nations embodying a supra-national con-
sciousness. For them the national State is^the ultimate
being, more real than the individuals arid groups which
make it up, and with an absolute claim upon the loyalty
of every one of its members. But the national State is at the
same time not a mere absorption of the many into the one ;
for it finds expression naturally and inevitably through the
multiplicity of functional organisations, each playing its
essential part in the organised life of the entire society, and
each responsible to the State for the successful fulfilment of
its own particular function. At this point the philosophy of
Fascism has obviously certain resemblances both to the
Syndicalism which had a substantial influence upon its
actual development in Italy and to Guild Socialism. But

FASCISM IN ITALY 629 '

Fascism diverges sharply from both Syndicalism and
Guild Socialism in that it denies the existence of the class
struggle, save under the conditions of bourgeois democracy,
and claims to remove the necessity for class conflict by
assigning to each class and group its significant place and
function within the structure of the Corporative State. It
is at war with Marxism and internationalism because
both doctrines set up claims to loyalty which deny the
claims of the national State ; and it is especially hostile to
Marxism, because Marxism, far more than bourgeois
internationalism, not merely denies the ultimate validity
of the claims of the national State, but sets up against them
a counter-claim to allegiance on a basis of economic class.

According to the Fascist theory, classes exist not inde-
pendently but only as the corollaries to the distribution of
functions within the national State. There is no true com-
munity of class extending across national frontiers, because
the class as it exists within each State is only a fragmentary
expression of the national consciousness of that State, and
has no claim to expression at all except in as far as it is
fulfilling its assigned function within the national body.
The Fascist State recognises Trade Unions, provided that
they are built in its own image, and repudiate all connec-
tions with Marxism and the class-war ; but it gives
equal recognition to associations of employers and to all
corporate groups based on professional solidarity. More-
over, its recognition is in all these cases conditional and not
absolute. It recognises the Trade Union, or the employers'
association, not as a body possessing independent rights
against the State, but only as a part of the necessary working
machine of the Corporative State itself. The Trade Union
and the employers' association thus become parts of the
State, each with a definite responsibility and both subject
to the controlling power of the State as a whole. The Trade
Union may seek to raise wages or improve conditions of
work, and the employers' association may seek to reduce
wages or to worsen conditions ; but both must bow to the
final judgment of the State, and no conflict between group

' 630 EUROPEAN POLITICAL SYSTEMS

interests must be pushed to the point at which it threatens
the security of the State. Compulsory arbitration in in-
dustrial matters is therefore an integral part of the Fascist
system.

The Fascists contemplate a far more complete disappear-
ance than has actually been secured of the antagonisms
between employers and workers. Under the Fascist State
employers and workers are to be organised into separate
syndicates on a professional basis. But these syndicates are
also to come together in corporations representing the
industry as a whole, and upon these corporations it v*as at
one time proposed that the responsibility for the concbeg of
industry should be largely and progressively devolved. r t»th
a view to the building up of this new autonomous structure
for Italian industry the Fascists established as early as 1923
their Ministry of Corporations ; and in 1926 a National
Council of Corporations was brought into being and
strengthened subsequently by the legal recognition accorded
to it in 1930. But in practice the Council of Corporations
has so far worked by bringing together over the whole
field of industry the separate associations of employers,
manual workers and technicians and professions ; and the
unified structure for each industry contemplated in the
original scheme has not in fact been brought into effective
existence, though some advance towards it has been recently
announced. Strikes, since the disturbances which followed
the murder of Matteotti, have been few and far be-
tween, and the arbitration machinery has worked after a
fashion ; but differences between employers and workers
have by no means been removed, though their expression
has been largely prevented by the complete domination of
the Fascist leaders over the new Trade Union movement
which they have created.

For in order to advance even as far as they have advanced
towards the corporative State the Fascists have been com-
pelled to create a new Trade Union movement of their own.
Not content with smashing the machinery of the Socialist
and Communist Parties, Fascism also destroyed the existing

FASCISM IN ITALY 63**

Trade Unions of the Italian workers. In their place Mus-
solini and his colleagues created new Fascist Trade Unions,
to which alone were conceded State recognition and the
right to enter into collective agreements under the auspices
of the Corporative State. Workers were not forbidden to
form or belong to other associations standing outside the
Fascist system ; but they were compelled to subscribe to the
Fascist Unions without acquiring any rights within them
unless they became members, and the other associations
were reduced to impotence by the refusal of recognition
or of the right to make agreements with employers. The old
Italian Trade Union movement was thus in process of time
almost completely liquidated ; and the new Trade Unions
established and maintained under Fascist leadership were
fully amenable to the will of the Party which had brought
them into existence. Much working-class discontent re-
mained and remains to-day ; but it was left unorganised
and without means of expression. The Fascists thus success-
fully realised, in form at least, their aim of making the
Trade Union movement an integral part of the new State.
There is clearly no more than a superficial resemblance
between a Trade Union movement thus disciplined and
organised under the auspices of the State and the inde-
pendent self-governing Unions intended by the Syndi-
calists and Guild Socialists to serve as the effective basis
for a new industrial society. Fascism took over from
Syndicalism and Guild Socialism something of the idea of
self-government in industry ; but it then proceeded to apply
this idea in a manner totally inconsistent with either
Syndicalist or Guild Socialist aspirations. For although the
Guild Socialists, unlike the Syndicalists, did recognise the
need for a political State, distinct from the industrial or-
ganisation of society, they thought of this State not as a
sovereign authority dominating the whole life of society,
but as a federal body emanating from the independent
economic institutions established for the government of in-
dustry. Moreover, both Syndicalism and Guild Socialism
contemplated the abolition of class distinctions and the

633 EUROPEAN POLITICAL SYSTEMS

total disappearance of the employing class, and stood for the
conduct of industry through self-governing corporations of
workers by hand and brain, with the total supersession of
private ownership and of the profit motive. Fascism, on
the other hand, recognises and seeks to stabilise class dis-
tinctions, and sets out to maintain the principles of private
property and production for private profit.

On this question of private property and the private ex-
ploitation of the means of production the attitude of
Fascism is that the State should only interfere with the
working of industry to the extent necessary to ensure the
stability and success of the social system as a whole. It
recognises that there are cases in which interference is
necessary and desirable, and that there may be cases in
which the State must either directly or through some form
of publicly owned corporation take over the actual admin-
istration of a particular industry or service, especially
where it is in the nature of a monopoly. The ultimate claim
of the State to interfere in any field of industry is there-
fore recognised ; but it is also laid down that interference
should in practice occur as seldom as possible, and rest
always upon exceptional grounds. Actually, the Fascist
State has been led to intervene to a substantial extent, not
only in regulating the relations between employers and
workers under a system of compulsory arbitration, but also
in the actual conduct of industrial enterprise. It has re-
organised the banking system with a considerable degree of
public participation ; and it has created for the financing
of Italian industry the Institute Mobiliare Italiano as a Public
Utility Corporation under the supervision of the Ministry
of Finance. This new body, set up in November 1931, came
into existence largely for the purpose of relieving the Banco.
Commerciale from the burden of its large holdings of indus-
trial shares. These shares were transferred from the bank
to a new company, the Societd Finanziaria Industriale, which
was financed mainly by the new Institute Mobiliare. The
resources of the Institute Mobiliare itself were drawn in the
first instance half from the Post Office Savings Bank of

FASCISM IN ITALY 633

Italy and half from the private concerns associated in the
Consorzio Mobiliare Finanziario, which in turn owned a
majority of the shares in the Banco, Commerciale. For addi-
tional capital the Institute has power to raise money by
means of debentures and interest-bearing bonds ; and it
can then grant loans to business enterprises or participate
in their share capital. It is thus a sort of semi-public invest-
ment trust for the development of Italian industry.

The creation of this body — one of the products of the
freezing of the Italian banking system in the course of the
world economic crisis — caused considerable misgivings in
the minds of some of the Italian capitalists, who feared that
it might become the means of realising some of the earlier
ambitions of the Fascist leaders towards the nationalisation
of industry. Reassuring statements were thereupon issued
by the Government ; it was declared emphatically that
there was no intention of using the Institute as an indirect
instrument of nationalisation, but at the same time the
ultimate claim of the Fascist State to intervene in any
part of the industrial field in defence of the national interests
was emphatically re-affirmed.

The Fascist Party thus combines an insistence on the
ultimate right of the State to control every aspect of the
economic and social life of the community with a prefer-
ence for leaving economic matters as far as possible in the
hands of the private entrepreneur. Drawing its chief support,
as it has done in the past, from the petite bourgeoisie and the
small farmers, Fascism was clearly bound to insist strongly
on the rights of private property and on the retention of
private enterprise as the basis of the new State. It was able
to reconcile this insistence with its totalitarian conception
of the State the more easily because of the comparatively
undeveloped character of Italian industry and commerce,
which still rest largely on a basis of small-scale enterprise.
But at the same time, in order to ensure the continued
support of the larger capitalist interests, it modified greatly
its original bias against large-scale enterprise and accorded
the same freedom to the large as to the small employer.

'• 634 EUROPEAN POLITICAL SYSTEMS

This made it unable to satisfy the aspirations of the
industrial workers for improved conditions, and in fact
wages have fallen under the Fascist regime, which has
consequently but a precarious hold on the support of the
industrial workers. It has, however, succeeded in domin-
ating so completely the organisation of the Trade Union
movement that working-class discontents, even if they
reach a considerable intensity, can find no means of col-
lective expression. Nevertheless, the failure of Fascism to
meet the claims of the industrial workers constitutes to-day
the chief danger to the stability of the totalitarian State.

The Fascist Party. Politically, the control exercised by
the Fascist Party over the country is complete. As we have
seen, the new electoral law of 1928 set up a totally new
system of government. Parliament does indeed still exist ;
but it has been shorn of almost all its real importance, and
so reorganised as to be in fact only a subordinate part of
the Fascist machine — a mere registering body for decisions
arrived at without consulting it, and occasionally a theatre
for the " Duce's " pronouncements. The real power rests
with the Fascist Party itself, and the real legislative body
in Italy to-day is the Fascist Directory appointed by the
head of the State from nominations submitted by a National
Council representing the local organisations of the Fascist
Party. This Directory works in conjunction with the
Fascist Grand Council, a larger body which includes, in
addition to a number of Ministers and dignitaries sitting
ex qfficio, a body of members also appointed directly by the
head of the State, together with four permanent members
chosen as a reward for their services in connection with the
March on Rome in 1922.

This Grand Council to all intents and purposes chooses
the Parliament. The system under which this is done is
somewhat complicated. All the syndicates and industrial
and professional and cultural organisations recognised by the
Fascist State are allowed to submit nominations for mem-
bership of Parliament. From the nominations thus gathered

FASCISM IN ITALY 635*

in from the various functional bodies the Fascist Grand
Council then proceeds to select 400, and these 400 then
form the National List of candidates for Parliament put
forward with the approval of the Fascist Party. No other
Party is allowed to nominate candidates, and the entire
electorate is called upon to vote for or against the whole
list of 400 candidates en bloc. If the voting goes in their
favour they form the Parliament. If it were to go against
them a new election would have to be held on the basis
of fresh nominations secured in the same way ; but it is
highly improbable that the list would ever be rejected. In
the election following the adoption of this system 90 per
cent of the electorate voted, and nearly 98 per cent of
those who voted voted in favour of the Fascist list.

What else, indeed, were they to do ? For there was no
prospect of securing the return of any alternative candi-
dates. The final stage of the election of candidates for Par-
liament has thus become practically meaningless, and
Parliament itself has become a body of little or no real
significance in the working of the machine of State. Such
value as the electoral machinery does possess in providing
for the expression of Italian opinion is derived not from the
final voting but from the initial nominations sent forward
by the various associations recognised as integral parts of
the Fascist State. The Fascists claim that this system
secures, in place of the outworn forms of democratic repre-
sentation under the Parliamentary system, a real represen-
tation of those functional groups which have an important
contribution to make to the national life. In place of
the old, and in its view outworn, conception of Parliamentary
democracy it sets up the ideal of functional representation.
Repudiating the democratic theory that each should count
as one and none as more than one, it puts forward instead
a system of functional representation of constituent groups
within the State.

But in practice, as we have seen, the real control rests not
with the Parliament elected in this way, but with the
Fascist Party, which dominates the life of Italy fully as

EUROPEAN POLITICAL SYSTEMS

much as the Communist Party dominates that of Russia.
There are, however, important differences between the
forms of control exercised by the Communist and Fascist
Parties. In the first place, the Fascist Party is far less
democratic in its internal methods of organisation than the
Communist Party. Built up largely round the personality
of Mussolini, it has conferred upon the head of the State
enormous powers in choosing his own coadjutors, including
not only his colleagues in the Government but all those who
are to have an important voice in the councils of the
Party. In Russia the Communist Party is a democratic
body exercising autocratic authority over non-Communists,
whereas Fascism reproduces in the structure of the Party
the authoritarian institutions which it has impressed upon
the Italian State. In the second place, the authority of the
Communist Party in Russia is based on a complete control
not only of the political life of the Soviet Republic but also
of its economic institutions. Russia has liquidated private
capitalism and abolished class distinctions, whereas, in
Italy, as we have seen, industry remains under private
ownership arid State intervention in economic matters
continues to be exceptional.

Thus, while there are close resemblances between the
position of the Communist Party in Russia and that of the
Fascist Party in Italy as far as politics are concerned, in
economic matters, which are fundamental, tnere is little
or no resemblance. That is why, whereas the Russian
system appears to be established on a secure and per-
manent basis, it is not possible to affirm with anything like
the same certainty that Fascism will endure for long. It
has sometimes been suggested that the entire Fascist
system depends for its continuance on the personality of
Mussolini ; and while this may not be true, it is certainly
true that any weakening in the leadership of the Fascist
Party could easily cause the entire system to crumble away,
for the simple reason that it has not superseded but only
been super-imposed upon private Capitalism, and has
therefore been compelled to leave in being the underlying

FASCISM IN ITALY

antagonisms between economic classes, even while it has
successfully checked their expression.

By many critics of the Fascist regime the account here
given of it will be deemed far too favourable, on the ground
that it accepts to too great an extent the subsequent ration-
alisation by Fascist advocates of the policy of opportunistic
violence actually pursued by the Fascist Party in its march
to power. According to these critics, Fascism has no real
philosophy or political theory of its own. It is no more than
a creed of violence and personal ambition dressed up in the
borrowed garments of a belated Hegelianism. It is of course
perfectly true that Fascism only found out what its philo-
sophy was when it had already begun to practise it, and
that the appeals on which it relied, and continues to rely,
in enlisting support have had very little to do with its
philosophical basis, save to the extent to which its philo-
sophy has been influential in bringing over a certain per-
centage of intellectuals to its side. Fascism secured its
adherents in its early days by appealing to the resentment,
the fears and the violent passions of men who found them-
selves living in a State devoid of clear purpose, and in-
capable of sustaining either public order or private wel-
fare. It appealed to the discontented classes with an aggres-
sive economic programme over which it threw a glamour
of romantic heroism by its insistence on the national
destiny. Though it repudiated the idea of class antagonisms,
it nevertheless recruited its adherents largely from classes
which rallied to it as a means of defending their class
interests against the Socialists ; and it was only able to
realise, even to the extent to which it has realised, the
totalitarian State by the ruthless suppression of the organisa-
tions built up for themselves by the largest class in that State,
the manual workers. Though it may claim to express the
solidarity of the Italian people, it has to be recognised that
this claim still rests on force and not on positive or willing
consent. Hence the continued necessity for rigid censorship
of Press and opinion, the insistence on strict tests of ortho-
doxy among the teachers in schools and universities, and

^638 EUROPEAN POLITICAL SYSTEMS

the continued elimination of all expressions of opinion
hostile to or even critical of the underlying assumptions of
the Fascist system.

Nevertheless, Fascism can claim to be a philosophy, even
if this philosophy has grown out of events rather than
determined their course. For it has successfully set up for
the time being a society based on the philosophy of national-
ism, and thrown back the attacks launched against national-
ism by the cosmopolitan philosophy which underlies the
Socialist as well as the Communist doctrine. Socialism and
Communism are philosophies based on accepting as
ultimate the solidarity of class ; Fascism is a philosophy
which attempts to combat these doctrines by appealing to
the rival ideal of nationality. And even the Marxists, who
believe that in the end economic forces are bound to exert
a predominant influence, do not attempt to deny that
nationality is a force working in the minds of men and
capable, because it is in men's minds, of playing an in-
fluential part, at least in the short run, in shaping the course
of history.

§ 5. FASCISM IN GERMANY

SINCE the rise of Fascism in Italy there has been a grow-
ing tendency to apply the name to a wide variety of political
movements in different European countries. Wherever
Parliamentary institutions are abandoned or their influence
seriously curtailed in favour of some form of dictatorship,
this dictatorship is loosely described as Fascist, provided
only that it is a dictatorship directed against the influence
of Socialist and Communist movements. The name Fascism
is thus loosely used to cover a number of political develop-
ments differing considerably among themselves. For
example, in the Austria of 1933 the dictatorship of the
Christian Social Chancellor, Dr. Dollfuss, is commonly
described as Fascist, although it is at present in violent
conflict with the Austrian section of the Nazis ; and again

FASCISM IN GERMANY 639

the dictatorship of Primo de Rivera in Spain was often
regarded as a Fascist movement, although it was in reality
rather an attempt to preserve the Grown against the
combined onslaught of the republican forces than a Fascist
movement originating among the nationalist sections of the
middle class. We have, then, to make up our minds whether
we propose to use the term Fascist in a sense wide enough
to cover all the post-war European movements directed
from the Right against the institutions of Parliamentarism,
or whether we propose to confine its use to such movements
as possess a closer community of idea with Italian Fascism.

There is undoubtedly something in common among all
the movements of the Right against Parliamentary govern-
ment, for they are in all cases the product of the failure of
the Parliamentary State to face satisfactorily the difficult
situations of the post-war world. As we have seen in an
earlier section, this failure of the Parliamentary State has
been most manifest and complete where Parliamentarism
has had the weakest tradition behind it, as in Italy and
Germany, and has been made the more unavoidable by the
attempt to impress a national democratic character on
Parliamentarism by the adoption of proportional represen-
tation. For the one chance that Parliamentarism might
have stood of successful survival in Central and Southern
Europe rested on its ability to create instruments of strong
and coherent government, and thus to pursue a steady and
continuous line of policy ; and the possibility of this rested
in turn on the existence of parties strong enough to com-
mand an effective majority. France, with her tradition of
democratic self-government, has been able so far to make
shift with a succession of weak Governments alternating
between the right and left of the middle-class parties ; but
French methods of government were bound to prove totally
inadequate in dealing with the far more difficult problems
which confronted post-war Italy, and, still more, the new
German Republic.

While however, some community of character must be
recognised among all the non-Socialist reactions away from

640 EUROPEAN POLITICAL SYSTEMS

Parliamentary government, it is both more convenient
and more accurate to confine the use of the term Fascist
to a narrower group of post-war movements. Of these by
far the most important, after the Italian movement des-
cribed in the preceding section, is the Nazi movement
which has come to full political power in Germany during
1933- For the Nazis, or National Socialists, while their
attitude differs in certain respects from that of the Italian
Fascists, and they have so far given less indication of having
a workable political or economic theory in their minds,
have drawn their support largely from the same elements as
rallied round Mussolini's Fascist organisations in the years
immediately following the war. Nazism is, like Italian
Fascism, a movement drawing its main strength from the
lower middle classes and the peasants, though it has also
rallied round it a considerable amount of support both
from military officers of the old regime and sons of the old
nobility, and from workmen feeling the pinch of Germany's
desperate economic condition, and despairing of any
succour from a working-class movement sharply divided
between the rival factions of Social Democrats and Com-
munists. Hitler's Brown. Army has been, like Mussolini's
Blackshirts, from the first a largely military formation,
though it has been until lately far shorter of arms than
Mussolini's men ever were, largely because of the steps
taken to secure the thorough disarmament of Germany
under the Peace Treaty. Moreover, attaining to its full
strength a decade and a half after the conclusion of the
war, it has not drawn its support to anything like the same
extent as Mussolini's Fascists drew theirs from the dis-
appointed ex-soldiers demobilised at the conclusion of
hostilities. The Nazis, apart from their leaders, are largely
young men — too young to have taken any part in the Great
War. Their fighting quality is therefore probably substanti-
ally lower and their discipline is certainly less than that of
Mussolini's armed Fascists at the time of the March on
Rome. That they have been able to take control so com-
pletely of the situation in Germany and to apply force on so

FASCISM IN GERMANY 64!

large a scale with so little resistance is attributable far less
to their own disciplined prowess than to the weakness or
absence of military formations among the forces opposing
them. There can be no doubt that if the Reichswehr and the
Stahlhelm organisations had been united with the support of
the police in stopping Hitler's Brown Army from uncon-
stitutional excesses, the task would have been well within
their powers. That, no doubt, was why the Nazis needed the
support of President Hindenburg and of the Nationalists
in order to establish their control. For as soon as they had
the Reichswehr as well as the Stahlhelm on their side, or at
least definitely precluded from opposing them, there was
nothing to stand in their way. The Republican Reichs-
barmer was too weak and practically without arms ; and
the Communist organisations had also been successfully
deprived of their weapons under the previous regime.

Hitler's Nazis are thus a far less effective military force
than Mussolini's Fascists, but the two movements spring
largely from a common source. Hitler, like Mussolini, is an
ex-Socialist, and, unlike Mussolini, he still retains the word
Socialist in the name of his Party. Like Mussolini, he has
built up his movement on the appeal to national emotion ;
and, again like Mussolini, he has sought his backing chiefly
among those elements in the population which can be most
easily rallied not only against the international doctrine of
the Communists but also against all plans for the socialisa-
tion of industry. Hitler's constant denunciations of Jews,
bankers and speculators are calculated to appeal not only
to the nationalist sentiments of his hearers but also to the
peasant and small bourgeois groups from which he derived
his original strength. Like Mussolini, he began with a
programme embodying large elements of Socialism ; but
the Socialist features of the Nazi programme have receded
more and more into the background, to be replaced, not
so far by any clear picture of the Corporative State, but by
a vast outpouring of rhetoric attributing Germany's
economic troubles to the injustices put upon her by the
Treaties of Peace, and to the machinations of the enemies

WR

, 642 EUROPEAN POLITICAL SYSTEMS

within her gates — the Jewish internationalists, the inter-
national Marxians, who are reputed in the last decade to
have governed Germany in alliance with the Jews, the
great stores, which are accused in one breath of profiteering
at the expense of the public and of undercutting the small
private trader, and, finally, even the Catholics, who are
said to have demonstrated their lack of patriotism by ally-
ing themselves in a succession of Governments with the
atheistical and internationalist leaders of the Social Demo-
cratic Party. Out of the farrago of denunciations that makes
up Hitler's speeches it is difficult to make anything like
sense. But it is quite unsafe to conclude that an inability
to talk sense is any barrier in the way of success in governing
a nation, especially under the topsy-turvy economic and
political conditions of to-day.

It is true that not all Hitler's lieutenants have been
content with a mere whirl of denunciatory words. Gregor
Strasser, for example, was long regarded as the real
intellectual leader of the Nazis, and the chief exponent of
their economic policy ; but Strasser parted company with
his fellow leaders, and lost his influence, in 1932, when
the Nazis were confronting the choice between entering into
a coalition on terms which would have made it impossible
for them to carry out the complete " purge " of Germany
which they demanded, and holding aloof in the hope that
time would allow complete power to fall into their hands.
Strasser, advocating coalition at the cost of compromise,
was driven from his influential position in the Party ; and
the leadership then passed, with Hitler still as figure-head,
to extremists of the type of Goebbels and Goering, whose
policy, as far as it is at present known, appears to be purely
destructive. Conceivably, now that the Nazis have climbed
to power, Strasser will come back, or perhaps some able
ally such as Schacht will be able to take hold of the dis-
located economic machine. But of this there is as yet no
sign. The destructive policy of the Nazis is plain enough ;
their constructive policy remains an entirely unknown
quantity.

FASCISM IN GERMANY 643

The Rise of the Nazis. Nazism began as an organised
movement, not in North Germany where it has since
attained to its greatest power, but in Bavaria. Hitler, an
Austrian by birth, began organising his National Socialists
in Bavaria in 1919. As we have seen earlier, the German
revolution of 1918 actually began in Bavaria, and it was
there that the first revolutionary Government was estab-
lished under the leadership of Kurt Eisner, the Independent
Socialist. But Eisner was assassinated by a royalist fanatic,
and after a short-lived Communist insurrection, a Govern-
ment under Social Democratic leadership assumed office.
But Socialism in Bavaria had been fatally weakened by the
events of 1919, and soon after the Prussian Kapp Putsch
of 1920 the Socialist Ministry resigned and an anti-Socialist
Government took its place. At the following elections a large
anti-Socialist majority was returned, and, with the support
of the new Government, the Communist movement was
rigorously suppressed. It was in this atmosphere of revolu-
tion and counter-revolution that Hitler created his Nazi
organisation, hovering at first between the demand for
Bavarian separatism and the creation of a powerful pan-
German State.

After 1920 the Nazi movement became more and more
pan-German in its attitude ; and in 1923, joined by Luden-
dorff and the most extreme section of German militarists, it
attempted a counter-revolution, designed, setting out from
Munich, to overthrow the Weimar Republic. The Bavarian
Government, by the use of dictatorial powers, successfully
repressed this revolution, and Hitler was condemned in
April 1924 to five years' detention in a fortress. He was,
however, released within a few months, and set to work
immediately to reorganise his National Socialist Party, which
thereafter spread gradually from Bavaria to other parts of
Germany, although it was some time before it achieved
any great importance in German politics, or came to be
regarded as in any real sense a menace to the stability of the
Weimar Republic. In the general elections of 1924 the Hit-
lerites, then allied to the Deutsche Volkische-Fmheits-bewegung

644 EUROPEAN POLITICAL SYSTEMS

(German People's Movement for Freedom) gained 32
seats. But in 1928, after it had broken with its late ally,
it was only able to return 12 members. Its real chance
came only with the world slump ; and by far the most
effective recruiting agent for the Hitlerites has undoubtedly
been the economic suffering which has overtaken the
German people ever since the withdrawal of foreign capital
began towards the close of 1928.

Between 1924 and 1928 Germany had maintained an
illusory internal prosperity by means of heavy borrowing
of capital from overseas. The withdrawal of this capital,
chiefly on account of the American boom, left her for the
first time since the Dawes Plan faced with the necessity of
living upon her own attenuated resources, and at the same
time meeting the heavy claims both of her late enemies for
reparations and of foreign capitalists for interest on the
large sums which she had borrowed. Conditions in 1929
were bad enough, but they became infinitely worse when
Germany had to face not only the withdrawal of foreign
capital but also the effects of the American crash and the
world depression on her export trade. The Nazi movement,
a product above all of disillusionment and despair,
went ahead by leaps and bounds from the moment when
the politicians at the head of the Weimar Republic ceased
to be able to maintain tolerable living conditions for the
mass of the German people, including the middle classes
as well as the manual workers. At the election of July 1932
the Nazis returned 230 members and polled 13! million
votes. Thereafter came a reaction, and at the election of
November 1932, on a reduced total poll, the Nazi members
fell to 196, and their vote to i if millions. It was then widely
prophesied that Nazism had already passed its zenith, and
was certain rapidly to decline. This prophecy might pos-
sibly have been correct, if, as many people then supposed
to be likely, there had been a material improvement in
the economic situation. But economically things went from
bad to worse during the following months, and in February
1933, when Hitler had already become Chancellor and

FASCISM IN GERMANY 645

established his Nazi dictatorship, the Nazis polled 17^
million votes and returned 288 members, thus falling not
far short of an absolute majority in the Reichstag, and com-
manding, in the enforced absence of the Communists, an
effective majority in conjunction with their 52 Nationalist
allies.

It was upon a coalition Government headed by the Social
Democrats that the first brunt of the great economic de-
pression fell. Divided internally, the Government had
great difficulty in pursuing any coherent policy in face of the
depression. In 1929 it found itself seriously at loggerheads
with Dr. Schacht, the right-wing President of the Reichs-
bank. Dr. Schacht's public denunciations of the Hague
Conference settlement led to the resignation of Hilferding,
the Social Democratic Finance Minister, and to a weaken-
ing of the position of the Social Democrats in the country,
although continued differences between Dr. Schacht and
the Government resulted in the resignation of the former
early in 1930. Meanwhile, the financial situation con-
tinued to grow worse, and the differences in the Cabinet
over the best means of meeting it more pronounced. The
parties of the Right, including the People's Party, de-
manded a drastic curtailment of unemployment benefits
and other social services ; and on this issue the coalition
Government broke up in March 1930, and was succeeded
by a bourgeois Government under the leadership of Briining,
a member of the Catholic Centre. This Government, in
face of the growing severity of the crisis, was compelled
at once to have resort to emergency powers, using the
authority of the President to put through its measures by
decree even without the co-operation of the Reichstag.

As the depression deepened these measures became more
and more severe ; for Germany under Bruning's leadership
was making a tremendous effort to build up, even in face
of adverse world conditions, a substantial export surplus
for the payment of reparations and the meeting of claims
arising out of Germany's foreign borrowing since the war.
This could be achieved even temporarily only by the most

646 EUROPEAN POLITICAL SYSTEMS

drastic curtailment of imports, and at the cost of a severe
and progressive fall in the standard of living of the German
people. Nevertheless the Briining Cabinet carried on, and
appeared for a time to be meeting with signal success. But
this success was achieved only at the cost of engendering in
the minds of a large section of the German people a mood
of desperation which boded ill for the future of a Republic
connected in the popular imagination with the inflicting
of these sacrifices. Briining's position consequently became
more and more difficult to maintain ; and at length in
June 1932, in face of the tremendous growth of the Nazi
movement and of popular discontent, President Hinden-
burg dismissed the Chancellor and on his own authority
set up a non-party Government of pronounced Nationalist
complexion under the leadership of von Papen. Thereafter
negotiations began for an accommodation with the Nazis ;
but Hitler, after some hesitation, refused to collaborate in
a coalition Government in which his Party was not offered
a free hand. The new Reichstag, elected in July 1932, was
thereupon dissolved, and another election held in Novem-
ber with the result, as we have seen, of a temporary set-
back to the Nazis. But popular discontent with the aristo-
cratic Nationalist Government of von Papen continued
to grow, and in December 1932 President Hindenburg
was compelled much against his will to ge^t rid of his un-
popular Chancellor, who was replaced by General von
Schleicher.

Von Schleicher, who was also associated with the forces
of the old Right in Germany, attempted to appease the
discontent by following a more moderate policy than von
Papen, and did his best to come to terms with the Trade
Unions and to obtain at least the tolerance of the Social
Democrats. But his Ministry was short-lived. The Nazi
movement became more and more menacing, and in
January 1933 President Hindenburg at last sent for Hitler
and offered him the Chancellorship. The precise conditions
on which this offer was made cannot be known ; but it is
clear that they included the association with the new

FASCISM IN GERMANY 647

Government under Hitler's leadership of the old Nationalists
— President Hindenburg's friends — as well as the Nazis, and
that the President relied on von Papen, who was included
in the new Government, and the other Nationalist Min-
isters, to do something to keep the Nazis in order. In prac-
tice, however, the entire power passed into the hands of the
Nazis ; for although von Papen became Vice-Chancellor
and Reichs Commissioner for Prussia (the autonomous
Government of Prussia based on a coalition led by the
Social Democrats having been superseded by a Commis-
sioner appointed by the Reich under von Papen's Ministry),
the real power in Prussia was exercised by the Nazi, Cap-
tain Goring, as Deputy Commissioner of the Interior.
The new Government immediately instituted a reign of
terror. Jews and Social Democrats, as well as Communists,
were remorselessly persecuted ; and a thorough weeding
out of all officials unsympathetic to the new Nazi regime
was begun. The Nazis seized power and installed Commis-
sioners of their own with dictatorial authority not only in
the States in which they and their allies commanded a
majority in the legislatures, but also in the free cities, such
as Hamburg, and even in the German States beyond the
Main line, including Catholic Bavaria.

Since then, Nazism has carried the revolution several
stages further. It has successfully edged its Nationalist allies
out of their positions of influence, merged the Nationalist
Stalhelm with its own forces, compelled Hugenburg to re-
sign from the Government, and the Nationalist Party itself
to dissolve and join the Nazi ranks. It has pursued success-
fully a vendetta against " political " Catholicism, which it
regards as the ally of Dollfuss's Christian Social dictator-
ship in Austria, and has persecuted and broken up the
Catholic Bavarian People's Party and the Catholic Centre.
It has set to work to eliminate the Protestant Churches of
Prussia, by installing its own nominees in ecclesiastical
authority. It has destroyed the largely Socialist Trade
Union movement, and begun to set up a new workers'
directory under its own authoritative control. In short, it

EUROPEAN POLITICAL SYSTEMS

has set itself to dominate, in the name of the Nazi State,
every aspect of the life of the German people, and to break
up by violence every organisation, secular or clerical, that
is capable of offering any sort of opposition to its complete
authority.

Wholesale arrests of Communists and Social Democrats,
and in some cases of members of the Catholic Centre as
well, have been carried out, to the accompaniment of
much ruthless brutality ; and the members of the Brown
Army, enrolled and clothed with authority as auxiliary
police, indulged in an orgy of domiciliary visits to suspected
persons, in the course of which a number of Socialists and
Communists were brutally shot down. Moreover, in the
disorcfer accompanying the imposition of the new tyranny,
numerous murders were committed, and arrests made by
bands of Nazis acting without a shadow of public authority.
Citizens hostile to the Nazi regime were kidnapped and
confined in private houses and subjected to many brutali-
ties. It is indeed impossible at present to estimate accurately
the extent of the reign of terror which the Nazis established
in Germany during the first weeks of their tenure of power ;
but enough news soon filtered across the frontiers, in spite
of the rigid censorship, to show that the Nazis were going far
beyond the methods practised by the followers of Mussolini
on the morrow of their triumph in 1922. ^

Nazism has thus assumed completely tyrannical power
within the frontiers of Germany ; for, although the Nazis
are still governing nominally in coalition \\ith ex-Nation-
alist upholders of the pre-war rfcgime, they have in fact
completely eliminated and destroyed their allies, and suc-
ceeded in having matters all their own way. Obviously this
change in the internal situation of Germany is destined to
have far-reaching effects on the European situation as a
whole. The Weimar Republic is clearly doomed. For, al-
though it is quite uncertain whether the Nazis intend to
restore a monarchical form of government, they have
shown that they have no use for the bourgeois Republic.
And it is hardly less clear that, even if the Nazis are in

FASCISM IN GERMANY 649 <

process of time overthrown, the new organisation of Ger-
many which takes their place will be something very
different from the Parliamentary Republic established on
the morrow of the Great War. For a time at least the Nazis
can be expected to remain in power ; for there is at present
certainly no force in Germany capable of standing up
against them, even if their alliance with the Nationalists
should be broken. The old Social Democratic Party,
though its leaders have moved their headquarters to
Prague, and are attempting to carry on underground pro-
paganda in Germany from abroad, is clearly dead past re-
call ; and it is still too soon to say what new force on the
Left — whether the Communist Party, or some new body
born out of the ashes of Social Democracy, or again some
revolutionary force germinated out of Nazism itself, is likely
to take its place.

The Nazis have been brought to power on a wave of
Nationalist sentiment and profound economic distress.
They have made lavish promises of their ability to deal
with the situation, which they trace primarily not to the
economic disorders of the world as a whole, but rather to
the hardships inflicted on Germany by the Versailles
Treaty. They are demanding first of all the right for Ger-
many to rearm ; and such hope as there ever was for the
successful outcome of the Geneva Disarmament Confer-
ence has largely disappeared as a result of their assumption
of power. Certainly the Nazis mean to rearm Germany as
far as they can afford to do so, and perhaps further, and as
fast as they feel strong enough to stand up to the political
consequences of defying France and Great Britain. But re-
armament is desired not only for its own sake, but also as
a symbol of restored German nationhood, and a throwing
off once and for all of the enforced repentance exacted
from Germany in the Versailles Treaty. Hitler and his
followers have again and again denounced the Treaty
itself, and the entire territoral settlement embodied in it,
as well as the disarmament of Germany. They have never
been prepared to recognise the Locarno Treaties or to

650 EUROPEAN P6LITIGAL SYSTEMS

accept the rearrangement of Germany's frontiers as per-
manent. They mean, if they are strong enough, to challenge
the entire Versailles settlement. They will presumably be
wary of picking a quarrel with France over Alsace-Lorraine
in the immediate future ; for France is bound to remain
for some time to come the greatest military Power in
Europe. But they have already shown signs of a readi-
ness to pick a quarrel before long with the Poles over the
Polish Corridor and the Silesian frontier. To say this is not
to suggest that there is an immediate prospect of armed
conflict between Poland and Germany ; for the Nazis
will obviously wish to reorganise their forces before they
are ready to begin fighting for their claims. Germany must
rearm before she can venture to fight, for the Polish Army
is large and well-equipped. What is meant is that the new
movement which has come to power in Germany rests on
a state of mind of aggressive nationalism which will cer-
tainly not in the long run refrain from challenging by armed
force the territorial settlement made at Versailles. Nor
does it appear possible that the embargo imposed by the
Peace Treaty on German rearmament can be maintained,
especially in face of the failure of the Allied Powers to
implement their own promises that German disarmament
would be but the prelude to international measures of dis-
armament which would once more establish/equality.

If, however, a Germany intent on rearmament is to have
any hope of satisfying her ambitions she must at all costs
find allies. Where, then, is she to seek for help ? She must
obviously turn to Italy, where another Fascist Government
is in power, and where jealousy of France and serious dis-
satisfaction with the terms of the post-war European
settlement also exist. But will the Italians, under Musso-
lini's skilful leadership, be prepared to respond to the
German overtures — at any rate to the extent of threatening
Europe seriously with another war? Mussolini, despite many
warlike utterances since he assumed power, has never
shown in the last resort any wish to take up arms, at all
events against any Power that could be regarded as Italy's

FASCISM IN GERMANY 651*

equal. The question is whether the change in Germany will
bring about a change in Italian policy as well, and lead
the Italians, now that they are in a position to find allies,
towards a more bellicose frame of mind.

Clearly, if there is to be any question of an alliance
with military aims between Germany and Italy, the position
of Austria, placed between these two Fascist powers, comes
to be of vital significance. France, in resisting ever since the
war the repeated attempts to bring about an Anschluss
between Austria and Germany, has had always in mind the
danger of an alliance, made stronger by a common frontier,
between Germany and Italy. If Austria's present Christian
Social Dictatorship were to yield, as many people think
it will, to a Nazi dictatorship, based on an alliance between
the Austrian Nazis and the Heimwehr, the political union
of Austria and Germany would be virtually accomplished
even if they remained nominally separate States. The
triumph of Fascism in Austria would create a Fascist bloc
running continuously from the Baltic to the Mediterranean,
and shutting off France effectively from the allies she has
been at pains to create for herself in Central and Eastern
Europe. This Fascist bloc would have on one side of it
France, Great Britain and the smaller Powers of Western
Europe, and on the other Poland and the Little Entente,
with Russia watching anxiously from the east the renewal
of hostile alliances in capitalist Europe.

At present, the chief obstacle to this development is to be
found in Italy ; for the Italians, while they are ready enough
to rejoice over the triumph of Fascism in Germany, have at
present no desire to precipitate a European conflict, or to
have the fresh complication of active German influence
and intervention reintroduced into the tangled international
politics of Southern Europe. Accordingly Mussolini, while
he has shown an attitude of friendship to the new Germany,
has evidently declared for the present against a Nazi coup
in Austria, and has encouraged the Austrian Government
to adopt a firm policy in resisting Nazi aggression. How long
this attitude will be, or can be, maintained is uncertain ;

EUROPEAN POLITICAL SYSTEMS

but while it lasts it undoubtedly helps to preserve a pre-
carious peace in Europe. For if the Nazis once get Austria,
there will be immediate and powerful repercussions on the
political situation both in Hungary and in the countries
which form the Little Entente — to say nothing of the effect
on France of the virtual establishment of the Anschluss
which she has been resisting ever since 1918.

At a time when speculations such as these are in the
minds of every student of European politics, Briand's ideal
of a United States of Europe on a capitalist basis seems
remote indeed. The Nazi triumph in Germany has made
dramatically apparent what was already going on under the
surface — a new division of Europe west of Russia into a
number of armed camps dominated as in the years before
1914 by the threat of war.

§ 6. THE CHALLENGE OF COMMUNISM

THE FIRST great challenge of which men became aware
after the war was that of Russian Communism. From the
moment of the Bolshevik victory in the second Russian
Revolution of 1917 men were everywhere conscious of the
emergence into the field of politics of a great new revolu-
tionary force. For the Russian Revolution w>is not merely
by far the greatest since the French Revolution of 1789,
but also as unlike any previous revolution as that of 1789
had been unlike anything which the world had known
before. There were indeed certain features in the Bolshevik
Revolution of 1917 which recalled the events of the Paris
Commune of 1871, to which Socialists had always looked
back as the example on a tiny scale of what a Socialist
Revolution might be, if it had to come by violent means.
But the difference of scale was too vast for the analogy of
the Paris Commune to hold good ; and outside a narrow
circle of theoretical Socialists people in Western Europe
knew little of the detailed history of the Paris Commune
or of the political principles which had found expression

THE CHALLENGE OF COMMUNISM 653

in it. The Russian Revolution appealed to them, with
whatever feelings they regarded it, as something totally
new in the history of the world, something fundamentally
startling to a degree which compelled them to go back
to the first principles of politics in determining their
attitude.

The Bolshevik Revolution was fully as startling to most
Socialists as to men of other opinions ; for up to 1917 the
great majority of Socialists had supposed that Socialism,
when it came, would be certain to come first in the most
advanced industrial countries, which were held to be the
ripest for it because they had advanced furthest along the
path of large-scale industrialisation, and had therefore
created within themselves the strongest working-class
organisations and the most widespread Socialist movements.
It seemed altogether contrary to the anticipated course of
evolution that Socialism should come first in a country
where the vast majority of the people were peasants living
on the land at a very low standard of life, where the
number of industrial workers was insignificant, and there
had been no prior evolution in the direction of Socialism
under the capitalist system. On these grounds many
Socialists, including the most prominent theorists of Ger-
man Social Democracy, held that the Russian Revolution
could not possibly establish itself permanently as a Socialist
Revolution, and indeed that it had no right to have hap-
pened at all. It was, according to these Socialists, indispens-
able that a country on its way towards Socialism should
pass through all the stages of evolution belonging to the
capitalist phase, and that only when Capitalism had within
a country developed its full potentialities and come to be a
fetter upon the further advancement of the productive
forces would the time be ripe for an attempt to put Socialism
into operation. Many Socialists held further that the
adoption of a complete form of political democracy was
no less indispensable as a forerunner of Social Democracy,
and that in a country where the vast mass of the people had
never attained to any share in the government it would be

654 EUROPEAN POLITICAL SYSTEMS

wholly impossible to create at a blow the conditions neces-
sary for the operation of a Socialist system. These Socialists
— including at this stage many Russian Socialists — would
have had the Russian Revolution stop short at the phase
which it reached in the first Revolution of 1 9 1 7, or rather
they would have had it halt there on the basis of a bourgeois
Parliamentary Republic, and then develop gradually
through the stages of Capitalism which Russia had still to
accomplish to the point at which it would be ripe for
Socialists to attempt to take control.

Over this issue there arose on the morrow of the Novem-
ber Revolution of 1917 a bitter controversy between the
Russian Bolshevists and the Social Democrats of Western
Europe and especially of Germany — a controversy en-
shrined in the literature of the movement in the vituperative
volumes of Lenin on the one side and Karl Kautsky on the
other. According to Lenin, the second Russian Revolution
was the fulfilment within a particular sphere of the course of
action laid down for the proletariat by Marx and Engels :
according to Kautsky it was an impudent attempt by a
small body of fanatics to seize power long before the
conditions for the coming of Socialism had been secured.

Nevertheless the Bolsheviks made their revolution, and
made it with immediate success after waiting for a number
of months in order to be assured of striking aj, the moment
most favourable to their cause. There had been talk of a
Bolshevik Revolution earlier in the year, especially in July.
But Lenin had been firm in urging the Party to hold its
hand until the conditions of success were present, that is
to say, until the Revolution could be made under such
circumstances as would place the Bolsheviks at the head of a
widespread movement among the mass of the population.
Lenin, quite as much as Kautsky, repudiated the idea of a
revolutionary coup d'tiat, to be carried through by a small
minority of class-conscious persons, irrespective of the
ripeness of the general body of working-class opinion for
according positive support. He would have nothing to do
with the purely insurrectionary theory of revolution ; but

THE CHALLENGE OF COMMUNISM 655

he held that the time was ripe in October, as it had not
been in July, because by October the Bolsheviks had
won over to their side a majority in the Workers' and
Soldiers' Councils which had sprung up at the time of the
first Revolution, and were therefore in a position to use
these mass organisations of the working class as instruments
of their policy.

This was indeed the essence of the policy which Lenin
and his group were attempting to follow. Their theory was
that the mass of the workers must, if revolutionary action
was to succeed, be brought under the leadership of a strong
and disciplined group which knew what it wanted and was
prepared to be ruthless in working for the achievement of
its aims. But they held equally that this disciplined group
would be powerless, however much determination it might
show, unless it could get on its side the mass organisations
of the workers, and carry through the Revolution with their
positive support. Thus the Bolshevik Revolution was based
on the two forces which have been fundamental ever since
to the Communist regime in Russia — a strong disciplined
party bound together by a common ideology and a common
body of revolutionary strategy, and an organised mass
movement based upon the workers and capable of being
brought under the leadership of the far smaller party.

Given these conditions, Lenin and those who were work-
ing with him in the Russian Bolshevik Party saw no reason
why the Revolution should not come first in Russia rather
than in one of the more advanced industrial countries. They
repudiated indeed the view that the Revolution could be
thought of at all fundamentally upon national lines. The
Revolution which they were making in Russia was only
part of a world Revolution destined to come in all capitalist
countries, and to carry the world on from the capitalist
phase of social evolution to a new Socialist phase. That the
Revolution should come first in Russia only meant that the
fighting broke out most hotly at that particular point of a
firing line that ran round the whole world, and that, at this
particular point, the defences of Capitalism were first

656 EUROPEAN POLITICAL SYSTEMS

broken ; because, even if the industrial proletariat was less
numerous in Russia than in the more advanced countries,
so also was Capitalism far weaker and far more easily
exhausted by the experience of three years of war.

The Bolsheviks were not making a Russian Revolution.
They were making a world Revolution, and merely begin-
ning it in their own country because there the opportunity
for making it had come first. Lenin indeed recognised that
the less advanced character of the Russian economy made
it impossible for the Bolsheviks, however thorough their
seizure of power might be, to leap straight from an unde-
veloped Capitalism to a Socialist system. He agreed with
Kautsky that Russia would have to pass through all the
stages of capitalist evolution before she could arrive at the
achievement of Socialism. But, unlike Kautsky, he held that
these later stages of Capitalism could be gone through
under Socialist instead of capitalist control — and gone
through under these conditions much more speedily and
far less disastrously for the workers. What Lenin aimed at
building immediately for Russia he always described not as
Socialism or Communism but as State Capitalism — a State
Capitalism to be achieved under the auspices of a proletar-
ian State based upon disciplined Communist control. Russia,
according to the Communists, is not to-day a Communist
country. It is still completing, with its successive Five- Year
Plans and its socialisation of agriculture, the stages of
State capitalist development ; and only when this phase
has been completed will the creation of a Communist
society become possible. Then, in Lenin's phrase, the
State — the new proletarian State created by the workers
in place of the Capitalist State which they have destroyed
— will " wither away." Government of men will give place
to administration of things ; and the need for coercion will
disappear in proportion as the new classless community
is brought effectively into being. The Proletarian State
based upon the working class has the object of abolishing
itself together with both the class which it is out to destroy
and the class by means of which it wields its authority. In

THE CHALLENGE OF COMMUNISM 657*

the classless Society of to-morrow there will be no State —
even in a proletarian sense.

Communism and the State. It is the fundamental
thesis of the Communists, as it was of Marx, that the tasks
which the State has to accomplish in the achievement of
Socialism call for the creation of a totally new kind of
State for their execution. It will never do, Marx and
Lenin alike say, merely to take over, by the capture of a
Parliamentary majority, the political machinery of the
bourgeois State, and to try to use this machinery for the
achievement of Socialism. For the bourgeois State has been
designed with quite different objects, and is not capable
of being used for a purpose radically different from that
which brought it into being. The bourgeois State was born
with the coming of Capitalism, is suited to the mainten-
ance of Capitalism, rests upon capitalist principles and
ideas, and is therefore not merely useless as an instrument
for bringing the Socialist community into being, but posi-
tively destructive of the Socialism of those who attempt to
use it for this purpose.

For deeply embedded in the whole idea of the capitalist
State as it exists to-day is the notion of private property,
and the defence of private property ; and no less deeply
embedded in it is the notion of individualism, expressing
itself through an individual liberty which is also conceived
largely as a property right. Individual liberty and pro-
perty were chiefly the ideals proclaimed by the French
Revolution ; and the world importance of the French
Revolution lay in creating a new type of State thoroughly
adjusted to the needs of an expanding capitalist system.
The entire code of law which capitalist States administer
is based on the defence of individual property rights. The
police, the Civil Service, the Constitution itself, exist
primarily for the defence of these rights. Even the army
is mainly the instrument for defending the property rights of
one group of nationals against the claims of others, or for
the appropriation of property rights by means of imperialist

658 EUROPEAN POLITICAL SYSTEMS

exploitation. But the property rights thus embedded in
the Capitalist State are not rights in effect belonging to
every individual. They are chiefly the monopoly of a single
class — the capitalist class — which owns by far the greater
part of the social property which the law is called upon to
defend, and uses this property as means of exploiting
labour. For from the right to exploit labour the value of
capitalist property is exclusively derived. If there were no
propertyless labourers for the capitalist to employ in his
factories or mines these giant instruments of production
would be of no value to'him, because he could not extract
from their use one iota of profit.

Accordingly, in pledging itself to the defence of property,
the capitalist State is in effect pledging itself to the defence
of the system of capitalist exploitation — to the defence of
the property of the " Haves " against the demands of the
" Have Nots " for a share in the fruits of social labour. It
is impossible, the Communists say, to change the character
of a State pledged to the defence of these ultimate capitalist
rights. Socialism, which challenges the entire right of pro-
perty in the means of production, and claims that the entire
product of man's social labour upon the means of produc-
tion ought to be common property in accordance with the
essentially social character of the productive process, must
create for itself a political instrument based upon these new
ideas of socialisation, and therefore actively in opposition
to capitalist notions of property and individual rights.

In seeking for a basis for this new instrument of socialisa-
tion Communists repudiate not only the capitalist concep-
tion of the rights of property but also the capitalist con-
ception of individual liberty. For the effective liberty of the
individual depends under Capitalism upon his possession
of property. The equal liberty which the law and the State
nominally afford him is to a great extent valueless unless
he possesses as a basis for its use the economic security which
in such a society property alone can give. Moreover, the
basis of the new society must be sought not in the indivi-
dual but in something more closely in accord with the

THE CHALLENGE OF COMMUNISM 659

growingly social character of the processes of living. More
real than the individual in a political sense is the class —
the body of persons who fulfil in the process of production
at a given stage of social development a common economic
function, and occupy by virtue of that function a common
economic status. To the class it is necessary to look for the
instrument which is to serve as a basis for the new State
needed for the building up of Socialism. In place, therefore,
of the insistence on individual rights — the right, for example,
of each man and woman to an individual vote — Communism
seeks rather to base its new political institutions upon the
collective rights of the class through which it attempts to
further the coming of Socialism — the working class. It
wants a political instrument collectively expressing the will
of the working-class ; and the question of individual voting
seems to it quite secondary to this primary desideratum.

The Communists found the appropriate instrument of
which they were in search, not in the pre-existing organisa-
tions of the workers — Trade Unions, Co-operative Societies
and the like — but in new mass organisations arising in and
out of the Revolution. For Trade Unions and Co-operative
Societies have alike grown up in order to satisfy the needs
of the workers under Capitalism, and have accordingly
taken on a character and a point of view largely influenced
by the capitalist environment in which they have had to
work. Co-operative Societies under Capitalism must com-
pete with the private traders and the Joint Stock Com-
panies, and must, in order to do this, behave largely as
capitalists behave. The Trade Unions must bargain with
employers or employers' associations and arrive with their
adversaries at terms of accommodation which will allow
work to proceed and wages to be paid under conditions
which capitalists can be induced to accept. Neither of these
forms of working-class organisation therefore possesses a
revolutionary character, or at least can retain that char-
acter when it meets with success and establishes itself as a
recognised institution within a capitalist Society. The
Trade Unions, and to a less extent, the Co-operative

66O EUROPEAN POLITICAL SYSTEMS

Societies, have been invaluable training grounds for the
workers, and have performed indispensable tasks in bring-
ing them together and giving them a sense of collective
strength and authority ; but, though they may still be
needed within a revolutionary society, and may indeed
find within such a society a greatly expanded sphere of
work and influence in giving collective expansion to the
social life of the workers, they can hardly be used directly
as the foundations for the building up of the new revolu-
tionary instrument of Government.

For this, something far more directly expressive of a
revolutionary will among the mass of the workers is clearly
needed. In the earlier phases of the Russian Revolution,
as in those of the German Revolution a year later, this in-
strument came almost spontaneously into being, as indeed
it had done earlier in that great dress rehearsal for the
events of 1917, the Russian Revolution of 1905. The Coun-
cils (Soviets in Russia, Rate in Germany) of Workers, Sol-
diers and Peasants, were the direct expressions of the gen-
eral mass of the working class in its revolutionary frame of
mind, and were therefore the natural foundation on which
the initial structure of the new proletarian State could be
built. But these bodies — spontaneous expressions of mass
sentiment — had, before they could be used for this task, to
be infused with far clearer and more conscious revolutionary
conceptions in the sphere of policy as well as of mass feeling.
This could be accomplished only if the disciplined revolu-
tionary party which believed itself to be the true expression
of the workers' needs and aspirations could take firm hold
of them and make them the instruments of its will. Through
the middle months of 1917 this was being gradually
achieved in Russia as the indispensable preparation for the
second and conclusive stage of the Revolution. That it
was never achieved in Germany was due partly to the far
greater hold of the German Majority Socialists over a large
section of the German working class, and partly to the
absence in Germany of any strong revolutionary party
corresponding to the Bolshevik Party in Russia. For,

THE CHALLENGE OF COMMUNISM 66 1

though the Spartacists possessed the necessary revolutionary
will, they had no such basis of common preparation as the
Russian Bolsheviks had gained during their years of exile,
nor were they nearly strong enough in personnel to make
their influence felt to the necessary extent ; while the
Independent Socialists, who to a large extent acted with
them, had no clear-cut theoretical ideas at all, but hovered
between a half-acceptance of the parliamentary and con-
stitutional ideas of the majority on the one hand and a half-
allegiance to Communism on the other.

In Russia, on the other hand, the Bolsheviks were strong
enough, determined enough and united enough to accom-
plish their purpose ; but it must not be forgotten that they
were greatly helped in this by the comparative weakness
of the other Russian Socialist Parties. By far the largest of
these was the Social Revolutionary Party, which had its
main strength among the peasants. But this party had little
coherence and was greatly weakened by the very fact that
its supporters were found among the scattered peasantry
all over the country rather than among the highly concen-
trated, though numerically far inferior, groups of the
industrial workers. When the time came the Bolsheviks,
with the temporary aid of the Left Wing of the Social
Revolutionaries led by Spiridonova, were able to sweep
aside both the far larger Riq[ht Social Revolutionary Party
and the Menshevik Social Democrats. These last, sharing
the German Social Democratic view that it was necessary
to build up the Constitutional Parliamentary State before
advancing directly tow ards Socialism, were prepared ' to
ally themselves with the bourgeois parties of the Left, and in
doing so largely forfeited their support among the main
body of the working class. For the workers, amid the col-
lapse of the old Russian system, were in a definitely revolu-
tionary mood, ready to be led towards the complete seizure
of power at which the Bolsheviks were aiming. Above all
they wanted peace, because of the sufferings which war
had brought with it and from total lack of sympathy with
the political aims of Tsardom. The attempt under the

662 EUROPEAN POLITICAL SYSTEMS

right-wing Socialist Kerensky to continue the war was
fatal to the hold of the anti-Bolshevik Socialists upon
the main body of the industrial workers.

Communism and the Peasantry. Nor was it less fatal
in the case of the peasants ; for above all else the peasants
wanted to get home. They were weary of fighting and still
more of being half starved in the army, far from home, and
often no less far from the scenes of actual warfare ; and, if
there was revolution afoot, they wanted to be in their own
villages in order to be sure of getting their share of the land
in any redistribution or seizure of the large estates that
might take place. Accordingly the Bolsheviks were secure of
the support of the main mass of both peasants and industrial
workers if only they promised peace and the other parties did
not. " They have voted with their feet," said Lenin at a later
stage, in defending the acceptance of peace on practically
any terms ; and there is no doubt that peace was one of the
two things the offer of which by the Bolsheviks definitely
brought the mass of poor men's opinion over to their side.

The second thing was the offer of the land, for the
peasants, even if they had for the most part no political
principles and no conscious interest in politics, were at all
events strongly interested in getting more land, and in
acquiring that good land much of which had been monopo-
lised by the great landowners. Accordingly the Bolsheviks,
adapting their policy to the need for securing the support of
mass feeling among the peasantry as well as the conscious
backing of the main body of the organised workers, were
able to carry through the second Revolution and thereafter
to use the Soldiers', Workers' and Peasants' Councils as the
basis of their power.

What was then widely said in other countries by Socialists
and non-Socialists alike was that, although the Bolsheviks
had temporarily won power with the aid of the peasants,
in the long run authority would rest not with them but
with the great mass of peasants who so far outnumbered
the industrial workers. The peasant, it was said, might be

THE CHALLENGE OF COMMUNISM 663 «

inarticulate and slow to move, but he was tremendously
powerful in defence of his interests ; and in the long run the
passive resistance of the peasantry was certain to compel
the Bolsheviks either to build up a State in accordance
with peasant needs or to yield up power to some alternative
Government that would give the peasants what they
wanted. What the peasants did want, it was said, was in
the first place the land, and then to be let alone — let alone
to farm it in their own way, however inefficiently, without
being called upon to pay large taxes to a distant central
Government in Moscow, or to bother their heads about any
problems outside their own village. Russia, it was predicted,
would in these circumstances cease to be a political unit at
all. It would fall inevitably to pieces, perhaps to be recon-
stituted as a series of peasant republics, perhaps to fall in
part under the sway of despots wielding arbitrary power in
particular areas — in fact it would be thoroughly and
irretrievably Balkanised. Communism, it was held, could
be in a country like Russia only an episode, for however
strong and determined the Bolsheviks might be they would
be unable for long to stand up against the overwhelming
force of peasant numbers.

The Communists for their part fully realised the serious-
ness of the problem they had to face ; for they were well
aware that, though they had secured, on the immediate
issues placed before the country, the support of the mass of
the peasants, the peasantry were not Communist in any
sense, or capable of being made Communist by mere force
of oratory or argument. But the Communist philosophy had
an answer to this problem. In the view of the Bolshevik
leaders the active role in the proletarian Revolution be-
longed to the industrial workers ; and it was upon the
Workers' Councils that the primary responsibility for build-
ing the new proletarian State must rest. The role of the
peasants was bound to be largely passive ; but, provided
that their craving for land was adequately satisfied, they
could be carried along upon the tide, and a central Govern-
ment strong enough to impose its will on the country as a

664 EUROPEAN POLITICAL SYSTEMS

whole could be brought into being without rousing their
collective opposition.

But in order to secure this it would be necessary to divide
the peasantry against themselves, by bringing into relief
the antagonism between poor peasants who had either no
land or far too little to enable them to achieve a tolerable
standard of living and the richer peasants who in some cases
employed labour, and, even if they did not, had holdings
large enough to raise them substantially above the general
level of the peasant standard of living. These richer peasants
included many who were small traders as well as cultivators
of the soil, and often small money-lenders into the bargain.
They were thus in a sense capitalistic in their way of living,
in that they exacted profit either from hired labour or from
buying and selling other men's produce, or from usury, or
from all these things. The Communists set themselves from
the first to build up their own support in the villages by
rallying to their side the poorer peasants, the bedniaki, and
stirring them up to strong antagonism towards the richer
peasants, the kulaki. This programme of action was inter-
mitted for a time after the institution by Lenin of the New
Economic Policy. But this was done only when the civil
war was over, when armed aggression from abroad had
ceased, and when the power of the central Soviet Govern-
ment had been sufficiently consolidated to remove the
danger of any serious Counter-Revolution securing peasant
support. Moreover, the New Economic Policy was con-
ceived and carried out only for the purpose of according the
Communists a breathing space ; as soon as they felt strong
enough to resume the offensive the class war in the villages
was taken up again, and a little later when the Five- Year
Plan seemed sufficiently advanced for a new task to be
attempted, the large-scale socialisation of agriculture was
instituted and a definite campaign launched both for
eradicating the last kulak remnants from the villages and for
transforming the peasant from a small-scale individual or
family cultivator into a unit in a new socialised system of
agricultural production.

THE CHALLENGE OF COMMUNISM 66 tj

For according to the Communist theory Socialism can
never be established in Russia in any real sense as long as the
great mass of the people continue to live on the land under a
system of individual cultivation which is bound to breed
in them an individualist habit of thought. Socialism involves,
in the Communist view, socialising men's minds as well as
their ways of working ; and their minds can be socialised
only if their ways of working are socialised first of all.
Accordingly agriculture as well as industry must be brought
within the range of socialisation, not only in order to pro-
mote the improvement of agricultural methods but also in
order to make the population of Russia thoroughly social-
ised in thought and attitude. The socialisation of agriculture
as well as industry is therefore an essential deduction from
the Communist philosophy ; and both these aspects of the
Communist policy imply the socialisation of men as well as
things — indeed, men even more than things are the objects
of socialisation.

The Soviet System. The Russians, we have seen, set
out to build up their new State on the basis of revolutionary
organisations created by the workers themselves. This is
the Soviet system, which is not fundamentally a method of
voting different from that of Parliamentary democracy,
but the logical outcome of a different form of social organis-
ation, arising out of the working class as the inevitable
expression of its collective consciousness as a class. The
Workers' and Soldiers' Councils of the Revolutionary
period have indeed now given place to a regular system of
local Soviets, extending over the whole country, and it is
from these local Soviets, which have now become organs
of a new form of constitutional government, that the
superior institutions of the Federated Soviet Republics and
of the U.S.S.R. as a whole are drawn. To those who have
been brought up to think in terms of pre-existing forms of
political organisations, the outstanding feature of the Soviet
system often seems to be the method of indirect election,
that is, of choosing the delegates or representatives who are

<»666 EUROPEAN POLITICAL SYSTEMS

to sit upon the higher and larger organs of government by
indirect election through the smaller local organs. But
though this method of indirect election does arise naturally
as the means of making the Soviet system effective over the
larger areas, it is not the fundamental thing, which is
rather that the whole scheme of governmental institutions
emerges from class organisations, and is based upon the
conception of class unity rather than upon the casting of
individual votes. The Soviet system is essentially a system of
class government — though that does not prevent it from
being based upon a franchise quite as wide as that of
nominally democratic countries under the parliamentary
system. The difference between the two systems is not that
one enfranchises more and the other less people, but that
one is conceived in terms of individual voters and their
rights, and the other in terms of the collective rights of a
dominant social class.

Of course, this class system of voting and the method of
indirect election which arises out of it make it far easier
than it could be under the parliamentary system for the
highly disciplined Communist Party and its local branches
throughout the country to establish an effective control over
the working of the entire machine. For the Communists,
being the one recognised class party, with their own
organisation of cells and branches extending to practically
every area, are able to exercise a tremendous weight in
elections of every sort. They do not, and they do not
attempt to, monopolise all the seats upon the local Soviets
for Communist Party members ; and when the Central
Congress of Soviets meets for the Union as a whole it
consists to a considerable extent of delegates who are not
members of the party. But the Communist Party is usually
in a position to secure the election of any individual whom
it particularly wants and to ensure that enough seats are
everywhere in its hands to enable its members, with their
coherent habit of acting together, to dominate policy.
Moreover, the higher up the scale of indirect election one
moves, the greater becomes the influence exerted by the

THE CHALLENGE OF COMMUNISM 667

Party, and the greater the proportion of Party members
sitting upon the governing bodies. The key positions in the
Soviet Union, apart from those technical posts for which it
is still necessary to call in outside help, are practically
monopolised by Communists ; and the Communist mono-
poly is likely to extend further and further as, with the
growing solidity of the new regime, Party influence and
membership become more widespread even than they are
to-day. For, despite the recurrent " purges " engaged in by
the party, the membership is likely to grow much larger as
industrialisation is extended not only by the expansion of
industry but also by the progressive socialisation of Russian
agriculture.

The socialisation of agriculture is undoubtedly a factor
making for a large increase in the direct participation of
Party members in the local working of the Soviet system.
But, let it be clear, there is no universal Communist mon-
opoly. For example, it is fully recognised as necessary to
give effective representation and a large degree of local
autonomy to national and cultural minorities within the
territory of the Soviet Union. Of course, Communism is
fully wide enough to appeal to these minorities, though at
present its hold on many of them is less strong than in
Russia proper. But the Bolsheviks have felt strong enough,
and sure enough of the pervasive influence of their doctrine,
to grant autonomy to these groups within the Soviet system.

There has been since the Bolsheviks assumed power a
great deal of discussion in Russia concerning the proper
relationship between the industrial workers and the
peasants within the new system. On the one hand, Lenin
and the Communist Party have constantly described the
Soviet system as a government of the workers and peasants,
and on the other they have spoken of the dictatorship of the
proletariat as involving the dictatorship of the industrial
workers. How are these two statements to be reconciled ?
Are the peasants part of the new ruling class in Russia,
or are they not ? The answer given by the Communists is in
terms of the distinction between the foundations on which the

668 EUROPEAN POLITICAL SYSTEMS

new State is built up and the character of the leadership
under which it is controlled. The workers and peasants
together form the foundation of the new Communist State ;
industrial workers and peasants alike have created this
State and now maintain it under the leadership of the
Communist Party. The party represents primarily the
industrial workers, and is to be regarded as above all the
expression of their point of view. The peasants' role is not
merely passive ; but it is definitely secondary to the role of
the industrial workers. Peasants as well as industrial workers
are, of course, increasingly found in the ranks of the Com-
munist Party, but the broad character of the Party con-
tinues to be industrial ; and its declared object is, by
industrialising agriculture as well as industry, to bring the
peasants into an attitude of mind in which they can become
full partners in the exercise of the dictatorship and in the
new Socialist society which is to arise out of it. The separate
peasant attitude is to disappear, and in its place is to come
a new attitude based on the abolition of the difference
between town and country and the comprehensive social-
isation of all economic processes, agricultural as well as
industrial. But until this has been brought about, the role of
the peasantry is to serve as allies of the industrial workers
in the maintenance of the new State, but in this alliance to
be brought under the effective leadership of the industrial
workers through the disciplined organisation of the Com-
munist Party.

This clear-cut theory of revolution and of proletarian
action in the period following the success of the revolution-
ary effort of the proletariat is based throughout on Marxism.
The Russian Communists conceive themselves as funda-
mentally Marxists, not in the sense of following blindly
what Marx and Engels said of the very different circum-
stances of eighty or ninety years ago, but rather of applying
the fundamental principles of Marxism to the new situation
which has arisen with the advance of Capitalism to a new
phase. At the time when Marx and Engels were writing,
Capitalism was still at a competitive phase of development.

THE CHALLENGE OF COMMUNISM 669

Great Britain was the only really advanced capitalist
country ; and there had not developed, as there has since,
an acute rivalry in world markets between a number of
developed capitalist countries all trying 'to sell their goods
and to assure themselves of the required supplies of raw
materials and other products needed for the expansion of
the industrial system. In other words, Capitalism had not
then become Capitalist Imperialism.

Lenin and Imperialism. The contribution of the
Communists, and above all of Lenin, their outstanding
thinker, has been that of carrying Marxism a step further
than it was possible for Marx and Engels to carry it, by
re-stating it in terms of the new phase of capitalist develop-
ment with which the working-class movement has now to
deal. Lenin's most important theoretical work is entitled
Imperialism, the Last Stage of Capitalism, and it is above all
in working out afresh the strategy of the Socialist Move-
ment in face of the problems created by the rise of Imperial-
ist Capitalism that Lenin's new contribution to the Marxist
philosophy lies.

According to Lenin's analysis the coming of Imperialism
brings to an end the peaceful and even development of
Capitalism as a system, and substitutes for the steady
technical and economic progress of the earlier period an
uneven process of growth marked by the outbreak of
serious crises and by a growing clash between the rival
Capitalisms of the great industrial countries. This clash,
leading inevitably to great imperialist wars, makes possible
in Lenin's view the victory of Socialism in particular
countries in which Capitalism breaks down under the
strain imposed upon it by the imperialist struggle. The
strategy of the working-class movement has accordingly
to be directed to the building up of an organisation capable
of seizing the opportunities created by such imperialist
struggles for achieving the revolution. This involves an
attitude radically different from that of the orthodox
Socialist parties ; for it contemplates the coming of Socialism,

EUROPEAN POLITICAL SYSTEMS

not as a result of a gradual evolution of the Parlia-
mentary system, but rather by means of a sharp revolu-
tionary uprising under proletarian leadership.

Lenin does no*, hold that a Communist or Socialist
Party, however strong, can make a revolution merely by
organising and preparing for it ; he holds that, in order to
achieve a successful revolution, it must await the coming of
a situation in which the temporary weakening or break-
down of the capitalist forces gives it the chance of acting
in such a way as to command the support of the great
mass of the workers in the country concerned. But he holds
equally that in the absence of a strong and determined
revolutionary party this chance will be bound to pass, or at
any rate to be so used that the instinctive revolutionary
struggles of the workers will merely become the means
whereby the more democratic elements among the middle
classes will succeed in re-establishing Capitalism. The
proletariat, Lenin insists, through the disciplined working-
class party which makes itself its class representative, must
seize the leadership of the revolution when the moment for
action arrives, and must push ruthlessly out of the way all
those bourgeois or moderate Socialist groups which cannot
be relied upon to press the revolution through to its con-
clusion in the establishment of a State under full proletarian
control. Consequently the strategy of preparing for the
revolution must be that of building up this disciplined
party ; and ruthless warfare must be waged against all
those Labour Parties which seek the support of the working
class on the basis of a programme of gradual Parliamentary
evolution or of conciliation of the bourgeoisie.

From this conception of revolutionary strategy arises the
virulence of the Communists when they arc speaking of the
Social Democratic and Labour Party leaders. For they
conceive these leaders and the parties which they control
as the chief obstacles in the way of the creation of the
revolutionary parties which alone will be competent to
seize the moment when it comes, and to put themselves
at the head of the entire working class.

THE CHALLENGE OF COMMUNISM

It is obvious that this theory was worked out
terms of the situation existing in Russia
Lenin's conception of revolutionary strat
put forward as universal, was really a p
arily for the Socialist Movement in Ri
for the Socialist Movement in coun
was struggling against a semi-autocrai
substantial section of the middle
opposed. The insistence that in the al
tionary leadership of the proletariat the1
the fighting for a revolution, the fruits of
be seized by the middle class, is clearly b;
such a situation as that of Russia, or to a less
war Germany, where the middle class was still largely
excluded from political power. In Great Britain or France
it is inconceivable that the middle class would want to make
a revolution side by side with the workers against the Gov-
ernment, and thereafter to throw over their working-class
colleagues and submit them to a new subjection, because
already in these countries the middle classes constitute and
control the Government. They are already for this reason
not a revolutionary force, but a force on the side of the con-
servation of the status quo. In so far as they assume a revolu-
tionary attitude at all, this will be only by way of counter-
revolutionary action against the threat of a Socialist
victory. They will begin by taking sides, if a revolutionary
situation arises, not with, but against the working class. In
Russia, on the other hand, and to a less extent in pre-war
Germany, the situation which Lenin envisaged did in
effect exist ; and, but for the Bolshevik seizure of leader-
ship in November 1917, the revolution of March would
have become, in the hands of the bourgeois parties and the
moderate Socialists such as Kerensky, an instrument for the
establishment of a liberal-democratic capitalist regime.
This is what actually happened in Germany, where the
Spartacists and Independents failed to seize control.

As soon as we begin to think in terms of the liberal par-
liamentary democracies of Western Europe, the problem

672 EUROPEAN POLITICAL SYSTEMS

of revolutionary strategy has to be envisaged differently ;
and it is largely the failure to realise this essential differ-
ence that has so far made it impossible for Communism to
secure any considerable hold in either Great Britain or
France. Moreover, in post-war Germany, with its far
higher degree of industrialisation, the situation was so
different from that in Russia that, when once the revolu-
tionary moment of 1918 and the early months of 1919
had passed and the bourgeois Republic been definitely
brought to birth, the Communist strategy was radically
inappropriate to the conditions of the new Republic and
therefore failed, though in less measure than in either
Great Britain or France, to rally the workers to its side.
The question which Communists seem never to have
thought out is how Marxism ought in the twentieth cen-
tury to be applied in those countries which are already
equipped with liberal-democratic Constitutions, and have
already large middle classes exercising the predominant
influence in their political affairs.

Communism, thus basing itself upon Marxism, repre-
sents a far more fundamental challenge than Fascism to
the institutions of capitalist Europe. For Communism puts
forward only incidentally an alternative form of political
organisation to the parliamentary State. Its fundamental
purpose is not to state a new political theory, or to suggest
new or improved means of working out the implications
of political democracy, but to accomplish a radical change
in the conditions under which political and economic
institutions alike arc to operate. It aims at the complete
socialisation of the powers of production, the complete
destruction of social classes, and the establishment of a new
type of society to which the old political conceptions will be
totally irrelevant.

Of course, Communism will be under no less necessity
than any previous system of reconciling the claims of liberty
and authority, and of finding scope for the individual
within a system of institutions making for the greatest
happiness of the greatest number. The old problems which

THE CHALLENGE OF COMMUNISM 673

have been argued about ever since men began to argue at
all in political terms will continue to concern it. But these
problems will take on radically different forms because the
underlying structure of the new society will be altogether
different from the old. Take, for example, the question of
liberty. So far, men have always been concerned with the
safeguarding of human liberty within a society based upon
and recognising the economic and class inequality of men.
A large part of the claims of libertarians in hitherto exist-
ing societies has in fact consisted either of claims which,
even if they were granted, would only in practice accord
real liberty to the possessors of economic security at a
fairly high standard of life or, on the other hand, of claims
designed to give those lacking this security some sort of
guarantee against the extreme pressure of exploitation by
their economic superiors. Within the framework of a
society based upon economic equality, or at least upon the
complete destruction of class divisions, the problem of
liberty will assume a new aspect.

Critics of Russian institutions in capitalist countries are
apt to dwell very greatly on the alleged suppression of
liberty in Russia to-day, and to base their arguments on
the disappearance of the characteristic liberties associated
in their minds with the liberal-parliamentary State. But
though the Soviet system in its present working does un-
doubtedly restrict individual liberty very seriously in
certain directions — above all in the expression of political
views hostile to the system itself— it has resulted in other
directions in an enormous extension of the liberties of the
great mass of the Russian people. Observers who come
back from Russia, unless they are too prejudiced to notice
what they see, practically all report that there exists among
the Russian people of to-day, in non-political matters, a
sense of freedom and of self-expression quite unknown among
the mass of the people in any capitalist country. They
report, moreover, that the Russian workman's attitude
even to the hard discipline of the Five- Year Plans differs
radically from the typical attitude of workmen in capitalist

XR

674 EUROPEAN POLITICAL SYSTEMS

societies, and that the Russian workers, or at least the
younger generation among them, feel that the industries
in which they are working are their common possession.
They have therefore towards them an attitude of respon-
sibility which makes hard service in forwarding the success
of the plan not a form of servitude but an expression of col-
lective freedom. Liberty, under the restrictions imposed
on its political expression by the necessities of the proletar-
ian dictatorship, is finding new forms and new substance
within the Russian Workers5 State. This is not to say that
the restrictions imposed upon it in the interests of the dic-
tatorship are good ; but in setting them down as criticisms
of the Soviet system it must not be forgotten that there are
very large extensions of liberty to be taken into account on
the other side. Above all it does appear that Russian
society is permeated by a real hope in the future, and that
a large proportion of the Russian workers do feel themselves
to be engaged upon a really worth-while task of social con-
struction, in strong contrast to the spirit of disillusionment
which pervades all classes in the capitalist world.

We come back now to the question which we left unan-
swered some time back. If Communism, thought out in and
for Russia and taking account primarily of the conditions
existing in Eastern Europe, has failed to create a strategy
effective in the very different conditions of Western Europe,
does this failure imply that Communism is itself inappro-
priate to Western Europe, or only that its strategy needs to
be thought out anew in West European terms ? If by Com-
munism is meant, not the precise system which the Rus-
sians have successfully instituted in their own country, but
rather a thoroughgoing system of Socialism to be instituted
by means of a radical transformation in the class structure
of society, the arguments against transplanting Com
munism in its Russian form to Western Europe are beside
the point. If, on the other hand, Communism means that
the policy and strategy of the Communist International
are to be rigidly applied by working-class parties through-
out the world, then Communism is most unlikely to become

THE CHALLENGE OF COMMUNISM 675

the instrument of social transformation in the western
countries. But this question can be dealt with more easily
in a separate section, in which we shall be discussing the
position and prospects of Socialism primarily in Western
Europe.

§ 7. EUROPEAN SOCIALISM

EUROPEAN Socialism as an organised movement, as
distinct from a body of theories, dates effectively from 1848.
Before the year in which Marx and Engels issued to the
world their famous Communist Manifesto Socialism had
already a considerable history behind it, and there had
been many great Socialist thinkers — Saint Simon and
Fourier in France, and above all, Robert Owen in Great
Britain. Socialist ideas, too, had played a part in many
organised movements in both Great Britain and France,
for example in the Owenite Trade Union movement of
1834 and in Chartism. But not until 1848 did there emerge
in Europe a continuous agitation based on a clear-cut
Socialist philosophy and programme of action. Ever since
1848 the Socialist movement of Continental Europe has
been based mainly upon the doctrines contained in the
Communist Manifesto.

The revolutions of 1848 and the following years con-
tained everywhere Socialist elements ; and in both Ger-
many and France Socialists attempted to wrest the effec-
tive leadership from the middle-class revolutionaries. But
these attempts were beaten down ; for nowhere except in
Great Britain was there yet a proletariat large enough to
form the basis of a considerable organised movement, and
in Great Britain the power of Chartism had been broken
before 1848. With the defeat of the Liberal revolutions in
the years after 1848, Socialism underwent persecution and
the Socialist movement was to a great extent eclipsed. But
it was not long before the work of rebuilding had begun ;
and especially in London there continued after 1848 to be

676 EUROPEAN POLITICAL SYSTEMS

a body of revolutionary exiles from Continental countries
who kept Socialist thought and agitation alive. Karl Marx
was the dominant figure among these Socialist exiles, as
was Mazzini among the non-Socialist revolutionaries in
London ; and in 1 864 Marx's chance came to re-create an
international movement similar to that which he and
Engels had hoped for in the " Year of Revolutions."

In 1864 the International Workingmen's Association,
better known as the First International, was born ; and
Marx at once assumed the leadership. Under the auspices
of the First International the work was taken in hand of
building up organised Socialist movements in the leading
Continental countries, and especially in France and Ger-
many. From this period dates the effective beginning in
Germany of the Marxian Social Democratic Party, which
had at this stage for its rival the German Workingmen's
Association under the leadership of Lassalle. In France the
International also established its organisation ; but here it
found itself opposed on the one hand to the semi-Anarchist
followers of Proudhon, who believed in a solution of the
social problem by means of Producers' Societies and a
reform of the credit system, and the followers of Blanqui,
much nearer to the Marxist point of view, but differing
from the Marxists in that they advocated the tactics of revo-
lutionary action by a class-conscious minority even in the
absence of support from the mass of the workers. In Italy,
Marx's movement took less strong root, for there it was
opposed not only by the followers of Mazzini but also by
powerful Anarchist influences which brought it more
under the sway of the great Russian leader, Michael
Bakunin. In Russia, Marxism at this stage had relatively
little hold ; for the main mass of the Russian Socialist
movement, attempting to base its agitation on the peasantry
in a country as yet quite undeveloped in an industrial
sense, found more to meet its needs in the doctrines of
Anarchism than in the " Scientific Socialism " of Marx
and Engels.

The First International reached the culminating point

EUROPEAN SOCIALISM 677

of its career with the creation of the Paris Commune in
1871, after the defeat of Napoleon III at the hands of the
Prussians. But this short-lived experiment in practical
Socialism was wiped out in blood, and its defeat was fatal
to the immediate prospects of the Socialist International
in Europe. Yet it lived on in the minds of Socialists as the
one actual working pattern of the Socialist revolution in
action. It profoundly influenced the later thinking both of
Marx himself and of his successors who built up the Com-
munist movement in Russia.

After the collapse of the First International the Socialist
movement in most parts of Continental Europe underwent
a period of repression. Great Britain indeed was unaffected,
as she had been amid her growing economic prosperty
practically untouched by the wave of unrest which had
brought the Marxian International to birth. There was no
rise of British Socialism after the fall of the Chartist move-
ment until it was born again in the course of the industrial
depression of the late 'seventies and early 'eighties. But
on the Continent the movement remained alive, though
it was driven underground. In France many of the leaders
were in exile or in prison, and in Germany too the move-
ment, after a period of growth, had soon to undergo
Government persecution under Bismarck's anti-Socialist
laws. In the meantime, however, German Socialism had
undergone a highly significant change. At the Gotha Con-
gress of 1875 the Social Democratic Party, created on a
Marxian basis by Bebel and Wilhelm Liebknecht, united
with the Workingmen's Association, which included the
followers of Lassalle. This unity was achieved on the basis
of an agreed programme which was a compromise between
the views of the rival leaders. The draft of it was sent by
the German Marxist leaders to Marx, and Marx replied
in the scathing criticism now known as Comments on the
Gotha Programme. So fatal would the publication of these
comments have been to the prospects of German working-
class unity that the German Social Democratic leaders sup-
pressed them, and they were not published till long after

678 EUROPEAN POLITICAL SYSTEMS

Marx's death. For Marx saw in the terms of unity accepted
by his German followers a surrender of the revolutionary
policy which he had laid down in the Communist Manifesto
of 18483 and a definite compromise with a form of Socialism
which he regarded as essentially reactionary.

The differences between Marx and the Lassallians were
many ; but for the purposes of this brief study it is neces-
sary to mention only one. Lassalle had always worked for
an extension of State intervention in industry, for the
development of social legislation, and for securing the help
of the State in the organisation of working men's co-opera-
tive societies and similar bodies. Thus, the Lassallian pro-
gramme embodied a policy of gradualism based on an
extension of State control, and demanded for its execution
a Parliamentary Socialist Party adopting an evolu-
tionary and compromising attitude. The German Social
Democratic leaders, in order to achieve unity, had swal-
lowed a large part of the Lassallian programme, contenting
themselves with producing, side by side with these clauses,
slogans drawn from the revolutionary philosophy of Karl
Marx. Thus from the very moment of its union with the
Lassallians, the German Social Democratic Party embarked
in principle upon the evolutionary course which was
characteristic of its actual achievements when it was called
upon after 1918 to assume a part in the Government. The
real cleavage between Social Democracy and Communism
in Germany goes right back to the controversy over the
Gotha programme in 1875 I f°r at tnat time few even of the
Marxist leaders saw the real implications of the com-
promise which they were adopting in the interests of
unity.

From the 'eighties onwards Socialism began to grow
rapidly in most of the European countries ; and, with the
passing of the repressive movements which had followed
the Paris Commune, Socialist parties emerged and were
able openly to put forward candidates for election to the
various national Parliaments. At first these candidates
met with little success ; but gradually the electoral strength

EUROPEAN SOCIALISM 679

of the movement increased, and in the early years of the
twentieth century the Socialists were already a respectable
fraction of the Parliaments in the leading Continental
countries. Thus in Germany immediately before the war
the Reichstag had 1 1 1 Social Democratic members out of a
total of 397. In France the Unified Socialist Party had
1 02 members out of a total of 602, and in many other
countries — Italy, Belgium, Holland, Switzerland, Denmark,
and Sweden — Socialist parties had risen to positions of
considerable influence.

In Great Britain, the course of evolution had been some-
what different. An attempt of the Social Democratic
Federation to create a Socialist Party in the 'eighties met
with little success, and it was not until 1900 that the
Labour Representation Committee, later re-named the
Labour Party, came into being. This new party, brought to
birth mainly under the influence of Keir Hardie and the
more advanced of the Trade Unionists, differed from most
of the Continental parties, except that of Belgium, in being
based not upon the membership of individual Socialists,
but mainly upon the Trade Union movement. Keir Hardie
and his group aimed from the first at what they called the
" Labour Alliance " — that is to say, at an alliance between
the comparatively small body of conscious Socialists and
the mass of the workers organised in the Trade Unions.
They succeeded in persuading the Trade Unions to join
with them in setting up a political party, in which, by virtue
of their greater numbers, the Unions possessed the ultimate
control, and for which they found the greater part of the
funds. This party was not, like the Continental parties,
definitely Socialist in principle. It accepted a number of
Socialist doctrines, and found its leaders largely among
Socialists ; but it was not until after the war a Socialist Party
in any clearly defined sense. Even when it became a
Socialist Party by the adoption of distinctively Socialist
resolutions, the Socialism which it took over from the Eng-
lish Fabians and the followers of Keir Hardie was of a
non-doctrinaire and largely non-Marxian sort, stressing

i 680 EUROPEAN POLITICAL SYSTEMS

social reform rather than Socialism in its immediate pro-
gramme and aiming at the achievement of its objects by
means of gradual and constitutional evolution through
Parliament and not by revolution.

On the surface the differences between British Socialism
as it existed in 1914 and Continental Socialism were there-
fore considerable ; for Continental Socialism was in all
the countries of Western Europe for the most part strongly
Marxist, at least in phraseology. But in practice the differ-
ences were far smaller than they appeared ; for, although
the English Socialists and the Continental Socialists were
accustomed to use different phrases and the Continental
phrases sounded by far the more extreme, neither German
nor French Socialism was really more revolutionary in its
methods of action than British Labour. The International
Socialist Bureau, better known as the Second International,
had been constituted in 1901; and in this new international
organisation the British Labour delegates found no diffi-
culty in associating quite harmoniously with their Marxian
Continental colleagues. Indeed, there was in matters of
policy a much sharper cleavage between the Italians and
Spaniards on the one side and the Germans and French
and British on the other than between those who thought
themselves Marxists and those who did not.

In Russia, the situation of Socialism before the war was
radically different, because Russian Socialists continued
to be subjected to the extremes of persecution. Most of the
best-known leaders were either in Siberia or in exile abroad,
and after the defeat of the Russian revolution of 1905
persecution had been intensified. The Russian Socialists
had to conduct their agitation from abroad, and do their
thinking largely on foreign soil. They were divided, apart
from minor fractions, into three considerable parties. The
largest of these was the Social Revolutionary Party, based
mainly upon the peasants and thinking mainly in terms of
a peasant revolution. This party was in reality more Anar-
chist than Socialist in its fundamental doctrines, and
looked back to Bakunin rather than Marx as the inspirer

EUROPEAN SOCIALISM 68l-

of its policy. It was also strongly Slavophil, and therefore
followed an individual national line of its own. The two
remaining parties both professed to be Marxist ; they were,
indeed, two rival groups into which the old Russian Social
Democratic Party had split in 1903-4. Of these two, the
Bolsheviks, who became the Communist Party and carried
through the second revolution of 1917, upheld Marxism
in the revolutionary sense of the Communist Manifesto of
1848 and of Marx's Comments on the Gotha Programme of
1875. On the other hand, the Mensheviks, the smaller of the
two groups, had assimilated their doctrines to those of
the western Social Democrats and especially of the German
Social Democratic Party. They claimed to be Marxists ;
but their Marxism had become evolutionary in the sense
that they believed that the way to the establishment of
Socialism in Russia must lie through the setting up in the
first instance of the bourgeois democratic State, and the
development under its auspices of Russian industrialisa-
tion to the point required for the creation of a working
class capable of assuming power. The disputes between the
rival Russian parties were acute in the years immediately
before the war ; but naturally the group most closely in
touch with the Social Democrats of Western Europe was
the Menshevik group, which had most completely adopted
the revisionist version of Marxism current in western
Socialist circles.

Post- War Socialism. The war broke up the Second
International. This federation of European Socialist parties
had in 1907 pledged the constitutent parties to use every
possible effort to avert war if it should threaten to break
out, and, if it actually broke out in spite of their efforts, to
employ the situation created by it for the purposes of
advancing the cause of Socialism in their own countries.
But when war did come in 1914, although there were
Socialist demonstrations against it in each country, the
Socialist parties, or the majority of them, rallied in the
moment of crisis to the support of their several " national

<682 EUROPEAN POLITICAL SYSTEMS

causes." The German, French, and British Socialists alike
voted in favour of the war credits demanded by the respec-
tive Governments ; and, though there was in each country
a Socialist minority opposed to the war, this minority had
at the outset no means of common action. Everywhere the
main mass of the working-class movement was drawn in to
the support of its own nation in arms. Indeed, some of the
Socialists on both sides were among the most jingo of all the
supporters of the war. Right up to 1918 not one of the
leading Socialist parties had withdrawn its support from
its own national Government ; and, in both Great Britain
and France, Socialists had been members of the respective
Cabinets during the greater part of the war. Only lack of
opportunity prevented the German Socialists from enjoying
a similar doubtful honour. Before long the anti-war minor-
ities in the various Socialist parties attempted to draw
together on international lines. At Zimmerwald in Septem-
ber 1915 the first international conference of anti-war
Socialists was held ; and this was followed up a little later
by a second conference at Kienthal in April 1916. To
these two gatherings came Socialists of very different
complexions. On the one hand there were Socialists whose
opposition to the war was based mainly on pacifist grounds,
and whose main object was to bring pressure on the various
Governments to make peace at the earliest possible moment.
But there were also Socialists who were to be subsequently
the leaders of Communism, and among them Nicolai Lenin.
This second group did not care a fig for pacifism. What it
wanted was to take full advantage of the opportunity
created by the crisis in world Capitalism for furthering
the cause of revolutionary Socialism. For the moment it
suited the second group to work with the first, in order that
the agitation for peace might be used to undermine the
morale of the various national forces. But there was really
nothing in common between the two groups of delegates
at Zimmerwald and Kienthal.

A new phase began with the first Russian revolution in
the early months of 1917. For even the moderate Russian

EUROPEAN SOCIALISM 685

Socialists, though some of them were prepared to continue
the war in response to the demands of the Allies, passion-
ately desired peace, and were well aware that their country
could not stand the strain much longer without absolute
collapse. Accordingly, in the course of 1917, Russia became
a new force appealing to the workers of every country to
agitate for a negotiated peace. Out of this agitation came
the project of a great international conference, to be held
at Stockholm, at which the united working-class demand
for a negotiated peace was to find expression. When the
Bolsheviks came to power in Russia they were fully prepared
to take the lead in this crusade for peace. For they had even
less desire, as well as less ability, to carry on the war of
nations than their predecessors in power. Accordingly
they took up strongly the demand for international working-
class action, and the later agitation for the Stockholm
conference became in effect the beginning of the world-wide
appeal of the Russian Communists for support among the
workers in other countries. The Governments were
successful in suppressing it ; but their very success was one
of the causes of a great strengthening of Socialist feeling
among the working classes in the belligerent countries.

Meanwhile, the Bolsheviks, holding power by a pre-
carious tenure in their own country, were by no means
disposed to rest content with a merely pacifist movement,
or to remain upon the defensive until world Capitalism
was ready to launch a combined attack upon them. They
regarded the revolution which they had made as merely
the forerunner of a world revolution which was to usher in
the new Socialist system for the whole capitalist world ;
and they promptly set about drafting a great new appeal to
the workers of the world to follow their lead and to join
with them in the making of this world revolution. Empha-
sising the continuity of their movement with the earlier
Marxism, they created, in order to further the cause of
world revolution, a new International as the successor of
the ill-fated Second International, which in their view had
shown its incompetence and unsoundness at the outbreak

684 EUROPEAN POLITICAL SYSTEMS

of war. This new Communist International, better known
as the Third International, was created at Moscow in 1919,
and from it a new Communist Manifesto was launched upon
the world.

Meanwhile, after the war the inter-allied Socialists took
the lead in* re-creating the old Second International, this
time with the new name of the Labour and Socialist
International. There were thus two rival Socialist Inter-
nationals, each claiming to represent the working-class
movement of all countries ; but these two bodies stood for
exceedingly different policies. For, whereas the Third
International was definitely calling upon the workers to
make a world revolution, the parties associated with the
Labour and Socialist International were for the most part
attempting to bring about the reconstruction of their owrn
national economies on the basis of further instalments of
social reform, and to extend their influence on strictly
constitutional and parliamentary lines. But not all the
Socialist parties were prepared to associate themselves with
either extreme ; and for some time there was great con-
fusion in the camp of international Socialism, with a
" Two and a half International," as it was called, attempt-
ing to mediate between the " Second " and the " Third."

Especially in Italy was there a sharp division of views.
The majority of the Italian Socialist Party had throughout
opposed Italian participation in the war, though a minority
had broken away and supported intervention. After the
war, the Italians, apart from Mussolini and his group,
who had broken with the Socialists, were split into
three significant factions — the Communists, who had
definitely gone over to the Moscow doctrines, the Maximal-
ists, who also proclaimed themselves revolutionaries but
were not prepared definitely to throw in their lot with
the Third International, and the moderate Socialists, who
aligned themselves with the constitutional Socialist parties
of Western Europe. We have seen in an earlier section how
these differences in Italian Socialism prepared the way for
the triumph of Fascism.

EUROPEAN SOCIALISM

Almost everywhere in Europe, as things began to settle
down after the war, it was realised that numerically
Socialism had become much stronger than it had been in
1914. Everywhere the Socialist parties had been able
substantially to increase both their representation and
their voting strength. In some cases, as in Great Britain,
the real increase of strength did not become manifest till
some years after the war ; but as soon as there had been
time for the immediate excitement to die down, the gain
in Socialist voting strength became everywhere apparent.
It was, however, equally clear that, while Socialism
had increased its numerical influence, the constitutional
Socialist parties were in most countries unlikely in the near
future, if at all, to gain clear majorities in their national
Parliaments. This prospect was especially remote in those
countries, including, as we have seen, practically all the
new States, which had adopted in their Constitutions the
principle of proportional representation ; for proportional
representation is a system admirably calculated to prevent
any party from getting a clear majority save under the most
exceptional conditions.

The Socialists were thus faced with a new situation. Before
the war they had been accustomed to take their exclusion
from office as a matter of course ; and, although they had
at times to decide whether to support one bourgeois Govern-
ment against another and thus keep it in office when it
would otherwise have fallen, no question arose in most
countries of their actually sharing in the responsibilities of
government. Socialism was before the war almost exclu-
sively a critical force, standing outside the machine of
government and aiming at pressing upon it the claims of
the working class. After the war, on the other hand, Social-
ism had become powerful enough in a number of countries
for the constitution of any Government of the Left to be
virtually impossible without its aid, and for the question of
its willingness to take office inevitably to arise. It might be
called upon either to enter into coalition with the left
bourgeois parties, or to give these parties indispensable

6B6 EUROPEAN POLITICAL SYSTEMS

support for their own tenure of power, or itself to face office
as a minority Government, relying on getting its measures
adopted with the aid of left bourgeois votes. The first of these
situations arose above all in Germany, the second in France,
and the third in Great Britain, where the break-up of the
great pre-war Liberal Party turned the Labour Party into
the leading opposition group.

What were the Socialists to do when they were faced with
this new situation ? To the extent to which they were social
reformers aiming at the improvement of social conditions
within the capitalist system it was clearly illogical for them,
when the opportunity came, to refuse to take the chance
of improving the quality of current legislation, whether
this involved actually taking office or only entering into
some sort of agreement to support the bourgeois parties of
the Left. But, as we have seen, the Socialist parties of
Western Europe had long been in their essence social
reform parties rather than Socialist parties a Uoutrance.
Accordingly even if, as in France, they refused either to
enter coalitions or to take office by themselves in a minor-
ity, they were only consistent with their earlier attitude
when they pursued the path of compromise, and made
the accommodations necessary for the furtherance of a
policy of social reform, in preference to declaring open war
upon the united bourgeois parties and making an immediate
attempt to establish Socialism — an attempt which most of
their leaders regarded as both impracticable at that stage
and in itself highly undesirable. For these leaders were, as
we have seen, by no means revolutionists ; and they were
for the most part even more bitterly hostile to the Com-
munists and to left-wing elements within their own countries
than to the more democratic elements in the middle-class
parties.

In the period immediately after the war, attention,
especially in Great Britain, was for the time concentrated
rather on the Trade Unions than on the Socialist parties.
Trade Unionism, even more markedly than Socialism, had
emerged from the war with greatly added strength in the

EUROPEAN SOCIALISM 687,

leading countries. Side by side with the official Trade Union
movements, which, like the Socialist parties, supported the
war, there had arisen unofficial movements among the Trade
Union rank and file in the factories. These movements, led
by unofficial shop-stewards and workshop agitators, became
the chief voices of industrial unrest during the later years
of the war ; and when, after the Armistice, the Trade
Unions were released from their self-imposed loyalty to
the cause of national unity, there arose among their mem-
bers a strong demand for aggressive action to raise wages
and improve conditions of labour, and movements came
into prominence with more definitely Socialist objects
centring round the demand for workers' control in industry.
At the same time, the industrial situation was complicated
by the demobilisation of the returning soldiers ; and in the
early months of 1919 the Trade Union movements in the
Allied countries took up a strongly aggressive attitude and
put forward many projects of socialisation in industry,
coupled with the demand for workers' control. The French
Confederation Gintrale du Travail came forward with its plan
of nationalisation industrialism. In Great Britain the Trade
Unions took up the Guild Socialist demand for industrial
self-government, and both the miners and the railwaymen
pressed for the socialisation of their industries and their
transference to representative bodies chosen largely by the
workers themselves. But in both countries the Governments
were able to gain time by the granting of immediate con-
cessions ; and with the successful completion of the process
of demobilisation the revolutionary moment passed, and
the Trade Unions found their opportunity gone, especially
when the brief post-war boom gave place to the industrial
depression of 1920-21.

Thereafter, the Trade Union movements of the various
countries had to face serious difficulties. From 1920 on-
wards, the centre of interest tended to shift back from
Trade Unionism to political Socialism. The shop stewards'
movement and the unofficial workshop committees which
had been influential under war conditions disappeared as

C688 EUROPEAN POLITICAL SYSTEMS

these conditions passed away ; and the employers were able
by selective dismissals to weed out the more active " agita-
tors." Guild Socialism, with its demand for industrial self-
government, ceased to command widespread support as the
possibility of aggressive strike action by the workers grew
less ; and in the chief western countries Trade Unionism
settled down again to the familiar routine of collective
bargaining. It was stronger numerically than before the
war ; but there was no fundamental change in its policy
or in its relation to the employers.

Syndicalism and Guild Socialism. This, however,
applies less to the south of Europe than to Great Britain,
Germany, and France. For, in the south, Syndicalist and
Anarchist influences were far stronger inside the Trade
Union movement ; and the Syndicalist tendency, which had
been strongest in France in the early years of the twentieth
century, had persisted in Spain and Italy after it had lost
its original momentum in France and been partly overlaid
by the development of large-scale Capitalism. Small-scale
industry tends to breed, in contrast to the strong centralised
Unions of the more highly industrialised States, a localised
and spontaneous type of Trade Unionism, which relies far
less on the building up of large-scale permanent organisa-
tions than on keeping alive through a relatively small
membership a militant spirit among a minority of the
workers, in the confidence that, if this minority gives the
lead at the right moment, the unorganised majority will be
prepared to follow.

This type of Syndicalist unionism was especially strong
in Italy and Spain. In Italy it was crushed, together with
the Socialist Party and the Socialist Unions, by the Fascist
revolution ; but in Spain it remained alive even under the
dictatorship of Primo de Rivera, and it played an important
part in the Spanish revolution of 1931, surviving thereafter
to give a good deal of trouble to the orthodox Socialists
who were collaborating with the Radical parties in the con-
solidation of the new Spanish Republic. In the stimulation

EUROPEAN SOCIALISM 680,

of sporadic mass movements among the workers this
type of Syndicalist Trade Unionism is highly efficient ; but
it lacks sustained power and, above all, the capacity for
creating a coherent and disciplined movement over any
wide area. It is, therefore, far more effective in carrying on
a guerilla warfare against established institutions than in
setting up any authority capable of taking over control.
It lacks precisely those qualities which enabled the highly
disciplined and centralised Communist Party to establish
itself in power over the vast territory of Soviet Russia.

Syndicalism, like Industrial Unionism in America, was
from the first essentially a movement of agitation, aiming at
the stirring up of the general body of the workers and at the
creation among them of a continuous revolutionary temper.
Guild Socialism, which bears certain superficial resemb-
lances to Syndicalism, was a movement of a widely different
character, in that it was not primarily an agitation at all,
but rather a theory developed among a relatively small
number of Socialist intellectuals and radiating outwards
from this small group so as to influence the more active
spirits in the Trade Unions. Having this essentially theo-
retical character, Guild Socialism, although it profoundly
influenced the development of Socialist and Trade Union
thought and policy in Great Britain — the only country in
which it ever developed an organisation of its own — never
became a movement of the workers ; and when the con-
ditions which had favoured its development passed away
it speedily lost its wider appeal and disappeared as a distinct
form of Socialism. Its effects remained in a permanent
modification of Trade Union and Socialist policies ; but the
Guild Socialist organisation itself— always very minute in
comparison with its articulateness and the spread of its
influence — dissolved with the coming of unemployment
and industrial depression.

Socialism and Social Reform. We have seen how,
when circumstances became adverse to aggressive Trade
Union action, the interest in the West European countries

<>6gO EUROPEAN POLITICAL SYSTEMS

shifted back from industrial to political activity, and the
hopes of the workers came again to be centred upon the
Socialist parties. These parties, as we saw, had by this time
resumed their pre-war attitude of pressing for a more de-
veloped policy of social reform, and had added to their
demands for reform proposals for the socialisation of
certain particular industries as a first instalment of an
attempt at Socialist construction within the framework of
capitalist society. Their policy was thus twofold, and their
appeal to the workers had already this dual character.
They relied for the getting of votes largely on their promises
of immediate social amelioration, while they appealed to
the more active elements in the working class, and the
middle-class sympathisers with Socialism, with their more
constructive Socialist proposals.

But in practice in both these fields the carrying out of
their declared policy presented considerable and increasing
difficulties. Social reforms cost money ; and it was becoming
harder, in face of the growing pressure on public finance in
consequence of the enormously increased burden of debts,
to extract additional revenues to be spent on a further
extension of social reforms. The hopes of the workers had
been raised by the lavish promises made to them during the
war ; and the Socialist parties after 1918 had embodied in
their programmes ambitious schemes of social amelioration.
Even before the coming of the world slump it was doubtful
how far the Socialists, if they actually took office, would
be in a position to implement their promises without so
taxing the richer classes as greatly to diminish the incentives
on which the capitalist system depends. This difficulty
became immensely greater after 1929, when the ability of
Capitalism to stand increasing taxation was diminishing
just at a time when the maintenance of the growing body of
unemployed, even at a very low subsistence standard, was
imposing large additional burdens on the national revenues.
Most of all did the difficulties of the German financial
situation make it out of the question for the German Social
Democrats to press for any considerable advances in

EUROPEAN SOCIALISM 69 1

social legislation in the years immediately before the Hitler
coup.

Nor were the British Socialists much more happily
placed in respect of the constructive part of their pro-
gramme. It was being borne in upon them to an increasing
extent that they could hope further to expand the social
services and further to redistribute wealth only if they could,
in order to secure the necessary resources, make a real
beginning with the socialisation of industry, and thus
transfer to the State some at least of the sources of national
wealth. But, commanding no independent majority in the
national Parliament, and depending for their ability to get
measures passed into law on the support of a certain number
of middle-class Liberals or Radicals, they were quite
unable to bring forward constructive measures of socialisa-
tion with any real hope of carrying them into effect.

Accordingly in both aspects the policy of moderate
Socialism suffered, especially after 1929, a visible check. In
the countries where the Socialists were strong enough to
make it difficult for the government to be carried on without
them, something like a stalemate ensued ; and where the
Parliamentary system was not strongly rooted this led
easily to the virtual abrogation of the powers of Parliament
and the substitution of more or less complete forms of
dictatorial government. In Great Britain, where the hold
of Parliamentarism was far stronger, the crisis of 1931 —
which made clear once and for all the impotence of gradual-
ist Socialism in face of the world depression — drove the
Socialists from power and reduced them temporarily to a
mere fraction of the representation which they had pre-
viously held. In France the Socialists, not having been
subjected to the test of office, were still able to maintain
their position, and in 1932 to instal and keep in power a
new Government of the Left under the successive leadership
of Herriot, Paul-Boncour, and Daladier. But this Radical
Government, hardly less than the more reactionary
Governments in power in other countries, found itself under
the necessity of economising at the expense of the social

r 692 EUROPEAN POLITICAL SYSTEMS

services and of the wages of public employees in order to
avoid a hopelessly unbalanced budget.

The Communists regard these difficulties of post-war
Social Democracy in the western countries as a decisive
exposure of the futility of the entire policy which the non-
Communist parties have been endeavouring to pursue.
According to them, there is no way of improving the
condition of the workers save by the institution of a Socialist
system, and no way to establishing Socialism save by a
violent revolution. Socialists who think otherwise are
merely beating the air, and in effect are serving the interests
of Capitalism by standing in the way of the development
of the revolutionary consciousness of the working class.
But it is exceedingly doubtful whether, in the circumstances
of the western countries, this analysis will bear examination.
For the proletariats of France and Great Britain and, even
to a less extent, of Germany, differ from the pre-revolution-
ary proletariat of Russia in that they certainly have some-
thing to lose besides their chains. There exists in certain
especially depressed areas in the advanced industrial
countries a poverty-stricken proletariat which has used up
all its savings under the pressure of prolonged unemploy-
ment and now subsists meagrely and with diminishing
physical efficiency upon some form of dole. But this sub-
merged section of the working classes in the western
countries is by no means typical of the working class as a
whole. For in neither France nor Great Britain has un-
employment of this type affected more than a small section
of the total industrial population.

It is mainly among these victims of a depressed capitalist
system that Communism, at least in Great Britain, has
found its rank and file adherents ; but upon such a basis it is
quite impossible for any effective nation-wide Communist
movement to be built up, unless and until depression over
the country as a whole becomes infinitely deeper and more
widespread than it has shown any sign of becoming even
after four years of slump. Except in these abnormally
depressed districts, which form only a small part of the

EUROPEAN SOCIALISM 693

whole industrial area, the majority of the workers are still
either regularly employed or subject only to short spells of
unemployment, which produce upon them nothing like
the same psychological or economic effects. Many of them
have savings, own their own houses, are in relatively good
jobs which they have no desire to lose, and so far from
being prepared to make a revolution because it may better
and cannot worsen their situation, hope strongly, even if
they hold Socialist convictions, that Socialism can be
brought into being painlessly and without an intervening
period of chaos and civil war. So far from responding to
Communist propaganda based on the idea of the inevit-
ability of revolution, they react strongly against this type
of propaganda and give steady support to the moderate
Socialist leaders, or, if they despair of moderate Socialism,
are more likely to react against Socialism altogether than
to go over to Socialism of a more extreme type.

Doubtless the Communist, if he accepts this diagnosis,
will answer that his policy is not in any way affected by it,
for it is his business 10 create in Great Britain and France,
as in the more distressed countries, a nucleus of revolu-
tionary working-class opinion in preparation for the time
when the further worsening of economic conditions will
make a far larger proportion of the total working class
ready to listen to his appeals. He regards world Capitalism
as in definite process of dissolution and decay ; and, while
he does not say that there can be no revival from the
present world depression, he does hold that even if a
revival occurs it can be only temporary and is bound to
give place to a still worse depression in the not distant
future. If, then, he recognises that he has little chance at
present of winning over the mass of workers to his point of
view, he holds only that the time is not yet ripe for the
realisation of his hopes, without in the least giving up his
conviction that his time will come, and that it is his business
to prepare the workers for the coming accentuation of class
.conflict.

694 EUROPEAN POLITICAL SYSTEMS

Class-Divisions in Modern Society. This diagnosis,
however, leaves out of account the radical difference
between the composition of the occupied population in
Great Britain and France and in such a country as Russia.
In Russia the great mass of the people were deeply impover-
ished peasants, and even among the industrial workers the
proportion of relatively well-paid and skilled workers was
very small indeed. Broadly speaking, the whole working
class was bitterly oppressed, and suffered in common the
social stagnation of a downtrodden class. But in the western
countries of Europe, and especially in Great Britain, this is
not so. The workers are far more differentiated among
themselves, and include a far higher proportion of relatively
well-paid craftsmen holding fairly secure jobs. The black-
coated proletariat, as it has been called, is infinitely more
numerous ; and above the ordinary ruck of black-coated
workers stands a very large and rapidly growing body of
professionals and technicians enjoying salaries very substan-
tially above the ordinary working-class levels. It is true that
many of the lesser black-coats are very badly off, and that
unemployment is fairly severe among the clerical grades ;
but there remains a formidable body of middle-class
workers who live not on interest or dividends but on
salaries earned in the professions or in the technical and
administrative departments of industry and commerce.
These intermediate grades are closely connected by ties
of family and marriage with the upper strata of the manual-
working class, as well as with the classes above them.

Class differentiation in advanced industrial societies is
thus far more complex than the familiar expositions of the
doctrine of the class struggle usually allow for. Above all,
the petite bourgeoisie can no longer be characterised, as Marx
and Engels quite correctly characterised it in 1848, as an
essentially reactionary class in process of disappearance
before the onset of large-scale industry. This bourgeoisie
which Marx and Engels described still survives, is still
numerous, and still lacks, as it lacked in their time, the
power of organising any coherent or powerful movement of

EUROPEAN SOCIALISM 695

its own, or of doing more than hover in its allegiance between
the classes above and below it. But the whole situation has
been transformed by the development, on the basis of
modern industrialism, of a new and quite differently
situated petite bourgeoisie, which grows in number and
strength in proportion as the technical development of
industry advances. For this new intermediate class possesses
precisely the qualities of initiative and leadership which the
older petite bourgeoisie so markedly lacks ; and it is capable,
by placing itself at their head, of transforming them from
a merely confusing element in the struggle of classes into a
powerful and aggressive force.

This, as we have seen, is precisely what has happened
in those countries in which Fascism has risen to power.
But it has happened under the guise of Fascism only where
these intermediate classes have found themselves threatened
with economic ruin by the disintegration of the economic
system. Fascism arises where there is no sufficient scope
within the industrial system for the new middle class to
exercise its talents and to earn an income which it considers
appropriate to its economic and social status. As long as an
advanced industrial country is able to provide its growing
middle classes with these opportunities, they will not go
Fascist ; but if in any country Capitalism shows serious
signs of dissolution, and Socialism threatens to displace it,
they will be likely to take a very active hand in the conflict
between the Socialist and the capitalist forces.

On the analogy of what has happened in Germany, and
to a less extent in Italy, it may be regarded as inevitable
that, when these groups do organise, their action should
take a counter-revolutionary form. But this is only because
in both Germany and Italy the capitalist system had fallen
into such decay, and was suffering under economic diffi-
culties so extreme, as to threaten seriously the position of
the industrial middle class. If to-day Capitalism in Great
Britain or in France went the way of German and Italian
Capitalism, doubtless Fascism would appear as a powerful
force in the two former countries as well ; but if, as seems

( 696 EUROPEAN POLITICAL SYSTEMS

more probable, the power of Great Britain and France to
stand up against even a long continuance of the present
world depression remains considerable, there is no reason
to anticipate this outcome, and the question is rather what
the attitude of these middle-class groups is likely to be in a
struggle between capitalist and Socialist forces carried on
under a capitalist system still comparatively healthy and
strong.

Under such conditions it is by no means a foregone
conclusion that the rising industrial middle class will throw
all its weight on the capitalist side. Doubtless some of it,
by virtue of snobbishness and a desire at all costs to preserve
a superiority of status and income, will go that way. But
there are other things besides these desires that count in the
minds of this section of the population. Consisting largely
of technicians and professional people, it is more than any
other group interested in its job and keen to get the greatest
possible scope for carrying on its work under conditions
ministering to the fullest efficiency. Some of its members,
at any rate, will be inclined to throw their weight on the
side of Socialism to the extent to which they are persuaded
that Socialism is really working in the interests of technical
progress and is, in the Marxian phrase, in accordance with
the requirements of the advancing technical powers of
production. Many members of this class have been deeply
impressed by the conception of Socialist planning in Russia.
Doubtless many of them think that the Russian experiment
would be very much better if only it were not Socialist,
and would greatly prefer a planned capitalist economy to
any form of planning under Socialist control. But some of
them have been led, by observing the Russian situation, to
realise that Russian planning has been made possible only
because the Russians have concentrated in the hands of
their governing authorities the ownership and control of
all the vital means of production in Russia, so that they
have been able to direct the material resources available
to them in accordance with the requirements of their
general economic plan, whereas no such coherent direction

EUROPEAN SOCIALISM 697.

of industrial effort is possible where the ownership and
control of the means of production remain in the hands of a
large number of private capitalist groups which claim the
right to do what they like with their own.

Western Socialists, in making their appeals, have there-
fore strong reason for making them on a basis calculated to
attract at any rate a proportion of the technical and
professional workers as well as the manual wage-earners.
Nor does this involve, as some suppose it does, any watering
down of Socialist programmes or policies ; for there is no
reason to suppose that the technical or professional worker
is less ready to accept an advanced Socialist programme
than a large section of the manual workers, who have also
something to lose besides their chains. Indeed, the techni-
cians and professionals are likely to be more attracted to a
Socialism sufficiently advanced and drastic to hold out real
hopes of successful planning than to a continuation of the
moderate and unconstructive policies of previous Labour
and Socialist Governments. Socialist parties are more likely
to succeed in winning over a majority of the electorate to a
Socialist policy if they do look as if they mean to embark
upon a businesslike attempt to instal a Socialist system
than if they bear the appearance of having no more than a
half belief in the efficacy of their own doctrines.

PART V : EUROPEAN INTER-
NATIONAL RELATIONS

1. Disarmament and Security

2. The League of Nations

3. The International Labour Organisation

§ i. DISARMAMENT AND SECURITY

BETWEEN 1914 and 1918 the leading countries of the
world were engaged in what was commonly described to
the peoples on both sides as a " war to end war." It was
promised by each Government to its own nationals that, if
they would but consent to prosecute the war to the bitter
end, so that the causes for which they stood might com-
pletely triumph, the world would, when once the victory
had been secured, be set free for ever from the threat of
future wars. Above all was this promised as a consequence
of the victory of the Allied Powers over Germany and her
associates. For these Powers professed to stand for a settle-
ment in which self-interest should have no part and every-
thing possible should be done to build up a friendly and
co-operating fellowship of nations. The League of Nations,
of which President Wilson was the most enthusiastic
advocate, was offered to the world on the morrow of the
Allied victory as the means whereby these large promises
were to be made good ; and in the Treaties of Peace, side
by side with punitive clauses which plainly violated the
principles for which the Allies had professed to stand, there
were other clauses promising disarmament in a world to be
freed henceforth from the danger of war. Disarmament, or
rather a drastic limitation of armed personnel and of war
material, was enforced upon the defeated Central Powers
by the Treaties of Peace ; but side by side with these

728

DISARMAMENT AND SECURITY

WHAT THE GREAT POWERS

SPEND ON ARMAMENTS

(1913 and 1930) in dollars

69?

579

535

1443

• 245

455

463

1 375

1349

259

232

1930 1913 1930 X9I3 I93<> 1913 I93<> 1913 1930 1913 1930 1913 1930 1913
U.S.A. U.S.S.R. G.B. FRANCE ITALY JAPAN GERMANY

GERMANY 5

ITALY 24 ARMAMENT

FRANCE 22 EXPENDITURE

U.S.A. 17 AS A PERCENT-

„ 7 AGE OF THE

G.B. 14 NATIONAL

BUDGET

ARMAMENT EXPENDITURE
PER HEAD OF POPULATION

11 (dollars) 1930

8

4 4

I I i

FRANCE G.B. ITALY U.S.A. JAPAN U.S.S.R. GERMANY

TOO EUROPEAN INTERNATIONAL RELATIONS

enforced measures of disarmament there were clauses under
which the victorious Allies themselves undertook speedily
to disarm. It was clearly contemplated that the compulsory
disarmament of Germany and the other Central Powers
should not place them permanently in a position of in-
feriority in relation to the victorious nations, but should be
the first step towards comprehensive and universal disarma-
ment, based on the assurances of peace under the new
League system.

It has sometimes been contended since by Allied states-
men that, whereas the disarmament of the Central Powers
under the Peace Treaties was a compulsory measure having
legal force, the undertakings entered into by the victorious
Allies were purely voluntary and conditional. They had, it
has been urged, no legal force behind them, so that no
sanctions can be invoked against the failure to carry them
out ; and they were, moreover, conditional on certain
other things being done in order to guarantee the security
of nations. According to this contention, the League
Covenant, even with the additional pacts and treaties that
have been concluded since 1919, is not enough to satisfy
this implied condition of disarmament. Before the nations
can be expected actually to disarm there must be positive
security against an attempt by any nation to appeal to arms
for a solution of international differences. Pending such
complete assurances, disarmament, it has been held, must
remain in abeyance, or be at best a matter of mutual bar-
gaining, in which each Power will scrutinise carefully what
each other Power is prepared to yield, and give up nothing
of its own right to arm save in return for a fully adequate
quid pro quo.

It is of course perfectly clear that the terms of the Peace
Treaties and of the League Covenant cannot really bear
this interpretation. It was definitely intended in 1919, at any
rate by President Wilson, and it wai definitely understood
by the peoples of the world — by the Central Powers above
all— -that the Allied nations, in forcing immediate disarma-
ment upon their vanquished enemies, were also making an

DISARMAMENT AND SECURITY yoi

unequivocal promise of early disarmament in their own
countries. Indeed, any other interpretation would make
nonsense of the entire system for the guarantee of peace
which it was proposed to set up ; for to make security
a prior condition of disarmament amounts to a contradic-
tion in terms. As long as all nations are armed to the teeth,
no nation can possibly feel secure. It is an absolute condi-
tion of security that disarmament should have already taken
place. It can doubtless be contended that the two processes
ought to go on side by side, and that while the nations are
disarming they should proceed simultaneously to build up
the framework of a system of mutual concession and co-
operation, in order to realise not merely security in a negative
sense, but the removal of thecauses of quarrels as well as the
prevention of the attempt to settle them by war. But the
idea that security can precede disarmament is sheerly
fantastic, and as long as it persists it is evident that no real
progress in the direction of disarmament is likely to be
made.

Fifteen years have now passed since the end of the Great
War, and throughout these years the Powers, both through
the League of Nations and in other international con-
ferences, have been continually discussing the cognate
problems of disarmament and security. As early as 1920,
the League of Nations set up a Permanent Advisory Com-
mission to discuss the question of disarmament. The Soviet
Union and the Baltic countries met in a special disarma-
ment conference of their own as early as 1922. The Wash-
ington Naval Treaty between the United States, the British
Empire, France, Italy and Japan was entered into in the
same year, and was meant to be the first step towards
a drastic programme of naval disarmament over the world
as a whole. Since then there has been, up to the Disarma-
ment Conference which is still meeting as we write, an
infinite amount of discussing, reporting, presenting of
plans and counter-plans, argument about the respective
merits of absolute and partial, qualitative and quantitative,
unilateral and general disarmament, and an infinite

7052 EUROPEAN INTERNATIONAL RELATIONS

amount of propaganda in favour of one project after another
for the guaranteeing of peace. But what has it all come to ?
How much nearer are we, after these fifteen years, either to
any sort of security against the occurrence of further wars,
or to any real disarmament, or even to a substantial reduc-
tion in the number of men under arms, in the size and
equipment of fleets by sea and air, or in budgetary expen-
diture, open or concealed, upon the fighting services ?

Armaments and Expenditure. Let us begin with a few
of the outstanding facts. According to the calculations made
by the staff of the League of Nations for the purposes of the
Disarmament Conference, world expenditure on arma-
ments amounted in 1925 to just under 3,500 million
dollars, and in 1930 to 4,128 million dollars. These figures
are calculated by aggregating in terms of dollars the
annual expenditure of 62 different countries. They cannot
pretend to complete accuracy ; but they are certainly near
enough to the truth to give a realistic picture of the situa-
tion as it exists at present. This hardly looks as if, despite all
the conferences, real progress were being made in the direc-
tion of world disarmament ; for although the cost of main-
taining a given quantity of armaments was undoubtedly to
some extent higher in 1930 than in 1913, it was also un-
doubtedly lower in 1930 than in 1925 ; so that the real
increase in armaments between 1925 and 1930 was con-
siderably greater than the totals of expenditure show.

No comparison with 1913 is possible for the world as
a whole on the basis of the available figures ; but a com-
parison can be made for certain of the leading Powers.
Thus if the expenditure on armaments in 1913-14, when
preparedness was at an exceptionally high level in^view of
the general expectation that a great war might break out
in the near future, is compared with the expenditure in
1930-31, it will be found that the three leading Allied
countries — Great Britain, France and Italy — together spent
on armaments in 1913-14 just over 900 million dollars,
whereas in 1930-31, despite their complete victory in the

DISARMAMENT AND SECURITY 703

war, and their success in disarming their late enemies, the
same three countries spent about 1,250 million dollars, an
increase of nearly 40 per cent, which should be compared
with a rise of about 18 per cent in dollar prices between the
two dates. It is true that this increase is very much less than
the increase in the United States, which was compara-
tively lightly armed before the Great War. The United
States spent on armaments 245 million dollars in 1913-14,
and 728 million in 1930-31 — an increase of practically
200 per cent. Japan increased her expenditure by 142
per cent, from 96 million dollars to 232 millions. The
U.S.S.R. showed an increase in armaments expenditure of
29 per cent, from 448 million dollars to 579 millions in
1929-30 ; but in this case the rise in internal prices was
very much greater than in the other countries concerned, so
that the figures exaggerate the real rate of increase. On the
other hand, Germany, compulsorily disarmed by the Peace
Treaties, spent in 1930-31 on armaments only 170 million
dollars as against 463 millions in 1913-14, a fall of 63 per
cent.

Put the position in another way. In 1930-31 Germany
was spending only 5 per cent of her total budgetary out-
goings on armaments, thanks to the compulsion laid upon
her by the Treaty of Peace. Great Britain, on the other
hand, was spending 14 per cent, and the United States
1 7 per cent, while France was spending no less than 22 per
cent, and Italy 24 per cent. France had the highest per capita
expenditure on armaments of any country in the world ;
for in 1930 her armaments cost her no less than 13 dollars
per head of population. Great Britain came next with
1 1 dollars, followed by Italy and Holland with 8 dollars ;
the United States spent 7 dollars, the U.S.S.R. 4 dollars,
and Germany only 3 dollars, while in Austria and Hungary
expenditure was only 2 dollars a head, and in Bulgaria only
i dollar. Certainly, compulsory disarmament, whatever
stigma it may be felt to convey, has its compensations from
the point of view of its effect on the national budget,
though of course these effects were in practice neutralised

704 EUROPEAN INTERNATIONAL RELATIONS

during the period after the war by the Allied demands for
reparations.

It is, however, in some respects misleading to compare
national armaments in terms of budgetary expenditure
alone ; for a great deal depends upon the nature of the
armaments upon which the money is spent, and upon the
different forms of military service adopted. Conscript
armies are much cheaper per head than long-service
standing armies recruited by voluntary enlistment. Naval
armaments cost in these days of vastly expensive capital
ships more than corresponding land armaments ; and the
different standards of life in the various countries affect
considerably the cost of maintaining armed forces of any
given size. It is therefore necessary to consider not only the
amount spent on armaments, but also the number of
effectives enrolled in the various armies, and the material
equipment of their naval and air forces. It is, however,
extraordinarily difficult, as the World Disarmament Con-
ference has already discovered, to obtain from countries
any really adequate or comparable account of the numbers
and equipment of their armed forces. Many of the Euro-
pean countries have, in addition to their regular armies,
numerous auxiliary forces, variously denominated frontier
guards, citizen guards, irregulars, and various other ambi-
guous descriptions. It is hard to know how far trained
reserves ought to be counted in estimating the size of the
national forces, or what account should be taken of part-
time armies such as the Territorial Army in Great Britain
in comparison with full-time soldiers. Again there is the
question of the colonial forces maintained abroad by the
various imperialist Powers. Is a statement of the British
forces to include the Indian army, or only the British troops
stationed in India, and is the number of the French army to
be reckoned by including the large, and from a military
point of view undoubtedly valuable, army raised and for
the most part stationed in Africa ? These questions admit of
no uniform answer likely to command unanimous agree-
ment ; and because of them it is exceedingly difficult to

DISARMAMENT AND SECURITY 705^

present any comprehensive picture on a comparable basis.
All that can be done and all that we have attempted to do
is to extract such relevant information as can be extracted
from the special tables prepared on the basis of returns from
each nation for the use of the Disarmament Conference, and
to set side by side with these figures certain figures for
earlier years, which unfortunately cannot be made fully
comparable with the Disarmament Conference returns.

Let us confine ourselves in the first place to a compara-
tive table for 1913, 1925 and 1928, published in an article
by General Sir Frederick Maurice in the issue of the
League of Nations periodical Headway for December 1929.
All these figures are derived from documents published by
various bodies connected with the League of Nations. The
1913 figures were originally issued by the Temporary
Mixed Commission on Armaments, while the figures for
1925 and 1928 are taken from the League of Nations
Armaments Year Book. On the basis of these figures, we
see that there had been in Western Europe between 1913
and 1928 at best only an insignificant tendency towards
the reduction of armaments. Italy appears, indeed, to have
a slightly smaller army, and France a substantially smaller
army, than before the war. But for Great Britain there has
been an apparent increase, which is, however, largely if
not wholly due to the figures being compiled on a different
basis. Taking the figures for France and Italy, we get a
total force of 1,050,000 comprised in their combined peace
establishments before the war, as against 920,000 in 1928,
surely a most unsatisfactory percentage reduction for the
ten years after the conclusion of the " war to end war " ?
Naturally, the Central European countries show a much
larger aggregate reduction, as they have for the most part
been compulsorily disarmed ; and certain of the Scan-
dinavian countries and also Holland have greatly reduced
the size of their armed forces, which were always small. It
is to be observed that for the European countries as a whole
the total reduction in the peace establishments between
1913 and 1928 amounted to less than one million out of

YR

706 EUROPEAN INTERNATIONAL RELATIONS

3[
»[

*E

]!

s[

DISARMAMENT AND SECURITY

EUROPEAN ARMIES IN 1931

707,

Country

Regulars

Gendarmerie

Others

Albania

13,000

—

?

Austria

21,000

17,000*
(and police)

—

Belgium

86,000

—

6,000

Bulgaria

19,000

6,000

3,000

Czecho-

slovakia

139,000

13,000

Denmark

8,000

—

3,000

Estonia

14,000

—

1,000

Civic Guard 29,000

Finland

32,000

—

2,000
Civic Guard 100,000

France

497,000

(662

,000 including

37,000

1 8,000

Colonial*)

Germany

100,000

—

?

Great Britain

137,000

—

Territorials, etc. 153,000

Greece

65,000

—

p

Holland

55,000

—

4,000

Hungary

35,000

—

12,000

India

260,000

__

74,000

Irish Free
State

6>°°° Reserves underlining Clvic Guard 7'°°°

Italy

491,000

90,000

—

Latvia

23,OOO

—

1,000

Lithuania

18,000

—

?

Luxembourg

500

—

Norway

6,000

_

—

Poland

266,000

—

64,000

Portugal

61,000

—

1 1 ,000

Roumania .

250,000

—

63,000

Spain .

195,000

16,000

?

Sweden

25,000

—

—

Switzerland .

1 2,000f

_

—

Turkey

I4O,OOO

30,000

—

U.S.A.

145,000

—

?

U.S.S.R. .

562,OOO

—

?

Yugoslavia .

184,000

—

28,000

* Heimwfhr not included. | Average daily number in training.

^ 708 EUROPEAN INTERNATIONAL RELATIONS

3f millions in arms in 1913, and that there were still in
1928 not far short of three million men regularly under
arms, apart from those included in the naval and air
forces of the countries concerned.

Turn now to the approximate figures for 1931, and con-
sider the absolute numbers under arms in the various
countries, again excluding naval and air establishments.
Three countries — France, Italy and the U.S.S.R. — possess
armies of over half a million men, Poland has over a quarter
of a million, and six other European countries have armies
exceeding the 100,000 permitted as a maximum to Ger-
many under the Treaty of Peace. Belgium, with her rela-
tively tiny population, is not far behind Germany, with
90,000 men ; and all the neighbours of Austria and Hun-
gary, with their permitted maxima of 12,000, and Bul-
garia with 20,000, still have armies many times larger than
those allowed to their defeated rivals. How can these vast
forces still under arms in every danger spot of Europe
possibly be compatible with any sense of security on the
European Continent ? It is indeed sometimes contended
that the larger the army the greater the security that it will
not be used ; but we have yet to find any reasonable person
who really believes in this fantastic doctrine after the ex-
perience of the years leading up to the outbreak of war in
1914. We were told often enough in those days that a
thorough preparedness was the best guarantee of peace ;
but it would need some credulity to hold any such opinion
to-day.

Turn now from the military forces of Europe to the navies
of the leading maritime countries. Navies are expensive
things, and only rich and powerful countries can afford
the luxury of large and up-to-date naval forces. But every
important country that possesses an outlet to the sea still
desires to equip itself with a powerful navy, and there is still
fully as much rivalry in naval as in military armaments.
It is true that the relative strength of the Great Powers in
capital ships has been regulated to some extent by inter-
national agreement since the Washington Naval Treaty

DISARMAMENT AND SECURITY

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• 7IO EUROPEAN INTERNATIONAL RELATIONS

of 1922 ; and the process of agreeing upon ratios was car-
ried somewhat further, among some only of the leading
countries, at the Naval Conference of 1927. But both the
Washington Naval Treaty and the subsequent Three-Power
Pact were effective, in as far as they were effective at all,
rather in preventing a race to increase naval armaments
above the existing levels than in actually reducing the
armaments already in existence or preventing the replace-
ment of obsolete vessels by new and more powerful engines
of destruction. Arrangements for naval parity between
Great Britain and the United States, with Japan only a
little way behind and ever anxious to catch up and achieve
an effective equality in capital ships, are no assurance at
all against naval warfare ; for the permitted naval equip-
ment is still large enough to leave each of these countries
armed to the teeth, while the maintenance by each of them
of a powerful navy not unevenly matched with each of the
others serves both as an inducement to the warlike spirit
and as a perpetual challenge to those nations which are
behind in naval armaments.

France, which comes next after the British Empire, the
United States and Japan in capital ships, has a powerful
enough navy to play an important part in any war based
on rival alliances of Powers ; and Italy, which comes next
after France, is only willing to accept measures of limitation
provided that she is conceded, in theory at least, the right
to build up to whatever tonnage France may be allowed,
though her financial power actually to do this, unless the
French substantially reduce their existing tonnage, may
legitimately be doubted. It was on this issue of Franco-
Italian parity that the attempt to make a new Five-Power
Naval Pact in 1927 finally broke down. It had been hoped
to supplement what had been done at Washington in 1922
in the case of capital ships by a further pact including other
classes of vessels. This proved to be impossible in face of
Franco-Italian rivalry, except for three countries — Great
Britain, the United States and Japan ; and even their
agreement was, as we have seen, rather a promise to

DISARMAMENT AND SECURITY

AIR FLEETS OF EUROPE, 1932

Great Britain

1,434+127

Spain

462+187

France .

2,375

Portugal .

159

Italy .

i>5<>7

Greece .

40+80

Germany

—

Albania .

—

U.S.S.R.

75°+75o(?)

Bulgaria .

—

Poland .

700

Turkey .

50

Czechoslovakia

546+141

Austria .

—

Roumania

799

Hungary

—

Yugoslavia

627 + 263

Switzerland

300

Belgium

I95+H3

Lithuania

70

Holland

321

Latvia

79

Denmark

78 (reducing to 24)

Estonia .

74

Sweden .

167

Luxembourg .

—

Norway

179

Irish Free State

24

Finland

60

U.S.A. .

i>752 + 599

Japan .

1,639

A plus sign ( + ) indicates aeroplanes not fit for active military use
where these are distinguished in the figures.

712 EUROPEAN INTERNATIONAL RELATIONS

abstain from fresh competitive building on a gigantic scale
than any indication of a willingness actually to reduce their
existing tonnage. The size of the armed fleets still main-
tained by the leading countries in 1932 is indicated in the
table on page 709, and while the figures are inevitably
to some extent misleading, in that they group together in-
discriminately vessels new and old, they are startling
enough to indicate plainly the narrow measure of success
that has so far accompanied all the output of conversations
and agreements on naval disarmament.

As a complement to fleets and armies there has come into
existence, for the most part since 1914, a new arm ; and
every country now considers it essential to its nationhood
to maintain not only a powerful army but also a large fleet
of fighting aeroplanes. Owing to the newness of this arm,
no comparison with earlier dates is of much use ; for obvi-
ously the aeroplane has come into existence not solely
as an addition to previous forms of armament, but also to
some extent as a substitute for them. When, for example,
it is suggested that fighting and bombing aeroplanes should
be totally abolished, the reply is at once made, especially
by Great Britain, that aeroplanes, provided they do not
exceed a certain range and carrying capacity, are to be
conceived rather as agencies of police than as offensive
military units. Are they not far cheaper and more con-
venient means than soldiers of keeping recalcitrant tribes-
men in order ? Cannot a native village be far more effec-
tively terrorised by dropping bombs than by punitive
expeditions by land ? Great Britain is prompt to protest
against bomb-dropping upon people whom she regards as
civilised ; but mere natives are another matter, and it is
even argued that the aeroplane is a merciful weapon
because, humanely used, it strikes far more terror than it
does material or human damage. In any case, the air
fleets of the world have risen to a prodigious size in recent
years ; and aeroplanes have from the standpoint of countries
struggling with serious budgetary difficulties the supreme
merit of being reasonably cheap.

DISARMAMENT AND SECURITY 713

Moreover, apart from fighting planes built directly for the
service of the various States, it is always possible in the
event of war to press planes built for civil aviation into
military use ; and it is a notorious fact that comparatively
few of the regular air roads which now run over a great
part of the world could be maintained as purely commercial
ventures, and most depend for their existence on subsidies
which States are prepared to grant in aid of civil aviation
on account of its potential military value. Germany, denied
all military aeroplanes, has naturally taken up civil flying
with enthusiasm. But the Germans are not alone in this.
The figures on page 711 showing the approximate
strength of the air fleets of Europe in comparison with those
of the United States and Japan give unhappily far less than
an adequate picture of the potential force that could be
put into the air by the various nations in the event of war.

The Traffic in Armaments. So much for the actual
forces under arms by land, sea and air in a Europe supposed
to be bound together in a League of Nations based on the
guarantee of perpetual peace, and further safeguarded by
a host of general and bilateral convenants, pacts and
treaties of every sort and kind. No account of the armed
camp which Europe still is could be complete unless some-
thing were said in addition of the means of making the tools
with the aid of which war's mischief is carried on ; for now,
as before the war, the armament-makers stand behind the
statesmen of Europe, egging them on to arm and counter-
arm, and drawing their toll of profit from the mutual fears
and suspicions of the nations. On the eve of the war much
had already been written by way of exposure of the arma-
ment rings which had been a powerful factor in stimulating
war feeling in all the leading countries, and in persuading
each country to buy more arms in order to get even with
its neighbours. For, as has often been pointed out, the
sellers of armaments more than any other class of traders
have a natural instinct and interest to combine. Almost
every other commodity is produced in response to a limited

714 EUROPEAN INTERNATIONAL RELATIONS

demand, so that the sale of a dose of it by one producer
means that less of it remains to be sold by others. But with
armaments this is not the case. If an armament firm suc-
ceeds in selling to one country some new and deadly engine
of destruction, that is a reason why all the other countries
which are its rivals in the armaments race should seek
immediately to possess themselves of a quota of the same
engine of destruction, or if possible of some newer and
more devastating engine, the purchase of which will in
turn set up a fresh demand from other countries for some-
thing newer and deadlier still. Adam Smith said once that
all capitalists were in a natural conspiracy against the
public ; but of no group of capitalists is this true to any-
thing like the same extent as of the purveyors of armaments.
The more they sell the more their products are in demand ;
and they would be more than human if, as capitalists, they
did not seek in these circumstances to sell as much as they
can possibly induce the Governments of the world to buy
or if, in their endeavours to sell as much as possible, they
did not resort often to methods which even the current
standards of business morality condemn.

As many writers have pointed out, the armament firms
have shown themselves throughout their history singularly
free from merely nationalistic prejudice. They have been
perfectly prepared to sell to anybody, and never happier
than when they have been in the satisfying position of sell-
ing to both sides in some jolly war which has created a
gratifying demand for their products. They have been
perfectly prepared to sell implements of war which have
been used for blowing their own countrymen to bits. For
nothing is more profitable than to sell to a potential enemy,
since such a sale almost inevitably creates an additional
demand for armaments from the home Government. In the
Great War many thousands of British and Allied soldiers
were killed and wounded by British rifles, British bayonets,
British guns ; and in the next war, if it comes in the near
future, it is quite certain that the same will be true. For
despite all that was known of the armament rings before

DISARMAMENT AND SECURITY

1914 and all the experience men had of them during the
Great War, they are still left free to pursue their old games,
and have even increased their power and degree of com-
bination in the post-war years. One great name indeed has
ceased to be prominently associated with the manufacture
of armaments since 1914 ; for the disarmament of Germany
and the prohibition of the manufacture of war material
within her frontiers has caused the disappearance of the
great Krupp concern from among the leading armament-
makers of the world — though in face of recent changes in
the German situation it would be quite unsafe to prophesy
that this disappearance is more than temporary. But, if for
the moment Krupp has been put out of the game, plenty
of other giants remain. The two pre-war British giants,
Vickers and Armstrong Whitworth, with their countless
subsidiaries, have now joined forces as far as their arma-
ments business is concerned ; and, though they fell on evil
days after the war as a consequence of grossly inflationary
finance in the course of the immediate post-war boom,
financial reconstruction has now set them free, with the
continued support of the Bank of England, to go on with
their familiar business of supplying the needs of any country
that is prepared to order their goods. It is true that arms
can only be exported from Great Britain under licence ;
but this does not apply to many semi-manufactures which
can be worked up into armaments abroad. Nor is any at-
tempt made under normal conditions to prohibit or even
to limit the export of arms ; for would not any such policy
result in throwing skilled British engineers out of work,
and in lowering the profitableness of British business enter-
prise ? Our rivals sell armaments to all comers, and so do
we ; for in these matters a number of blacks are always
reckoned as making a white.

It is not suggested for a moment that Vickers- Armstrong is
any worse than the corresponding armament firms of other
countries. France has its famous Schneider-Creusot combine,
with a history extending back to the French Revolutionary
Wars in the eighteenth century ; and Schneider-Creusot,

EUROPEAN INTERNATIONAL RELATIONS

it is well known, is, together with other French arma-
ment firms, the great power behind the ComitS des Forges,
the political representative of French heavy industry
and the close associate of every reactionary Government
that has held office in France since the war. Schneider-
Creusot, moreover, is closely linked up with the armaments
industry in Central and Eastern Europe. M. Eugene
Schneider is a director of the Banque de I' Union Parisienne
and president of the Union Europlenne Banque ; and it is no
accident that the first of these bodies finances an important
credit institution in Hungary, while the second plays an
important part in the control of the Skoda works in Czecho-
slovakia. France has not been backward in assuring the new
States of Central and Eastern Europe of an adequate supply
of arms. The Skoda firm has its factories in Poland and
Roumania as well as in Czechoslovakia ; and Schneider-
Creusot together with its associated concerns has been most
active in the munitions trade in the Balkan countries as well
as further north. But even here internationalism is not
absent ; for the Schneider-Creusot group does not hesitate
to supply arms to the Hungarians as well as the Czechs,
although these two countries are obviously arming largely
against each other. We say nothing here of the giant Mitsui
armaments concern in Japan, which ranks after Vickers-
Armstrong and Schneider-Creusot as the third greatest
armaments concern in the world ; for there is enough to
occupy our attention in Europe without considering the
position in other Continents. Germany, owing to the Peace
Treaties, can to-day put up no armaments giant to rank
beside these three ; but it must not be forgotten that, since
Germany has been forbidden to manufacture armaments
herself, there has been a remarkable growth of armament
firms in her immediate neighbourhood, in both Sweden
and Poland, or that the Bifors concern in Sweden has close
associations with Krupps, and has been afforded full per-
mission to use the Krupp patents. Dutch armament firms,
too, have German associations ; and the fact that they are
also associated with Vickers-Armstrong is assuredly no

DISARMAMENT AND SECURITY

guarantee of any unwillingness on their part to fulfil Ger-
man orders. But there is no space to pursue in this book
the ramifications of the European armaments firms ; those
who are in search of further enlightenment must be referred
to the exceedingly useful booklet published by the Union of
Democratic Control in 1932 under the title of" The Secret
International" From this booklet have been taken many of
the facts and illustrations given in this section.

Armament-makers, if they are to be successful profit-
makers as well — and of what use would it be to make arma-
ments if there were no profit in the game ? — must have the
ear of statesmen ; and they have always been on the alert to
ensure the respectful attention of statesmen to their intelli-
gent anticipations of the danger of war. No sooner does an
armament firm secure an order from any one country than
its representatives are off in haste to tell the Ministers at the
head of the war departments of all the other countries of the
sinister intentions of their customer ; and these representa-
tives are sure to be able to return with a refreshing stream
of additional requisitions for the means of destruction. In
order to ensure the needed attention in high quarters, arma-
ment firms are usually very careful in recruiting their di-
rectorates. While a mysterious " genius " such as Sir Basil
Zaharoff may remain in the background, and prefer the
reputation of being the mystery man of Europe to taking a
permanent part in the activities of the businesses which he
controls, the Boards of Directors of the great armament
firms are usually so chosen as to include a sufficiency of
persons likely to find favour in high places. Retired army
officers with good connections in the War Offices of the
various countries usually play a prominent part in the high-
class commercial travelling of the armament rings. But the
rings have also found it useful to offer a lucrative home to
retired civil servants, or even to ex-politicians possessing
the necessary official connections. The overhead cost of
selling armaments is considerable ; and it is said that in the
years immediately before the war certain of the leading
firms maintained in the principal Continental capitals

7l8 EUROPEAN INTERNATIONAL RELATIONS

private missions of their own, with no other functions than
those of hospitably entertaining, and on occasion suitably
rewarding, important personalities in a position to influence
the placing of orders for their wares. Nor is there any reason
to suppose that this practice has ceased to-day, though re-
publican statesmen are perhaps in some cases less open to
direct bribery than the predatory hangers-on of the pre-war
Russian and Austro-Hungarian imperial courts.

The industry of warfare is, however, by no means con-
fined to the firms which make guns, rifles, armour-plate
and the other familiar products of the metal and engineer-
ing industries. It is also becoming more and more an affair
for the firms manufacturing chemicals and explosives of
many different kinds ; and these firms are no less strongly
organised and hardly less successful in influencing national
policies than the armament makers in the metal trades.
Great Britain's solicitude for the maintenance of an
effective dyestuffs industry was not mainly due to the im-
portance of an adequate supply of dyestuffs for the textile
trades ; and the willingness of the British Government to
purchase nearly two million shares in the British Dyestuffs
Corporation was an illuminating comment on its belief in
the achievements of the " war to end war." Since then the
chemical industry of Great Britain has been reorganised on
a broader basis, and the British Dyestuffs Corporation has
been merged with Brunner Mond, the United Alkali
Company, and the great explosives concern of Nobel, into
Imperial Chemical Industries Limited, with its issued
capital of over £70,000,000, its control over practically the
whole chemical industry of Great Britain, and its ramifica-
tions in other countries, especially Canada and the United
States. I.C.I, has, moreover, a holding in the famous
/. G. Farbenindustne of Germany, on whose pre-war experi-
ence it was largely modelled. The chemical trade has the
advantage over the armament-makers that the plant which
it uses to make ordinary commercial products in time of
peace can be readily adapted for the manufacture of ex-
plosives, poison gases, and other more patriotic products

DISARMAMENT AND SECURITY

in time of war ; and though the one considerable paper
achievement in lessening the horrors of war that has been
made by the nations of the world since 1918 is the agree-
ment of 1925 forbidding poison gas, it requires an optimist
to believe that, if a great war once breaks out, nations
equipped with large chemical factories able to turn out
poison gases of unprecedented virulence, will, if they feel
their backs against the wall, for long stand out against the
temptation of using the forbidden weapons. Each of the
Great Powers has set up a special authority for the study
and organisation of chemical warfare ; and chemical re-
search is in every country subsidised to some extent by
Governments in view of the possibility that it could be
turned to profit in case of war.

What can be done in face of the menace to the con-
tinuance of civilisation represented by these powerful
vested interests, which have the strongest possible motive
for inducing the nations to arm one against another ? The
danger which threatens the world from this profit-making
traffic in the implements of destruction is certainly far
greater than the menace of the trade in opium or the White
Slave Traffic, which special international institutions have
been established to suppress. It is surely clear that, even if
armaments ought to be made at all, their manufacture
ought to be so controlled and regulated that it is impossible
for anyone to have a financial interest in making them.
They ought not, at all events, to be made under the induce-
ment of private profit, or under conditions which foster
powerful private concerns with a direct interest in stirring
the nations up to mutual hatred and to actual war. In
other words, the manufacture of armaments, as long as it
continues to exist at all, ought to become a public monop-
oly ; and this system of socialisation ought to be applied not
only to the direct manufacture of munitions of war in the
narrower sense, but certainly to an industry such as the
chemical industry, a large part of whose productive re-
sources is capable of being applied to the ends of war. If this
were done, there would no longer be hawkers of armaments

EUROPEAN INTERNATIONAL RELATIONS

and private scaremongers with a direct interest in selling
war. Governments would no longer have contracts for war
supplies to let out to the citizens of their own or other
countries, and the necessity of manufacturing all arma-
ments under public auspices would give at any rate some
greater assurance of publicity than exists under the present
conditions of an authorised private trade in armaments.

But the socialisation of the industries producing the in-
struments of war would not solve the entire problem. In-
deed, it might even raise new problems of its own. For the
smaller countries at present depend for their armaments
largely upon factories located in the greater countries, or
at all events upon companies organised and financed by
groups of capitalists belonging to the great imperialist
Powers. If the production of war material were made a
public monopoly, the sale of armaments outside their
country of manufacture would obviously become to a
greater extent than it is to-day a matter of political policy ;
for States could hardly follow the example of private firms
and sell munitions of war to other States with whom they
contemplated the likelihood, or even the possibility, of
armed conflict. To a great extent this would be an advant-
age, in that it would tend to diminish the international
trade in arms ; but it would also place many of the smaller
countries in the position of depending for their supplies of
arms upon the Great Powers. This dependence, while it
would strengthen the influence of the Great Powers in pre-
venting minor wars, as long as these Powers were able to
act together, might become a source of danger in as far as
the Great Powers were working one against another. France
for example, instead of supplying the new States of Central
and Eastern Europe with the money wherewith to buy arms
from the Schneider-Creusot combine, would be in a posi-
tion to supply these countries with arms directly from her
own munitions factories, and to refuse to supply countries
of whose policy and aspirations she did not approve. Great
Britain might find herself supplying another group of
countries and refusing supplies to other countries in the

DISARMAMENT AND SECURITY 72!^

same way, while Germany would have an even more power-
fill motive than she has to-day for demanding an equality
of treatment which would allow her to resume the manu-
facture of war material on the grand scale.

The socialisation of the armament industries might,
moreover, induce more of the smaller States to set up arma-
ment works of their own, and to give high protection to
those industries which are capable of being turned to the
production of armaments in the event of war ; and it
might thus, over a wide field, especially in the heavy
industries, encourag£ still further the growth of economic
nationalism. The socialisation of the armaments industry
is certainly not by itself a sufficient means of checking the
growth of armaments, or of preventing States from arming
one against another or ranging themselves in imperialistic
groups and rival European alliances ; but the dangers
involved in a policy of socialisation, while they are real, are
very much less than the dangers of leaving things as they
are. For it is better, if dangers exist, that they should be
brought out into the open and that the responsibility for
guarding against them should be put definitely on the
Governments of the world, than that they should be
covered up from public view because they are under the
control of private profit-making concerns for which the
Governments which encourage their operations are in a
position to disclaim responsibility.

There is, indeed, one very difficult problem of the present
time which is intimately connected with this question of the
socialisation of the armament industries. At present the
largest importer of arms from die rest of the world is China,
which draws supplies from practically all the countries in
which important armament works are situated. China has
practically no armaments industry of her own ; she depends
almost entirely on supplies brought in from abroad. On the
other hand, Japan, as we have seen, has a very powerful
armament industry under the leadership of the Mitsui
combine. Japan also imports arms, and imports to a much
larger extent semi-manufactured materials out of which

,722 EUROPEAN INTERNATIONAL RELATIONS

arms can be made. But she is in a far better position to
dispense with external assistance in the equipment of her
forces than her chief rival in the Far East. If the European
countries were to socialise their armaments industries and
then refuse to supply arms to China, they would in effect
be putting that country at the complete mercy of Japan.
On the other hand, if they continued to supply China from
their socialised armament factories, this would at once
involve political complications in their relations with
Japan, though, since Japan has announced her withdrawal
from the League of Nations, she would no longer be in a
position to raise the issue before the League even if she
desired to do so. In face of the League's recent judgment on
Japanese intervention in Manchuria, it would be obviously
and grossly unfair to refuse to supply the Chinese with
arms if Japan were to launch a further attack upon them —
and it would be in practice no less unfair to impose an
embargo on the export of arms to both combatants, as
Great Britain did for a brief period early in 1933 — for
Japan can get along without the imports, whereas China
obviously cannot. But in this case too it would be worth
while to face the political complications involved in the
socialisation of the armament industries in order to do away
with the sinister influence upon world affairs at present em-
anating from the vested interests of the great armament
firms.

Projects of Disarmament. We have seen that, ever
since the Peace Treaties were concluded and the Covenant
of the League of Nations drawn up, the countries of the
world have been continuously engaged in the discussion of
proposals for disarmament. Ever since the Permanent
Advisory Commission on Armaments and the Temporary
Mixed Commission on Disarmament were set up in 1920
discussions have been going on either among technical
experts or among statesmen themselves. As long ago as 1925
the League Council created a special Preparatory Com-
mission of twenty-six members with instructions to prepare

DISARMAMENT AND SECURITY

the ground for a World Disarmament Conference, and this
committee reported in 1927, shortly after Germany had
become a member of the League. In this year, the U.S.S.R.,
invited together with the United States to take part in the
discussions on disarmament, brought forward, for the first
time in a general assembly of the nations, a proposal for a
draft convention based on universal and complete disarma-
ment. The practically unanimous rejection of this scheme
by the larger countries induced the U.S.S.R. to try again ;
and in 1928 M. Litvinov came forward with a proposal for
partial disarmament, which met with no better success.
Not until February 1932 did the World Disarmament
Conference finally begin, under the presidency of Mr.
Arthur Henderson ; and as we write the World Conference
is still in session, and seems likely to remain in session a long
while yet.

In the meantime, as we have seen, there have been
separate discussions on the question of naval disarmament,
beginning with the Washington Five- Power Treaty of 1922
and leading on to the Three-Power Pact of 1927 between
Great Britain, the United States and Japan, to which
France and Italy were also signatories in respect of certain
of the clauses. But the failure of the negotiations of 1927
compelled the advocates of naval disarmament to recognise
that little progress could be made in this field unless
military disarmament were also taken into account. For
the two problems cannot in effect be separated ; and the
obstacles to success are in both cases to a great extent the
same. Accordingly the World Disarmament Conference of
1932 was called to deal with the naval as well as the military
aspects of the question ; and in the long succession of rival
plans which have been laid before it during the past year,
questions of naval and military armaments have been
constantly considered in relation to each other. The
problem of naval disarmament is indeed technically the
simpler, in that it is for the most part of vital concern only
to a small number of Great Powers ; for the navies of the
smaller countries are, in relation to the fleets of the Great

724 EUROPEAN INTERNATIONAL RELATIONS

Powers, of very little importance or fighting value, whereas
the armed forces even of the smaller States constitute
potential contingents in the military forces of great rival
European alliances, and the complications of military
disarmament are far greater because of the difficulty of
defining the permissible number of effectives on a uniform
basis for different countries with widely varying military
systems and conditions of service.

In all this succession of discussions on the question of
disarmament it has been impossible to isolate this one issue
from other problems arising out of the relations between
nation and nation. Thus, discussion on disarmament has
been constantly mixed up with, and affected by, the
simultaneous negotiations over such matters as security,
arbitration, mutual assistance, and the renunciation of war
as a means of settling international disputes. The draft
Treaty of Mutual Assistance, which came under discussion
in 1922, arose out of the work of the Temporary Mixed
Commission to which reference has already been made.
In the revised draft of this projected treaty, presented to the
League after an accommodation between the French and
British points of view, it was proposed to limit the assistance
promised by all the signatory States to any country which
found itself in the position of resisting aggression by another
State, to those nations which had actually reduced their
armaments in reliance upon the promise of assistance given
by the Treaty. The two questions of disarmameni and
security were thus linked together at an early stage in the
discussion of the problem ; and they have throughout been
very closely connected, especially in the minds of the French,
who have continually insisted that they cannot be expected
to disarm save on the basis of some firm assurance that other
countries will come to their help in face of any threat of
invasion of their territory.

The Third Assembly of the League in 1923 recommended
acceptance of the revised draft of the Treaty of Mutual
Assistance ; but there was no readiness to accept it among
the leading countries included in the League, and its

DISARMAMENT AND SECURITY 725,

rejection by most of the countries concerned, and especially
by Great Britain, which was not prepared to involve herself
in any obligation binding her in certain circumstances to
go to war on behalf of another State, called for the making
of a new start.

The next attempt came from certain of the smaller States
of Europe, which at the fifth League Assembly in 1924
brought forward the Geneva Protocol. This project, most
closely associated with the name of Dr. Benes of Czecho-
slovakia and with the short-lived British Labour Govern-
ment of 1924, was based on an explicit renunciation of war
by the signatory States, and on the recognition of the
compulsory jurisdiction of the Permanent Court of Inter-
national Justice, set up at the Hague in 1920 as a part of
the new post-war machinery of international collabora-
tion. The Geneva Protocol did not involve the submission
of all disputes to the Hague Court, for it was recognised
that disputes would arise which it would not be possible
to settle by judicial methods ; but it did involve both a
definite renunciation of war and an agreement to submit to
the compulsory authority of the Court all matters admitting
of judicial decision. Eighteen States, including France,
Belgium, Czechoslovakia, and Yugoslavia, signed the
Geneva Protocol ; but the fall of the British Labour Govern-
ment at the end of 1924 was followed by its rejection by
Great Britain, largely on the ground that its acceptance
involved obligations over and above those contained in the
Covenant of the League, especially in the provisions for
applying economic sanctions to States which the League
Council held to be in the wrong. Great Britain, as a naval
Power, held that the burden of these economic sanctions
would in practice be placed largely upon her, and was not
prepared to commit herself to an absolute undertaking to
blockade any State designated by the League as the aggres-
sor in an international dispute. This British attitude was
fatal to the prospects of the Geneva Protocol, since without
British participation it could be of but little value, especially
in view of the absence of the United States from the League

J26 EUROPEAN INTERNATIONAL RELATIONS

and their refusal to recognise the jurisdiction of the Inter-
national Court.

The rejection of the Geneva Protocol involved yet another
fresh start ; and this time the initiative was taken by the
Great Powers, and especially by Great Britain, which,
having refused to accept the system proposed in the Pro-
tocol, was compelled, in view of the continued demand of
France for guarantees of security after the end of the Ruhr
struggle, to put forward some alternative proposal. This
alternative was worked out in the Locarno Pacts, which
became effective in 1926 after the admission of Germany to
the League of Nations. Under the Locarno agreements
Great Britain, France, Belgium, Germany and Italy all
bound themselves by guarantees against any attempt to
alter by force the territorial settlement set up in Western
Europe by the Peace Treaties. Under the Locarno settle-
ment all war between Germany, France and Belgium was
to be abolished, and no changes could be made in their
respective frontiers in Western Europe by an appeal to
force. This mutual settlement was further guaranteed by
Great Britain and Italy, which bound themselves to go to
the assistance of any State suffering as a result of the viola-
tion of the pledge given by the three countries directly
involved. In addition to this the Pacts concluded at Locarno
included a series of arbitration treaties between Germany
and her neighbours in both east and west. Such treaties
were signed not only with France and Belgium, but also
with Czechoslovakia and Poland ; and at the same time
France signed treaties of mutual assistance with Poland
and Czechoslovakia. But in these further treaties Great
Britain was not involved, as she was not prepared to give
any guarantee of the integrity of the eastern frontiers
established under the Treaties of Peace.

The Locarno Pacts were acclaimed at the time by Sir
Austen Chamberlain as the " real dividing line between the
years of war and years of peace " ; they were to remove for
the future all danger of any attempt by Germany to regain
her lost territories in the West by an appeal to arms, and

DISARMAMENT AND SECURITY 727

they were intended to be the foundation of a new friendship
between the French and German peoples. In order to
secure a settlement on these lines Great Britain gave up her
objection to entering into any commitment that might
conceivably involve her in going to war on the Continent
of Europe ; but the chance of the obligation which she
undertook having actually to be fulfilled seemed in 1925
to be relatively small. Thus France secured under the
Locarno settlements some part of the international guaran-
tees of security which she had been demanding ever since
the conclusion of the war. But in fact the Locarno settle-
ments, though they remain in force, have by no means
succeeded in establishing the cordial relations hoped for
between Germany and France, or in diverting permanently
the current of either German or French foreign policy.
France has not felt the security given to her under the Pacts
to be complete enough to remove the need for asking for
further guarantees ; and while the German Republican
Government renounced on behalf of Germany any attempt
to alter the western frontiers of the Peace settlement by
force, propaganda for frontier revision continued unabated
inside Germany, and it by no means follows that German
Governments of a very different complexion will be pre-
pared permanently to honour the signature of the German
Government of 1925. While, therefore, Locarno undoubted-
ly did something for a time to settle the acute unrest which
had accompanied the Ruhr struggle of 1923-24, it by no
means removed the danger of war in Europe or established
any effective system for the guarantee of future peace. For
one thing, the problem of the Eastern frontier remained
open ; and for another, no one was at all certain how much
the signatures appended at Locarno would really be worth
if the European situation underwent any considerable
change. Accordingly, there was no real change in the policy
of France ; and before long the return of more national-
istically-minded Governments in France caused the French
demand for further guarantees as the indispensable con-
dition of any approach to disarmament to be quite as

728 EUROPEAN INTERNATIONAL RELATIONS

loudly expressed as it had been by M. Poincar^ in the days
of the Ruhr occupation.

For the time being, however, the chief centre of European
unrest shifted from Western to Eastern and Central
Europe. Ever since the end of the war, France had been
building up there a system of alliances and pacts for mutual
defence and political collaboration. Hard upon the heels of
the Franco-Belgian military pact of September 1920 came
the Franco-Polish Treaty of Mutual Defence concluded in
February 1921. Meanwhile, the succession States bordering
upon Hungary had been drawing together in the series of
pacts which developed into the Little Entente. In August
1920 Czechoslovakia and Yugoslavia formed a defensive
alliance directed against the possibilities of Hungarian ag-
gression or a Hapsburg restoration in Hungary ; and later
in the y^ar a looser agreement was made between Czecho-
slovakia and Roumania on the same lines. In March 1921
the ex-Emperor Karl made his first attempt to establish
himself on the Hungarian throne ; and this at once led to
action by the Little Entente countries, and was followed by
the conclusion in April of a definite alliance between
Czechoslovakia and Roumania, and in June by a similar
alliance between Roumania and Yugoslavia. Karl's second
attempt in October 1921 further cemented the alliance of
the three Little Entente Powers ; and France, in pursuit of
her policy of alliances in the east, began to build up a
system of mutual engagements with the Little Entente
States, as well as with Poland. Thus in June 1924 France,
which had already made an arrangement with Roumania,
entered into treaties of alliance and mutual help with both
Czechoslovakia and Yugoslavia, the treaty with Yugo-
slavia following upon the agreement reached between
Italy and Yugoslavia in the same month. Poland and
Roumania had also made a defensive alliance in March
1921, so that, in the absence of an Eastern Locarno, the
countries which felt themselves threatened either by
potential German aggression in the East, or still more
by any attempt to restore the Hapsburgs and lay the

DISARMAMENT AND SECURITY 729

foundations of a new Austro-Hungarian Empire, were
bound together in close connection with France into an
East European system closely corresponding to the Western
system which underlay the main Locarno Pact. But these
agreements in Eastern Europe were far more in the nature
of military alliances than of attempts to bring together into
a system of security countries with opposing interests and
attitudes ; and accordingly, while they might be tem-
porarily effective in keeping the peace, they were clearly
aimed at achieving this result by the threat of force rather
than by the establishment of any sort of international
co-operation.

Accordingly the League of Nations was before long back
at its work of trying to promote some more intensive agree-
ment for ensuring peace and promoting disarmament all
over Europe. In 1925, as we have seen, the League Council
created a commission to prepare the way for a Disarma-
ment Conference ; and in 1927 it set up a Special Com-
mittee on Arbitration and Security. Numerous agreements
for arbitration by the Permanent Court of International
Justice at the Hague had been reached between particular
countries from 1921 omvards ; but these referred only to
disputes turning upon juridical issues, and they were often
hedged round with a great many reservations which con-
siderably limited their value. The question primarily before
the League after Locarno was that of so amending the
League Covenant, or so reinforcing it by pacts or treaties,
as to build up real and effective guarantees for the preserva-
tion of peace, and thus to make possible some substantial
achievement in the field of international disarmament.
It is not proposed in this book to follow through their suc-
cessive stages the countless negotiations and projects of the
next few years — from the proposal of the U.S.S.R. for
universal disarmament in 1927 and its more limited
disarmament proposals of 1928, to the General Convention
for Improving the Means of Preventing War which was
passed by the League in 1931, but has not yet reached the
stage of extensive ratification. It suffices to make a general

730 EUROPEAN INTERNATIONAL RELATIONS

review of the main problems, achievements and failures of
the years between the Locarno Pacts and the Disarmament
Conference of 1932.

Means of Preventing War. This discussion is bound to
turn mainly upon three instruments designed to improve the
chances of world peace. These are the Optional Clause, the
General Act, and the Kellogg Pact — the first two emanating
from the League of Nations, and the third from the inde-
pendent initiative of the Government of the United States.
It is simplest to begin with the Kellogg Pact of August 1928.
This American proposal, which has been, on paper at
least, universally accepted, involves the nations of the world
in a complete renunciation of all wars save wars of defence.
It is meant as a symbolic and declaratory agreement indi-
cating the determination of the countries which sign it to
keep the peace. But it is unaccompanied either by any
sanctions in the event of its violation, or by any definition of
what constitutes a defensive as against an aggressive
war. Indeed, the United States, standing outside the
League of Nations and also refusing until 1930 to adhere to
the Court of International Justice, could hardly propose any
international agreement involving either sanctions or the
setting up of machinery for the determining of the ag-
gressor in face of a threat or actual outbreak of war. It
could only propose that the nations should consult to-
gether when the occasion arose, and be guided in their
action not by any pledges given in advance — for the
United States Government would have had no power to
give any such pledges, and Congress would certainly have
refused to place any such authority in its hands — but by the
actual circumstances of the moment. This, of course, con-
stitutes a fatal weakness in the Kellogg Pact, in the opinion
of all those who believe in the League system of endeavour-
ing to preserve the peace by means of an organised asso-
ciation of States, and with the aid of machinery and rules
created in advance of the actual situations with which they
are intended to deal. All the Governments, including that

DISARMAMENT AND SECURITY 73!

of the U.S.S.R., signed the Kellogg Pact ; but the append-
ing of their signatures to it made little or no difference to
their attitudes or to their beliefs in the effectiveness of the
means available for the prevention of war.

At the time when the American Government came
forward with the proposals which resulted in the Kellogg
Pact, the League of Nations was already engaged in the
discussions which led up to the formulation of the General
Act ; and this new instrument filling out the terms of the
League Covenant was actually adopted by the League in
September 1928, the month after the signing of the Pact.
Before the drafting of the General Act, the chief instrument
existing under the League Covenant for the preservation of
peace was embodied in the Optional Clause. This Clause,
which had been accepted in full at the beginning of 1928 by
fifteen States, involved the recognition of the power of the
Permanent Court of International Justice to make binding
decisions on all disputes of a legal character concerning the
interpretation of treaties and on any question of interna-
tional law arising between States accepting the Clause. But
the Optional Clause dealt only with disputes in relation to
which a decision could be arrived at by the legal interpre-
tation of existing treaties or in accordance with the estab-
lished principles of international law. The General Act was
designed to fill in the very large gaps thus left in the frame-
work of the system of international arbitration and judicial
settlement of disputes. Under it signatory States were
given the alternative of sending disputes of a justiciable
character (i.e. arising out of the interpretation of existing
treaties or turning on questions of international law) either
to the International Court or by agreement to a special
arbitration tribunal. But provision was also made for dealing
with non-justiciable disputes. These were to be sent in the
first instance to a conciliation commission, which might be
either a standing body or constituted ad hoc ; and a failure
by this commission to settle the dispute was to involve its
reference to an arbitral tribunal of five members, of whom
two were to represent the States directly concerned, and

732 EUROPEAN INTERNATIONAL RELATIONS

three were to be appointed from the nationals of other
countries. This arbitral tribunal was to have power to give
a binding decision, and any State adhering to the General
Act entered into an obligation to accept the decision so
made.

The General Act, unlike the Optional Clause, thus aimed
at establishing a complete framework of arbitration in
disputes of all kinds arising between nations. But it was
open to States to adhere to it not only generally but also
subject to such reservations as they might choose to make in
respect of their national sovereignty or of any particular
class of disputes ; and although France and Italy, as well as
Great Britain under the second Labour Government,
accepted the General Act, the acceptance was made
subject, especially by France and Great Britain, to so many
reservations as largely to destroy its effect. For example,
France felt that the reservation excluding from the obliga-
tions imposed under the General Act disputes already in
existence before it was signed removed the entire range of
differences arising out of the Treaties of Peace outside the
new machinery of pacific settlement which it laid down ;
and France would certainly have refused to sign the General
Act if she had thought that there was any chance of the
question of territorial revision of the Peace Treaties of 1919
and 1920 being successfully raised under it. Great Britain
also made a reservation in respect of disputes arising prior
to her accession to the General Act " or relating to situa-
tions or facts prior to the said accession " — an exception so
wide that almost anything might be held to come under it ;
and the British adhesion, like the French, was subject to
a whole string of further reservations, of which the most
important were those which excluded questions which by
international law lie within the domestic jurisdiction of
States, disputes between Great Britain and other countries
within the Empire, and disputes " in regard to which the
parties to the dispute have agreed or shall agree to have
recourse to some other method of peaceful settlement."

Thus the General Act, almost equally with the Kellogg

DISARMAMENT AND SECURITY 73^

Pact, amounted in face of the reservations which the lead-
ing States attached to their signatures to little more than
a gesture. No more than the Kellogg Pact could it be re-
garded as any real guarantee of the maintenance of peace
among the nations of Europe. Yet even in this truncated
form it is doubtful whether it would have been signed had
not the second British Labour Government remained hi
office long enough to carry it through. Moreover, it is signi-
ficant that, even before the ratifications of the General Act
had begun to come in, the League was already engaged in
discussing the draft of yet another attempt to promote
European security — the General Convention for Improving
the Means of Preventing War.

While these discussions on the question of security were
proceeding, the League was already engaged in a some-
what desultory series of preparatory conversations and
negotiations in preparation for the projected Disarmament
Conference. As we have seen, attention in this field had
from the Washington Treaty of 1922 been concentrated
largely upon the question of naval disarmament. The
Three-Power Naval Pact of 1927, with its failure to secure
agreement between France and Italy, had left the situation
in this field extraordinarily unsatisfactory ; and the Five-
Power Naval Conference of 1 930 was a renewed attempt to
secure agreement between the principal naval Powers. At
this Conference the French at once brought up the question
of the interdependence of naval and military armaments,
and demanded the right to increase their navy on a very
large scale in the absence of effective guarantees of security
by both land and sea. Great Britain proposed an extension
of the naval holiday which had been agreed upon at
Washington in 1922 for a period often years, up to 1935.
The proposal to abolish submarines was strongly opposed by
the French, while Italy demanded parity with any other
Continental Power. Thus the failure of 1927 was repeated
in 1930 ; for no method was found of accommodating the
French and Italian claims. A Three-Power Treaty between
Great Britain, the United States and Japan was indeed

,734 EUROPEAN INTERNATIONAL RELATIONS

arrived at, and this definitely fixed the relative quotas of
cruisers and submarine strength as well as of capital ships,
subject to a saving clause allowing the signatory Powers
to increase their fleets if other countries actually increased
theirs. The provisions for a further naval holiday in respect
of capital ships were signed by France and Italy as well as
by the three Powers which signed the main part of the
Treaty ; and an attempt was made to regulate and human-
ise submarine warfare. But the naval armaments allowed to
the three principal Powers still remained at an exceedingly
high level, so that the Treaty, like its predecessors, was
rather a conditional guarantee against a new race in naval
armaments than any assurance of effective reduction ; and
in any case the failure to reach a Franco-Italian agreement
far overshadowed any success which was reached in the
negotiations between Great Britain, the United States, and
Japan. The whole question of naval armaments was left in
an exceedingly unsatisfactory position, to be handed over
to the General Disarmament Conference of 1932 along
with the still almost untouched problem of armaments by
land and air.

The Disarmament Conference. After the years of
preparation to which reference has been made already, the
World Disarmament Conference at last met on February
and, 1932, with Mr. Arthur Henderson in the chair — for
Mr. Henderson retained the presidency of the Conference,
which had been offered to him personally, despite the fall
of the British Labour Government in the previous Sept-
ember. After the opening formalities it did not take long for
the assembled delegates to make plain the profound
divergences of view which still existed among them,
despite all the preparatory work that had been done on
most of the major issues. No review will be attempted here
of the long series of proposals and counter-proposals put
forward in the course of 1932 and 1933 on behalf of the
various delegations, or of the successive attempts which
were made to produce compromise drafts on which some

DISARMAMENT AND SECURITY 735^

limited agreement could be based. It seems more useful to
try to set out in the broadest possible way the attitudes
adopted at the Conference by the chief Powers and to
attempt to draw from these differences of attitude certain
conclusions about the prospects of world disarmament as a
result of international negotiation.

Although the lesser Powers, whose most frequent spokes-
man was the Conference Reporter, Dr. Benes, took at
times an important part in the deliberations, most of the
attention at the Conference was inevitably concentrated
upon the divergent views of the Great Powers. Great
Britain, France, Italy, Germany, the United States and
Russia had their distinctive points of view as well as their
mutual jealousies ; and each of them was prone to insist on
the abolition or drastic limitation of those forms of arma-
ment which favoured its rivals, while maintaining its own
right to keep the almost unrestricted use of those armaments
which told most in its favour. This difference of view arose
most obviously over the discussion of what is called qualita-
tive disarmament — that is, over the attempt to ban certain
weapons and forms of warfare as contrary to the inter-
national code of civilised warfare. But the differences were
by no means confined to these points. They went so far as
to involve in the minds of the different delegations totally
different conceptions of the way in which the question of
armaments ought to be approached, and of the appropriate
relationship between disarmament and security.

At the one extreme stood the Soviet Union with its
proposal for complete disarmament by all nations. It has
often been suggested that the Soviet Union put forward this
proposal only because it knew that it would not be taken
seriously, and hoped to gain the support of pacifist opinion
throughout the world by a gesture which it would not be
called upon to implement. Soviet Russia is, indeed, inevit-
ably in the existing state of her foreign relations, a heavily
armed country ; and it is not likely that she would agree to
disarm unless she were sure that other countries were
disarming too. But there is no doubt that Russia has a very

EUROPEAN INTERNATIONAL RELATIONS

strong interest in being allowed to pursue her internal
policy of building up a Socialist system without the danger
of foreign military interference, and that accordingly she is
as deeply interested as any Power can possibly be in
forwarding the cause of international disarmament. Even
if the Russians had no anticipation that their proposal of
complete disarmament would be accepted, and even if they
meant to put this proposal largely to propagandist use,
there is no reason to question their profound desire for the
largest possible measure of international disarmament that
there is any hope of securing. The Russians are certainly
prepared to go as far as other nations can possibly be
induced to go in the direction of general disarmament,
and in the complete prohibition of special types of warfare
or forms of military equipment. Moreover, the U.S.S.R.
took the lead at the Disarmament Conference in pressing for
a plain agreed definition of what constitutes " aggression " ;
and in the summer of 1933 the Russians signed pacts em-
bodying a far-reaching definition and thus implementing
the earlier " pacts of non-aggression," with a succession of
countries including the Baltic States, Poland, the Little
Entente, Turkey and other " border" States.

It is most convenient to take next the attitude of the
United States ; for in this case again there is no ground for
questioning the desire for a large measure of actual reduc-
tion of armaments, and not merely of agreed limitation on a
basis which might enable countries to retain their present
armaments and even to increase them. President Hoover's
proposal of a cut of nearly a third in all armaments, subject
to certain minimum provisions for the preservation of order,
was undoubtedly made sincerely ; and its unfavourable
reception by some of the other delegations, and notably by
the British Government, was one of the worst setbacks
which the Conference encountered. The Americans, more-
over, were prepared to go a long way in order to meet the
point of view of other countries. For example, whereas
they were in the first instance opposed to any system of
budgetary limitation, on the ground that this would react

DISARMAMENT AND SECURITY 737

unfairly upon them in face of their higher level of costs, they
expressed at a later stage their willingness to accept the
principle of budgetary limitation side by side with that of
quantitative limitation of effectives and equipment, and
the qualitative restriction of permitted types of warfare.
The Americans did undoubtedly try hard to make the
Conference a success ; and, while they were not prepared
for unilateral methods of disarmament, they did try their
hardest to push Europe in the direction of an actual cutting
down of its armed forces.

Italy put forward, next to the U.S.S.R., the most drastic
proposals for disarmament. Italy was prepared, according
to her spokesmen, to go as far in the direction of disarma-
ment as other nations could be induced to go with her in
practically any direction, quantitative and qualitative.
But there was one condition which accompanied all the
Italian proposals, whether it was stated openly or only
implied. This was that the disarmament of France must
proceed as fast as the disarmament of Italy, or even faster,
through the abolition of certain types of armament in which
France has at present the advantage. For instance, Italy
wished to abolish all capital ships ; for to do this would
have given her a far better chance of making actually effec-
tive the parity with France which she claimed at the Naval
Conference of 1927 — when, it will be remembered, the
claim was the principal cause of the failure to arrive at a
Five-Power Naval Pact. Yet it is not necessary to question
the sincerity of the Italians' desire for an actual restriction
of armaments, provided that France restricts hers to at least
an equal extent. For undoubtedly the burden of armaments
expenditure presses very heavily on a country which is
endeavouring to carry an international weight beyond her
internal economic strength.

Great Britain appeared on the face of the matter, and
was largely in reality as well, the country least willing
among the Great Powers to accept a drastic scaling down.
The British spokesmen claimed that Great Britain had to a
large extent disarmed herself already, and that in the

ZR

738 EUROPEAN INTERNATIONAL RELATIONS

military sphere and in the air her forces were no longer
more than barely sufficient, and perhaps not even barely
sufficient, to enable her to maintain her imperial commit-
ments and connections. She was prepared to go some
distance further towards disarmament provided that she
could be sure that other countries would disarm as well,
and that she would not be asked to reduce her arms below
what she regarded as the necessary minimum in those
fields in which her imperial commitments were greatest.
She was prepared in naval disarmament for considerable
further reductions in capital ships, but inclined to maintain,
again on imperial grounds, a stiff attitude in face of attempts
to secure a drastic limitation in the smaller types of craft.
Again and again the British stressed the point that Great
Britain could not be regarded as a nation at all heavily
armed, and that accordingly special consideration ought
to be given to her claims in relation to any proposal such
as President Hoover's for scaling down all armaments by
one-third or some other fixed proportion.

But these were not the only points on which Great
Britain took a line certain to breed dissension in the
Conference. For example, her spokesmen, together with
those of the United States, Italy and Germany, advocated
the complete abolition of submarines ; but they were
unwilling to accept the complete abolition of bombing
from the air, although they wanted a limitation on the
number and size of military aircraft, because they
demanded as an exception the right to use bombing aircraft
for police purposes in outlying districts. Again, while Italy,
Russia, Germany and the United States all wished to
abolish the tank as an undoubtedly offensive weapon,
Great Britain refused to accept this proposal unless she
were allowed to keep tanks up to a maximum size which in
fact included practically all the effective tanks which she at
present possesses. The British spokesmen insisted throughout
on the importance of qualitative disarmament, not only in
the sense of protecting the civil population against aerial
bombardment and chemical warfare, but also in the sense

DISARMAMENT AND SECURITY 739

0

of limiting armaments as far as possible to means of defence,
and excluding those implements of war and those methods
of warfare which are most susceptible of being used for
purposes of offence. But when it came to definitions, and the
question which were mainly offensive and which mainly
defensive weapons was referred to expert commissions for
report, it soon appeared that each country was inclined to
regard as defensive those weapons in which it enjoyed a
superiority, and as offensive those whose unrestricted use
was more likely to favour its rivals. This applies particu-
larly to the French unwillingness to abolish the submarine
and to the British unwillingness to abolish the tank ; and it
also applies to the British insistence on the need for restrict-
ing the size of land forces as against their less oncoming
attitude in the matter of naval armaments.

The German case, as it was stated at the Disarmament
Conference, turned mainly upon the question of equality.
Under the Peace Treaty German armaments had been
subjected to severe quantitative limitation ; and the use of
certain particular forms of armament, including tanks,
heavy guns and military aeroplanes, had been totally for-
bidden. Germany's civil aviation and her manufacture of
substances which might be turned to military use had been
placed under control, her navy had been taken away, and
her right to build fresh vessels had been restricted as to both
size and number. The Germans wanted to escape from the
stigma of inequality which all these special restrictions had
placed upon them. They were prepared to accept the
continuance of certain restrictions on condition that the
Allies would implement the promises contained in the
Treaty by applying the same restrictions themselves. That
is to say, the Germans would not insist on rearming with
the forbidden weapons if their abolition could be made
an agreed international measure ; but if other countries
intended to go on making and using the forbidden forms of
armament, the Germans claimed their right to do the
same, and the refusal of this right caused at one stage the
withdrawal of the German Government from further

74-O EUROPEAN INTERNATIONAL RELATIONS

participation in the Conference. The crisis thus created in
the affairs of the Conference was finally ended by the agree-
ment reached by Great Britain, France, Italy and the United
States with the von Schleicher Government in December
1932. Under this agreement, the claim of equality was
conceded in principle, on the understanding that it could
not be fully applied at once, but only by stages, but that the
special restrictions imposed on Germany by the Peace
Treaty were at once to be replaced by limitations to be
included, for Germany as well as for other countries, in the
convention to be drawn up by the Disarmament Confer-
ence. Germany would thus no longer be subjected to any
form of restriction different in kind from those applying to
other countries. Having gained this point, the Germans
returned to the Conference ; but the von Schleicher
Government did not last long, and its replacement by the
Nazi regime soon raised fresh difficulties. The concession
to Germany had come too late ; for it is quite possible that
if the claim granted in December had been granted earlier
in the year, the Briining Government would never have
fallen, and the advance of the Nazis might have been
checked or reversed. The late Allies had therefore largely
themselves to thank for the growing difficulties in the way
of disarmament presented by the German attitude of 1933.
For, though the Nazi Government subsequently withdrew
its wrecking proposals, and agreed to accept the terms
endorsed by its predecessor, the fears aroused by the
militaristic temper of its leaders remain.

Among the Great Powers we come last to France,
because the French attitude to disarmament differs
radically from any of those so far described. France has
throughout insisted upon the close connection between
disarmament and security. She is willing to disarm only
to the extent to which she feels that the need for armaments
is reduced by the provision of some effective alternative
means of national defence. Moreover, unlike the other
countries described, she conceives of national disarmament
as consisting not solely in a reduction in the quality or

DISARMAMENT AND SECURITY 74!

quantity of the military personnel or implements of war at
the disposal of each individual nation, but also in the
possible provision of an armed force, at the disposal not
of any one nation but rather of the League of Nations
itself, as an instrument for the forcible preservation of
world peace. Both the Tardieu Government's plan, put
forward at the beginning of the Disarmament Conference,
and the later plans favoured by the Radical Socialist
Governments which succeeded it, have embodied this
project of an international security force to be used exclu-
sively for the preservation of world peace.

Briefly, the French plan of November 1932 proposed in
the first place that the guarantees against war embodied
in the Kellogg Pact and the Covenant of the League should
be strengthened by actual guarantees of action against the
aggressor. The French held that any violation of the
Kellogg Pact, or of any of the other undertakings entered
into under the League Covenant or under separate treaties,
ought to involve the breaking off of economic and financial
relations with the aggressor by all the other signatories. They
advocated, in addition to the general engagements to ensure
peace entered into through the League and under the
Kellogg Pact, that there should be within the League a
distinct pact of European Powers defining the conditions
under which each State would have the right to the assist-
ance, military as well as moral, of the other signatories.
They held that all countries entering the European pact
must adhere to the General Act, and that the guarantees
of mutual help should come into action as soon as any one
Power was attacked or invaded by another.

As a basis for this proposed European pact, the French
proposed a uniform type of army in Continental Europe — a
short-service army with a limited personnel — and the limita-
tion of the equipment to be provided for this army so as to
make it more effective in defensive than in offensive war-
fare. All heavy war material capable of serving as a basis
for offensive warfare should, the French held, be kept
under the control of the League in separate dumps set up

742 EUROPEAN INTERNATIONAL RELATIONS

in each country, and should be earmarked exclusively for
the use of the States which found themselves the victims
of aggression. At the same time there was to be international
control of the manufacture of war material, and each
country was to set aside a special armed force, to which
alone the heavier types of armaments would be reserved,
to be placed at the League's disposal for use against an
aggressor. Aerial bombardment was to be wholly forbidden,
and bombing aeroplanes totally suppressed ; but these
measures were to be conditional on the effective inter-
national control of civil aviation through a European Air
Transport Union. For naval disarmament a further special
pact between the chief Powers interested in Mediterranean
affairs was proposed, on the basis of leaving intact the rela-
tive strength now existing between these Powers — that is
to say, the Italian claim for naval parity was again rejected.
In addition, each State possessing a navy was to agree to
place a part of its navy at the disposal of the League for use
against an aggressor by the same method as was suggested
in the case of military forces.

This ambitious French plan, linking together the two
questions of disarmament and security, was conceived on
totally different lines from the plans put forward by the
other Powers ; for none of the others was prepared to con-
template either the creation of a special international armed
force, or the earmarking of certain armaments and con-
tingents for the service of the League under the direct
orders of an international authority. It was obviously im-
practicable to secure any sort of agreement on the basis
of the French plan in face of the hostile attitude of the
other Powers ; but the French were equally unwilling to
give way and to agree to any considerable limitation of
armaments — though they did in fact under the Radical
Governments of 1932-33 take some steps towards a reduc-
tion of military expenditure — unless countries not only
bound themselves to the preservation of the peace by
stronger covenants than they had been prepared to enter
into as yet, but also provided for the definite use of armed

DISARMAMENT AND SECURITY 743

f

forces against any country held guilty of breaking the
peace.

There was thus, among the major Powers, a complete
deadlock, which, by successive compromises and agreed
resolutions evading the main issues, it was vainly attempted
to conceal. By the end of 1932 it had become obvious that,
despite the temporary removal of the immediate obstacle
to a convention caused by the German demand for equality,
there was no real prospect of a convention which would
bring with it any considerable advance in the direction of
general disarmament. All that could be hoped for at that
stage was some practical progress in the field of qualitative
disarmament, especially in respect of the abolition of gas
and chemical warfare, and of severe restrictions on aerial
bombing, including the prohibition of the use of aircraft
deliberately against the civil population. But it remained
very doubtful how far, in face of the continued mainten-
ance of general armaments at a very high level, covenants
prohibiting or restricting the use of particular weapons
would in fact be adhered to if war actually broke out, and
a country found itself facing the prospect of defeat through
the denial to itself of some particular prohibited form of
war. In 1933 the Conference, recognising the futility of
trying to agree upon any inclusive general convention in the
immediate future, settled down to consider a less ambitious
draft, dealing largely with qualitative disarmament, and
decided to leave the major points of difference for discus-
sion at a later stage, creating for this purpose some sort
of permanent Disarmament Commission, and agreeing to
resume the discussions later on in the hope that some way
of overcoming the obstacles might before long be found.

Throughout the Conference there was considerable dis-
content among the delegates of the smaller Powers, which
found themselves continually pushed into the background,
while the Conference adjourned in order to enable the
major Powers to hold private conversations of their own in
the hope of bridging their differences. Some at any rate
of the smaller countries, particularly those of Western

744 EUROPEAN INTERNATIONAL RELATIONS

Europe, are keenly anxious to press disarmament to the
furthest possible lengths ; and these countries resented
strongly the domination which the Great Powers were
attempting to exercise. Nor was this the only serious
diplomatic cause of offence which occurred at the Con-
ference ; for again and again, especially when the German
claim to equality was under discussion, Great Britain,
France and the United States adjourned to negotiate and
discuss, to the exclusion not only of the smaller Powers,
but also of Italy. Italy had been prepared from the first
to grant the German claim to equality, whereas France had
not ; and Great Britain had been unwilling to take any
clear line except in agreement with France. It was natural
enough under these circumstances for the British and
French to meet together and discuss their attitude, and for
them to desire to have the co-operation and countenance
of the United States ; but the result of excluding Italy was
unfortunate, for it tended to align the Italians more defin-
itely with the Germans, and also to give the Italian Gov-
ernment a strong desire to take the first opportunity of
asserting its claim to be fully consulted in the deliberations
of the Great Powers.

In fact the exclusion of Italy from the conversations of
1932 over German equality and the general question of dis-
armament was, it is to be feared, the immediate cause of the
use made by Mussolini of MacDonald's visit to Rome early
in 1933 in quest of a Four- Power Pact ; for at Rome
Mussolini turned the tables on the British and French by
raising openly, for the first time since the war, the issue
of Treaty revision, and thus stirred up all the smaller States
of Europe, which had acquired their present territories
under the Treaties of Peace, to a strong antagonism to the
attempt to create a Four-Power Pact among the great
western countries, and so keep in check the dangers to
European peace created by the revival of militarism in
Germany. MacDonald's attempt may have been perfectly
well intentioned ; but in allowing Mussolini to use the occa-
sion in order to proclaim the doctrine of Treaty revision,

DISARMAMENT AND SECURITY 745

so far from helping to further the cause of European
peace, he stirred up fresh sources of discord and created
additional antagonisms between the smaller and greater
Powers, besides making the entry of France into any pact
of the kind contemplated far more difficult than it need
have been. Even though the difficulties were smoothed
over, and an emasculated Four-Power Pact initialled by
the four States, this did not undo the damage.

Treaty Revision. For France cannot, without forfeit-
ing her position of ally and protector to a number of the
smaller States of Central and Eastern Europe, enter into
any pact in which the revision of the Treaties is proclaimed
as one of the principal objects. Throughout Central Europe
Treaty revision means, in the minds of most people, the
loss by the new States of the position which they gained
at the end of the world war, the renewed aggrandisement
of Hungary, and the possible reconstruction of the Austro-
Hungarian Empire. In Poland it means the threatened loss
of the Corridor, and of her rights in Danzig ; while in the
Balkans it means the threat of a renewal of the military
power of Bulgaria. Moreover, the Great Powers which
were thus speaking of Treaty revision showed no sign of a
willingness to give up any of their own war conquests. They
might be prepared to concede territorial readjustment in
favour of Germany or Hungary at the expense of the smaller
Continental States ; but they did not indicate that they
were prepared to hand back to the Germans any of the
colonial territories which they acquired under mandates
in 1919. In these circumstances Treaty revision, as it was
put forward in the early months of 1933, seemed to the
smaller States of Central and Eastern Europe a barefaced
attempt by the Great Powers to compel them to make
sacrifices in the interests of Germany and Hungary, without
giving up anything themselves.

Nevertheless, it is undoubtedly true that the Peace
Treaties ought to be revised, and that many of the territorial
settlements made in a spirit of vindictiveness and of" spoils

746 EUROPEAN INTERNATIONAL RELATIONS

to the victors " after the conclusion of the world war were
palpably unjust as well as inexpedient. Hungary was re-
stricted within frontiers far too narrow on either national
or economic grounds ; Austria was left in an impossible
economic situation. There is no logical or rational defence
of the continuance of the Polish Corridor under the existing
conditions ; Poland has no right on national grounds to
retain territories inhabited largely by Ukrainians ; nor can
the present frontiers of Bulgaria be upheld on any principle
of national justice. There are all over Europe countless
wrongs crying for redress — wrongs created by the Treaties
of Peace in the attempt to make a compromise between the
irreconcilable spirits of national self-determination and
" spoils to the victors." Nor is there any valid grotind, if
other countries are to be allowed to possess colonial em-
pires, why a Germany readmitted to equality of status
should be denied that right. In Europe it is arguable that
the frontiers created in 1919 and 1920 did far less violence
to the principle of national self-determination than the
frontiers which existed in 1914 ; but the degree of violence
which they do to this principle to-day is a sign not only
that the principle of national self-determination was not
carried out so completely as it might have been, but also
that in face of the intermingling of European populations
and the interpenetration of national groups, it is impossible
to make any satisfactory settlement of European frontiers
that will not hopelessly violate at many points the nation-
alist principle, even if no account is taken of the highly
important factor of preserving the unity of coherent
economic areas.

In effect, nationalism as a basis for the territorial organi-
sation of Europe is bound to break down if and as long as
the attempt is made to carry it into effect on the principle
of the absolute independence and sovereignty of each
national State. Each national minority is acutely conscious
of its grievance, not only because it is often persecuted by
the representatives of the national majority which dom-
inates the State in which it is included, but also because

DISARMAMENT AND SECURITY 747

it resents being shut up absolutely and finally within the
frontiers of a national State regarded as finally self-govern-
ing and sovereign in all respects. The grievances of national
minorities are greatly aggravated in many areas by delib-
erate persecution ; but they will exist even in the absence
of persecution as long as States are regarded not merely as
convenient territorial divisions of the European Continent,
but as absolute national entities with full rights of disposal
over the lives and means of existence of all their citizens,
with regard only to their own interests and with no regard
at all to the claims of a wider pan-European or world unity.
The multiplication of independent sovereign States, which
the attempt to establish the principle of national self-
determination in Europe involved, has in effect brought
with it problems insoluble within the limited conditions of
State sovereignty — problems which can be solved only by
the universal admission that States have only limited rights
in relation to their subjects, and must admit the claims of
some authority transcending merely national boundaries.

This great issue of nationalism and internationalism,
which will have to be discussed more fully in a subsequent
section, is inevitably raised here because it is closely in-
volved with the whole question of disarmament. The French
demand for security is by no means unreasonable or to be
rejected out of hand, however much the methods by which
the French propose to realise security may be rejected as
impracticable. Nations will not disarm, though they may
agree within narrow limits to restrict their armaments or
their armaments expenditure on an agreed basis, as long as
they continue to be nations in the sense of claiming com-
plete national sovereignty. For the whole idea of absolute
sovereignty involves in the last resort the right to do any-
thing which may be held to serve the interests of the nation
regarded as an ultimate unit, irrespective of the conse-
quences which the doing of it may have for the rest of the
world. This right includes necessarily and inevitably the
right to make war in the national interest. For, as long as
nations continue to exist as nations in the sense just given

748 EUROPEAN INTERNATIONAL RELATIONS

to the term, there will continue to be causes of war between
them, if only because there will be territories to which more
than one nation considers that it possesses an indefeasible
national right. Under these conditions no territorial settle-
ment can ever be permanent, and no security of peace can
ever exist. But where there is no security there cannot be
any real measure of disarmament ; for the sense of insecurity
will lead inevitably to the endeavour of each nation, save
those few small countries which see their best protection
in being completely defenceless, to make itself strong enough
to ensure its own safety. In fact, no nation ever is or can
be strong enough to achieve this object ; for, even if it
is stronger than its immediate neighbours or than any other
single Power, it can never be strong enough to be sure of
resisting successfully any combination of Powers that may
be formed against it.

There is accordingly no limit to the quantity of arma-
ments that a country may hold itself to require as the
necessary minimum for its own defence. For no nation can
tell against how many other Powers or with what allies it
may be called upon to defend itself. Under these conditions,
even if limitations of armaments are agreed upon inter-
nationally, nations will inevitably tend not only to create
armaments right up to the permitted limits, but also to
evade the spirit of the limitations by devising new and more
powerful means of warfare within the letter of their engage-
ments. There will be a qualitative if not a quantitative race
in armaments ; and in these days of invention the qualita-
tive factor is coming to count for more and more. It may
be worth while to hold disarmament conferences in the
hope of achieving at least some limitation, and of checking
from time to time the armaments race, much as the World
Economic Conference of 1927 did check for a time the
upward movement of European tariffs. But it is out of the
question to expect much more than this, save as a result of
a far-reaching change in the en tire structure of the European
State system. For this there is no sign that either states-
men or peoples are as yet prepared.

DISARMAMENT AND SECURITY 749

For it is difficult indeed for those who have grown up in
the tradition of national sovereignty to think in any
different terms, and the whole idea of sovereignty is so
deeply embedded in the political ideas of the modern world,
and in its economic as well as its political relationships, that
it will hardly be driven out save as the result of some sharp
and desperate shock to the existing structure of European
society. Nor should it be forgotten that this idea of State
sovereignty, inconsistent as it is with the conception of any
real League of Nations as an organ of effective international
co-operation, is deeply embedded in the Covenant of the
present League, which has been based throughout on the
attempt to bring together sovereign States, and not at all
designed to break down national sovereignty in the interests
of a wider conception of world, or even of European, unity.
The League of Nations is in fact a League of Governments,
each of which regards itself as representing an altogether
independent and self-determined sovereign State ; and no
Government feels itself entitled, or is prepared, to give away
anything that might result in an abrogation of any part of
its sovereignty. Hence the unanimity rule, by which many
of the most important functions of the League are con-
ditioned. For, as Lord Cecil said in the course of the original
discussions at which the form of the League Covenant was
decided, " all international decisions must of their nature
be unanimous," a sharp and unequivocal proclamation of
the doctrine of national sovereignty, and at the same time a
plain declaration that the new House of Nations at Geneva
was being built upon the sand.

§ 2. THE LEAGUE OF NATIONS

THE LEAGUE OF NATIONS formed at the conclusion of
the Great War and as a part of the Peace settlement consisted
at the end of 1932 of fifty-seven member States. Of these,
twenty-seven, or rather less than half, were in Europe,
and eighteen in America. The total included, besides Great

75° EUROPEAN INTERNATIONAL RELATIONS
i

Britain, the great self-governing Dominions — Canada,
Australia, New Zealand, South Africa, and Ireland, and also
British India ; so that the British Empire collectively, if it
chooses to act together, is able to exert a considerable voting,
influence within the League. The most notable absentees
from the League are the United States and the U.S.S.R.,
and next after these Egypt and Brazil. Brazil, which
was at one time in the League, resigned some years ago
without at the same time relinquishing her membership
of the International Labour Organisation. Otherwise the
membership of the two bodies is the same ; but, in both cases,
States not members, and especially the United States, are
often asked to send delegates or observers to particular
conferences. The European countries included in the
League range from the Great Powers to Albania and Luxem-
bourg ; but certain tiny independent States, such as Monaco,
San Marino, and Liechtenstein, are outside the League.
Most of the South American States, with the exception of
Brazil, belong ; but Costa Rica and Ecuador are two further
exceptions. Japan, which had been in the League from the
outset, gave notice of withdrawal in 1933 as a result of the
League's action over the Manchurian dispute ; but, of
the other Asiatic Powers, China, Persia, and Siam, as
well as India, are inside the League, while Afghanistan,
Arabia, Nepal, and Manchukuo are non-members. Thus,
with the important exceptions of the United States, Japan
and the U.S.S.R., the League can be regarded as fully
representing the countries which play a leading part in
the world's international affairs.

It was of course intended, when the League was first
created, that the United States should be a member of it.
Indeed, the whole idea of the League largely came from
President Wilson, who took a larger part than any other
man in pressing the idea on the Great Powers at the con-
clusion of the war, and in formulating the principles under-
lying the Covenant. But President Wilson found it beyond
his strength to induce the politicians of his own country or
American public opinion to accept the commitments which

THE LEAGUE OF NATIONS 751

they conceived to be involved in membership of a League
inevitably centred upon Europe and involved in the tangled
mutual relationships of the European States. Nor did a
clause specially inserted in the Covenant to affirm the
continued validity of the Monroe Doctrine reconcile Ameri-
can opinion to the possibility of League interference
between the United States and its smaller neighbours in
Central and South America. The United States stood aloof;
and this by itself sufficed to make the League much less
than a representative international organisation for the
world as a whole, and greatly to increase its concentration
upon European affairs. For, with the United States outside,
the remaining Great Powers associated with it, with the
exception of Japan, were all European Powers ; and in-
evitably the League was from the outset largely concerned
with complications arising out of the peace settlement of
1919 and with relationships along the new frontiers con-
stituted in Europe under the Treaties of Peace.

The exclusion of the U.S.S.R. is no less important than
that of the United States. At the time when the League was
formed the Soviet Union was still widely regarded as certain
to disappear in the near future, and civil war was still in
progress on all the Russian frontiers. Statesmen in capitalist
countries were entirely unwilling to recognise that the
victory of Communism in Russia could be permanent, or
that a country basing both its internal and its external
relations on principles so widely different from their own
might have to be accepted into the comity of nations. They
hoped for, and were actively engaged in fostering, the
victory of the counter-revolutionary forces upon Russian
soil ; and the admission of Russia to the League was re-
garded as no more than deferred pending the establishment
of a settled and acceptable form of government over her
vast territories. Nor were the Russians in 1919 in a mood
that would have made easy their acceptance of the obliga-
tions involved in League membership. For, while capitalist
opinion was still looking forward confidently to the over-
throw of Communism in Russia, the Russian Communists

752 EUROPEAN INTERNATIONAL RELATIONS

T

were still hoping for a rapid victory of the revolutionary
forces all over Europe, and regarded their own revolution
as only the first instalment of a world revolution which was
due speedily to arrive. In these circumstances their desire
and aspiration were, not to ensure the maintenance of the
status quo, but to forward as rapidly as possible the triumph
of the world revolution ; and for this reason the League and
Russia were not merely incompatibles, but from the first
antagonistic, in that the Allied Powers inside the League
were in their several ways actively forwarding the cause
of the various counter-revolutionary generals who were
overrunning one part or another of Russian territory.

The situation has changed since then, and the Soviet
Government in Russia is now recognised de jure or de facto
by a considerable number of Powers, though this recogni-
tion remains precarious, and the deeply rooted hostility of
the capitalist States towards Russia retains undiminished
force. But the recognition of the Soviet Government by
one after another of the capitalist Powers has not made
the way plain for the entry of Russia into the League,
though Soviet representatives have participated in a
number of the special conferences held under its auspices,
including both the World Economic Conferences of 192 7 and
1933 and the Disarmament Conference. Russian states-
men no longer hope for the speedy triumph of the revolution
all over Europe ; and they have largely modified, as the
indispensable condition of being let alone to pursue their
own economic development, their attempts to stimulate
revolutionary movements in other countries. But they have
not in the smallest degree abandoned their hopes, or
reconciled themselves to the maintenance of the status quo.
World revolution remains in their view, now as much as in
1919, the only solution of the world's economic and political
problems. The Russians have, however, shown themselves
willing to recognise that this end cannot be gained by the
maintenance of unfriendly relations with their capitalist
neighbours, or by any attempt to impose their revolutionary
ideas by force. They have accordingly been fully prepared to

THE LEAGUE OF NATIONS 753

work for the maintenance of world peace, and to conclude,
with any country that is willing, non-aggression pacts
based on the renunciation of all attempts to overturn
Governments or make territorial changes by armed force.
By July 1933 Pacts of Non-Aggression, usually amplified
by further pacts so defining the aggressor as to exclude all
forms of military action, had been signed by the U.S.S.R.
with nearly all the border States, including the Little
Entente, Poland, most of the Baltic States and Turkey.
They have perforce reconciled themselves to a far slower
pace than they once hoped for in the development of the
world revolution ; but to defer hope is not to abandon it,
and the gulf between Russia and the capitalist States of
the world remains as impassable as before in terms of
ultimate ideals, if not of immediate policy.

The absence of Russia from the League has had serious
consequences on its claim to speak with a voice representa-
tive of world opinion ; for there has been a constant danger
that the European Powers included in the League might
attempt to use it as an instrument not merely for the
preservation of the status quo in their own countries, that is
to say, as a guarantee against revolution at home, but also
positively against Russia. At one time the French especially
were full of the idea of a sanitary cordon, to be drawn across
Eastern Europe, shutting off the territory of the Soviet
Union from those of the Powers west of the dividing line.
Of late this idea has fallen into the background ; but even
to-day, when plans are put forward for a European Union
such as Briand advocated, there is a constant danger that
the union may be less a means for the preservation of world
peace than a league of capitalist States directed against
Socialist Russia.

The participation of the States of Central and South
America in the League was largely an assertion on their
part of their independence in foreign politics of the United
States. But in practice the League has not dealt either very
much or very effectively with American affairs. The
United States, as we have seen, secured in the League

754 EUROPEAN INTERNATIONAL RELATIONS

Covenant a recognition of the continued validity of the
Monroe Doctrine ; and in pursuance of this policy the
Americans have remained suspicious of League interven-
tion in American affairs, and the European Powers which
have dominated League policy have seen the need for
walking warily where America is concerned. Thus League
intervention has been largely ineffective in checking the
outbreak of little wars on the South American Continent,
even when the attempt has been made to join forces with the
United States for their prevention.

Nor has the League been happier in its dealings with the
affairs of the Far East. In this case, indeed, the great Euro-
pean Powers are all far more closely concerned than they
are with what happens over the greater part of South
America. But the League countries cannot move in the Far
East without the full participation of the United States,
which is quite as deeply concerned as any of them — indeed
far more deeply concerned than any other country save
Great Britain. Moreover, Japan, though she has been up to
1933 a member of the League, has been determined
throughout in the last resort to have her own way in Far
Eastern affairs, and by no means to accept European dicta-
tion in her dealings with China. The attempt of the
League, tardy and hesitant as it was, to interfere in the
Manchurian dispute of 1932—33 only served to drive Japan
into open revolt against the public opinion of Europe as
expressed in the League declarations, to the extent of ac-
tually severing her membership. It is, indeed, more than
probable that if the European Powers had acted more
promptly and decisively than they did in the case of
Manchuria, so as to make their joint influence and deter-
mination felt before Japan had taken the step of recog-
nising the so-called independent State of Manchukuo,
their action might have been far more effective ; for Japan
was at that time far more open to influence than she is
to-day, now that the weakness of League action has been
plainly shown.

The real truth is that the Western Powers were not

THE LEAGUE OF NATIONS 755

prepared to act unitedly on behalf of China against Japan-
ese aggression, however clearly the Japanese action violated
the principles laid down in the Covenant of the League.
Some of the European statesmen more than half sym-
pathised with Japan ; while others, who took what is
called the " League view," were unprepared to involve
their countries in the risk of open conflict with the Japan-
ese, especially as they felt no assurance that their League
partners would act solidly with them. Consequently, Japan
was allowed to flout the League in the Far East ; and the
demonstration of weakness thus given to the whole world
not only undermined its influence in Japan and in Asia
generally, but also went far to undo such authority as it had
managed to build up for itself even in Europe.

Despite the fact that nearly half the member States of
the League are situated outside Europe, the League is
predominantly a European affair, and concerns itself pre-
dominantly with European relationships. It is in fact to
a great extent a loose association of the Great Powers of
Western Europe to which the smaller Powers of Central,
Southern, and Eastern Europe are admitted upon a footing
in which inferiority and equality are curiously blended. In
one sense all the League Powers are formally equal, since
they have all an equal voice in the League Assembly, which
is the body wielding in theory the ultimate control. But
real power in the League resides far more in the Council
than in the Assembly, and upon the Council there is a sharp
differentiation between the greater and the smaller Powers.
In the original Constitution of the League, provision was
made for the five Great Powers which were then expected
to be included in it to have direct representation upon the
Council. These were the United States, the British Empire,
France, Italy, and Japan. All the other States together were
to have only four representatives upon the Council,
selected by the Assembly from time to time at its discretion.
In the first instance the four representatives from the
smaller Powers were selected from Belgium, Brazil, Greece,
and Spain ; and in view of the withdrawal of the United

756 EUROPEAN INTERNATIONAL RELATIONS

States, this meant that the League Council had from the
first an overwhelmingly European composition.

Since its original constitution the personnel of the League
Council has been substantially modified. First, in 1922, the
number of members to be selected by the Assembly from
the Powers to which direct representation was not given
was raised from four to six, and later, in 1926, this repre-
sentation was raised again from six to nine, and at the same
time Germany was nominated a permanent member of
the Council. In theory the election of Council members by
the Assembly to the seats not reserved for the principal
Powers is an entirely open matter ; but in practice an un-
written rule seems to have grown up. Since Canada secured
a seat on the Council in 1927 one seat has been in practice
reserved for the British Dominions, the Irish Free State
having taken Canada's place in the election of 1930. Three
seats have been given to Latin America. Spain and Poland,
despite the original understanding that there should be
rotation among the States not granted permanent member-
ship, have been continuously represented, while the re-
maining three seats have been scrambled for by the other
European countries and the Asiatic States other than
Japan. This has meant in practice that the representatives
of the small countries have stood little chance of securing
election unless they have been able to build up a kind of
electoral bloc by some form of agreement to support one
another's candidates at successive elections. With the
exception of Germany the States defeated in the late war
have stood virtually no chance of securing representation.

Some sort of inequality was of course inevitable if the
League was to be made to work at all ; for the Great
Powers would certainly never have accepted a League in
which their rights were to be no greater than those of, say,
Albania or Siam or Luxembourg. They were bound to insist
on some form of inequality, despite the theoretical prin-
ciple of the absolute independence of sovereign States on
which the League has been built up. But in reality the
element of inequality in the League has been far greater

THE LEAGUE OF NATIONS 757^

than the representation on the Council shows. The Great
Powers are in a minority on the Council, and in theory the
small Powers might combine so as to out-vote them on the
Council as well as in the Assembly. But what happens in
fact is that the decisions of the League are very often taken
as a result, not mainly of discussions in the Council, but of
private consultations held among the Great Powers, and
apart from the recognised machinery of the League. Again
and again, when some important issue has come up, the
Great Powers have first met and endeavoured to decide
what their attitude was to be, and have then gone to the
League and secured the acceptance of the policy upon which
they had already reached agreement.

This, too, is impossible to avoid in the present state of the
world's international relations. For, as long as force poten-
tially counts in international affairs, the last word is bound
to be with the Great Powers, which alone are in a position
to employ force in matters of primary importance. It would
be of no use for the smaller League countries to out- vote the
Great Powers on any issue on which the Great Powers were
able to agree ; for they would have no means of making their
vote effective, and if they persisted in their attitude the
only possible result would be to destroy the League alto-
gether, and therewith remove such protection as it docs
give to their frontiers and such guarantees as it provides
against their being the victims of aggressive war. Accord-
ingly, though the smaller countries often grumble at the
attitude assumed by the Great Powers, in the last resort
they have to take what the Great Powers please to give
them, and the League inevitably becomes more a piece of
machinery for registering the decisions of the Great Powers
associated with it than a real organ of world-wide inter-
national collaboration. This is not the fault of the individuals
who dominate the Council, though it doubtless expresses
pretty accurately the point of view of those of them who
sit there as representatives of the larger countries. It is not
primarily anyone's fault ; it is simply the outcome of the
existing condition of international politics and of the

,758 EUROPEAN INTERNATIONAL RELATIONS

continued acceptance of State sovereignty as a basis for
the government of the world's affairs.

It is even misleading to think of the League as pre-
dominantly a federation formed to bring together the
nations of the world with a view to co-operative action in
the interests of the world as a whole. It was not created
primarily as an organ of world government even in the
most rudimentary sense, but, as the terms of the Covenant
and the discussions which accompanied its formation alike
make sufficiently clear, as an instrument for the prevention
of war, and the peaceful settlement of disputes between
nation and nation. These functions are primarily arbitral
and judicial, and only to a quite minor extent those of
positive collaboration in constructive tasks. The League has
indeed developed through its economic and financial
organisation some activities making in the direction of
a more constructive form of collaboration. But these are
still in a very rudimentary stage ; and even the influence
which the League exerted in persuading the countries of
Europe to return to the gold standard after the war could
only take the form of a gentle suasion made effective far
more by the action and attitude of the great Central
Banks than through the instrumentality of the League
itself. The League's economic activities are still largely
statistical and informative ; and the World Economic Con-
ferences of 1927 and 1933 have demonstrated the difficulty
of translating into positive action even those recommenda-
tions upon which the representatives of all the assembled
countries are able to agree. The I.L.O. has gone somewhat
further in a constructive direction ; but its achievements and
shortcomings can be more conveniently discussed in a
later section.

Positive collaboration in dealing with world problems
through the League has gone furthest in the fields most
remote from the major issues of politics and economics.
It is in the sphere of public health, of the suppression of the
traffic in drugs, and of the White Slave Traffic, in the
improvement through suasion of the standards of hygiene

THE LEAGUE OF NATIONS 759

and public morals in the more backward countries, that the
League has so far done its least spectacular but most
efficient work. But the success achieved in these fields is
the result of the ability to handle such matters without
raising large political complications, or stirring up vested
economic interests too strong to be interfered with without
provoking political reactions. In these fields the League is
undoubtedly useful and doing excellent work ; but however
important what it has done in these respects may be in
itself, clearly it is but secondary in relation to the main
objects which all believers in any real form of inter-
nationalism have at heart.

The League Covenant. The fundamental weakness of
the League of Nations, as it exists at present, is that it is
based upon a full recognition of the absolute independence
and sovereignty of the States composing it, or at any rate of
the Great Powers which in practice dominate its activities.
Or perhaps it would be truer to say that this is not so much
the weakness of the League as a fatal defect in the existing
system of international relationships — a defect from which
no international body constructed within the prevailing
system of ideas about the rights of nations can possibly
escape. It would be unfair to blame the League for embody-
ing the principles of national sovereignty and independence
as long as these principles continue to be firmly insisted
upon by the States which make it up. But it would also be
mere self-delusion to imagine that the League can become
an effective instrument of positive international collabora-
tion as long as these principles of autarchy remain intact.

That the League is based firmly on the idea of State
sovereignty appears again and again through the successive
clauses of the Covenant in the stress laid on the unanimity
rule. There is, indeed, some departure from this rule, but
only at the expense of the smaller States. As far as the
Great Powers are concerned it is insisted upon throughout as
the very basis of the Covenant save in mere matters of
procedure, in relation to which any organisation that is to

760 EUROPEAN INTERNATIONAL RELATIONS
(

work at all must have some power of determining its action
by a majority vote. Thus Article 5 lays down that, except
where it is otherwise expressly provided, " decisions at any
meeting of the Assembly or of the Council shall require the
agreement of all the members of the League represented at
the meeting." This clause plainly proclaims at the outset
the doctrine of State sovereignty, subject only to such
modifications as are introduced by the terms of the
Covenant itself.

What, then, are these modifications ? We need not con-
cern ourselves with those which deal purely with matters of
procedure, but only with those which may involve import-
ant issues of international policy. The most important of
these are embodied in Article 15, which deals with the
action to be taken by the League in handling any disputes
which are not actually submitted for arbitration or judicial
settlement to the Permanent Court of Justice or to some
specially constituted tribunal. Under Article 15 the mem-
bers of the League undertake to submit any disputes not
so referred to consideration by the League Council, and it
is open to any member of the League to bring a dispute to
the notice of the Council and to insist on investigation by
the Council. When a dispute is thus submitted, the first
duty of the Council is to endeavour to effect an amicable
settlement ; but if this cannot be done the Council must take
action in the form of making a report, not only reviewing the
facts of the dispute, but also making recommendations for
its adjustment. This report can be made by the Council
either unanimously or by a majority vote ; but unless the
report is made unanimously by all the members of the
Council, except those who represent actual parties to
the dispute, no obligation rests upon the members of the
League to carry out the recommendations embodied in
the report. They are left free under the Covenant to do
precisely what they like, with only the academic recom-
mendation that their actions must be taken in such a way
as to further " in their own opinion the maintenance of
right and justice." If, however, the Council is able to make

THE LEAGUE OF NATIONS 761

a unanimous report, or one in which all the member/
other than those who represent States directly parties to
the dispute are prepared to concur, a definite obligation
is imposed upon all member States ; for all the members
agree under the Covenant that in these circumstances of
unanimity " they will not go to war with any party to the
dispute which complies with the recommendations of the
report." Observe that even in these circumstances they
are not committed, under Article 15, to take any action
against the State which fails to comply with the recom-
mendations of the League, but only to refrain from hostile
action against the State which does carry out the League's
proposals.

The Council may, however, instead of taking the respon-
sibility itself, refer any dispute with which it is called upon
to deal to the Assembly of the League, upon which all
States are represented and all have alike one vote, irre-
spective of their size and importance. If such a reference
to the Assembly is made, the power to issue a report and
to make recommendations for the settlement of the dispute
is thereby transferred from the Council to the Assembly.
In this case the unanimity rule is not insisted on ; for it
would clearly be out of the question to rely on unanimity
among the large number of separate nations included in
the League, especially as one or another of them, without
being directly a party to the dispute in question, would
almost certainly be in such close relations with the offending
State as to back it up almost automatically, or at least to
abstain from voting so as to destroy the unanimity required
for League action against it. A curious procedure has
therefore been worked out for the application of Article
15 where a dispute is referred by the Council to the Assem-
bly. The Assembly can take a decision in such a case by
a majority vote ; and the decision so taken can become
binding upon all members of the League, but only on one
very important condition. This condition is that the repre-
sentatives at the Assembly of all those States which have
members on the League Council, except the States which

762 EUROPEAN INTERNATIONAL RELATIONS

Ure directly parties to the dispute, must vote unanimously
in favour of the Assembly's report and recommendations,
and there must be also a clear majority of the other mem-
bers of the League. Thus each great State, unless it is itself
a party to the particular dispute which is under considera-
tion, maintains its absolute right of veto upon any action
which it is proposed to take under Article 15.

There is doubtless some invasion of the principle of State
sovereignty in the fact that under Article 15 a State which
is itself a party to a dispute can be overriden by the verdict
of other States, even if it is one of the Great Powers repre-
sented on the Council. But this is as far as the Great Powers
have been prepared to go in limiting their absolute sov-
ereign rights ; and, as we have seen recently in the case of
the Manchurian dispute, the attempt to put the machinery
of Article 15 in motion against a Great Power has merely
caused that Power to give notice of withdrawal from the
League, and has not induced the remaining Powers to take
any action which would compel the recalcitrant Great
Power to observe the recommendations embodied in the
League's report. The exception in these circumstances in
effect confirms the rule. Even the small invasion of the
claims of absolute State sovereignty embodied in Article 15
is hedged round with so many restrictions as to make its
operation very difficult under the League's rules of pro-
cedure ; and if, finally, these difficulties are overcome, it
remains open for a Great Power which finds its sovereignty
invaded to regain all its rights by withdrawal from the
League.

It is true that Article i lays down that a State may only
withdraw from the League after giving two years' notice of
its intention, and subject to the proviso that all its inter-
national obligations and all its obligations under the
Covenant shall have been fulfilled at the time of its with-
drawal. But what are the obligations of a State under
Article 15 ? Article 15 does not say that any State is com-
pelled to carry out the terms of the recommendations issued
by the Council or the Assembly. It only lays down that the

THE LEAGUE OF NATIONS 763

members of the League will not go to war with any Stat<?
which does comply with the recommendations. It says
nothing about their going to war with, or employing any
lesser sanctions against a State which does not. Therefore,
as far as Article 15 is concerned, it is perfectly open for
Japan, or any other Power which may find itself in a
similar situation, to argue that in refusing to accept the
recommendations of the Council or the Assembly it is not
in any way violating the League Covenant or impairing
even technically its right to resign from the League under
the terms of Article i.

This question of sanctions is dealt with in Article 16.
The governing words of the Article are those with which it
opens. They run as follows : " Should any member of the
League resort to war in disregard of its covenants under
Articles 12, 13, or 15, it shall ipso facto be deemed to have
committed an act of war against all other members of the
League, which hereby undertake immediately to subject
it to the severance of all trade and financial relations, and
the prohibition of all intercourse between their nationals
and the nationals of the Covenant-breaking State, and the
nationals of any other State, whether a member of the
League or not." This sounds drastic enough in all consci-
ence, since it envisages the complete boycott of the offend-
ing State not only to the extent of the severance of rela-
tions with it by all the other League States and their
nationals, but even to the point of blockading it com-
pletely against all intercourse with the rest of the world.
But under what conditions can these drastic obligations
upon the League's members arise ? We have seen already
that the only circumstances in which they can arise under
Article 15 is the action of a member of the League in going
to war with a party to the dispute which complies with the
recommendations of the League's report. Doubtless as a
matter of plain common sense most people would hold that
Japan is at present at war with China. But the Japanese
firmly maintain that this is not the case. There has not
been, and is not likely to be in the circumstances, any

764 EUROPEAN INTERNATIONAL RELATIONS

formal declaration of war : there are merely certain opera-
tions of a military character, designed primarily for the
suppression of brigandage, and any act involving a formal
state of warfare can doubtless be carried out under the
convenient auspices of the new State of Manchukuo, which
is not a member of the League. The art of wholesale murder
without making formal war thus acquires a new political
significance ; and as there is no authority entrusted with
the duty of deciding what does constitute making war and
what does not, the Japanese, or any other State similarly
situated, can easily put up at least a technical case for
urging that the obligations envisaged under Article 16
cannot be invoked in consequence of anything they have
done to violate the terms of Article 15. Doubtless if the
League chose to declare through the Council or the
Assembly, with the required degree of unanimity, that the
Japanese were engaged in making war on China, and that
China had complied with the recommendations of the
League, the obligations envisaged in Article 1 6 would then
arise. But the Council is not under any compulsion to do
this, and is in practice most unlikely to do it at the expense
of any Great Power.

There remains to be considered the reference in the words
quoted from Article 16 to disregard of covenants under
Articles 12 and 13. Article 12 binds the members of the
League, if any dispute likely to lead to a rupture arises
between them, to " submit the matter either to arbitration
or judicial settlement or to enquiry by the Council " ; and
the members of the League agree " in no case to resort to
war until three months after the award by the arbitrators
or the judicial decision or the report by the Council."
Here again the sole obligation is not to resort to war, and
there is still no definition of what constitutes a resort to
war, so that the same difficulty arises as in the case of
Article 15. Article 13 relates only to disputes which the
members of the League concerned " recognise to be suit-
able for submission to arbitration or judicial settlement " ;
and it is left to the parties themselves to determine whether

THE LEAGUE OF NATIONS 765

or not a particular dispute does come within this definition,
subject only to the proviso that " disputes as to the inter-
pretation of the 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, are declared to be among those which
are generally suitable for submission to arbitration or
judicial settlement." But the value of this proviso is largely
destroyed by the word " generally," which clearly leaves it
open to any State to declare that in the particular dispute
in which it is concerned an exception should be made to
this general proviso, even if the circumstances are such
as to bring the dispute within the broad terms of the
article.

Under Article 13 the members of the League agree " that
they will carry out in full good faith any award or decision
that may be rendered, and that they will not resort to war
against a member of the League which complies there-
with." But this obligation refers only to disputes which
they have themselves agreed in advance to submit to
arbitration or judicial decision in accordance with the
terms of Article 13, and therefore does not constitute any
invasion of their independent sovereignty, or impose upon
them any obligation to carry out the decisions of the
League upon any question which they do not regard as
suitable for arbitration or judicial settlement.

The conclusion to be drawn from this somewhat compli-
cated review of the most vital clauses of the League
Covenant is that in setting up the League of Nations the
Powers which agreed upon the draft of the Covenant most
carefully refrained from subjecting themselves to any
obligation to carry out the decisions of the League, even
when these decisions have been unanimously made by all
the League Powers which are not direcdy parties to the
dispute. The most they bound themselves to accept was that
they would not go to war with any party to the dispute
which did comply with the recommendations made

766 EUROPEAN INTERNATIONAL RELATIONS

unanimously by the League Council. Even this would of
course be a very valuable concession if there were any
means of securely implementing it ; but, as the Japanese
dispute has plainly shown, it is possible for a Great Power
to violate quite openly the decisions made by the Council
or the Assembly in full accordance with the terms of the
Covenant without incurring any of the drastic penalties
laid down against offenders in Article 16. The most that
can be said is that, if all the Great Powers except one were
really determined to take action against the remaining
Great Power, and this one Great Power did, in spite of
their determination, go to war with a League member
contrary to the terms of the Covenant, the remaining
Powers could, by declaring that the offending Power had
taken this course and thereby implicitly defining the act of
going to war, bring into force against it the sanctions of
Article 16.

It is, however, clear that the extremely drastic character
of the sanctions contemplated in Article 16, and the failure
to provide for any less drastic sanctions as an alternative
form of pressure upon the offending State, make it impos-
sible for the League to invoke the Article unless all the Great
Powers not directly involved are prepared actually to go to
war with the offender and to place their forces at the
disposal of the League, not only for the carrying out of a
universal blockade but also, if necessary, for the actual
levying of war at the League's orders. Indeed, this levying
of war is clearly contemplated under the second clause of
Article 16, which lays down that where the obligation to
enforce a boycott under the first clause of Article 1 6 arises
" it shall be the duty of the Council to recommend to the
several Governments concerned what effective military,
naval or air force the members of the League shall severally
contribute to the armed forces to be used to protect the
Covenants of the League " ; and it is further laid down in
Section iii. of the same Article that the members of the
League " will afford passage through their territory to the
forces of any of the members which are co-operating to

THE LEAGUE OF NATIONS 767

protect the covenants of the League " — a provision which
incidentally raised considerable difficulties in the way of
the entry of Switzerland into the League on account of
the determination of the Swiss Government to maintain
inviolable the historic neutrality of Swiss territory.

Short of the readiness actually to make war upon the
offender, or at all events to threaten war and be prepared
actually to make war if the threat is not effective, the League
is unable under the Covenant to apply lesser sanctions. It
seems clear that this insistence that sanctions, if they are
applied, must take so extreme a form, must have been
deliberately designed, by excluding the employment of
less extreme sanctions, to make the use of Article 16 as
difficult as possible, and thereby to prevent the League
from taking measures of a less forcible character by way of
pressure against an offending country. For it is evident that
sanctions which can only be applied by the threat of
actually making war and involve the handing over by the
individual Powers of their armed forces to the control of the
League for this purpose are exceedingly unlikely to be used
in practice, in face of the insistence of national sovereignty
which marks the Covenant as a whole, and is deeply rooted
in the attitudes of the States which make up the League's
membership.

Sanctions and Armaments. This question of sanctions
is of course very closely connected with the attitude which
successive French Governments have consistently taken up
in relation to all proposals for disarmament. The French
have recognised the inadequacy of the provisions of Article
1 6 and of the Covenant as a whole for the purposes which
they have in view, and desire, in pursuance of their
policy of insisting on adequate guarantees of national
security as a condition precedent to any substantial measure
of disarmament, to add to the Covenant fresh international
obligations within the general framework of the League
binding the League States together for the common
enforcement ot a peace based upon the territorial status quo.

768 EUROPEAN INTERNATIONAL RELATIONS

The French, as we have seen, want not only additional
promises that the other League States will come to their
assistance against any aggressor who attempts to upset the
existing territorial arrangements in Europe, but also the
definite establishment of an armed force composed of
national contingents under the control of the League, and
the setting up of a number of internationally controlled
" dumps " of those heavier munitions of war whose use it is
proposed to restrict in the disarmament convention — these
" dumps " to be guarded for the exclusive use of the League
itself or of national contingents operating under the
League's orders and in defence of the conditions embodied
in the Covenant. But no other Power has shown any
willingness to accept this broadening of the obligation to
use the collective force of the member States in support of
the status quo, although in the absence of some such scheme
as the French Government put forward to the Disarmament
Conference of 1932 the sanctions provided for in Article 16
of the Covenant are likely to remain ineffective.

How far, then, is any scheme of the sort proposed by the
French at the Disarmament Conference really practicable ?
If certain types of armaments are either prohibited or
drastically limited under a Disarmament Convention, is it
practicable or desirable to maintain a supply of these
forbidden armaments to be used exclusively under the
League's control ? These armaments would have to be kept
somewhere, that is to say, upon the territory of some State
belonging to the League. The French suggest that there
should be a number of separate " dumps " for the keeping
of these armaments ; but in practice would any State in the
event of a resort to war refrain from using all the arms at
its disposal, even if some of them were nominally reserved
for use at the orders of the League exclusively, and were
forbidden to it unless it were actually making war on the
League's behalf? It seems most unlikely that if war had
actually broken out any great State would in fact accept
such a limitation upon its effective fighting force. But if one
State seized and used the armaments contained in the

THE LEAGUE OF NATIONS 769

" dump," other States would obviously follow its example /
for it would be out of the question for them to deny them-
selves the use of a type of armament which was being used
by their adversaries. In practice, therefore, the reserved
arms, if they were allowed to remain in existence at all,
would certainly be used ; and the proposal to reserve them
exclusively for use at the orders of the League would
inevitably break down.

Nor does there seem to be any greater hope in the pro-
posal that each country should establish a special contingent
of heavily armed troops to be used only in the service of
the League ; for the conditions which apply to the establish-
ment of special " dumps " of armaments subject to this
condition apply with even greater force to national con-
tingents of soldiers, sailors and airmen. It would be impos-
sible in the event of war to restrict the use of any such
contingents by the nations to which their members
belonged, and therefore to prevent them from being added
in effect to the armed forces of the belligerents. The French
answer to these objections would doubtless be that, even if
they are valid, the establishment of the proposed " dumps "
and contingents of men would nevertheless equip the
League with an armed force upon which it could call for
service against a State guilty of serious offence against the
comity of nations. In the French view the League is nothing
as an authority with power to apply sanctions as long as it
has no armed force of its own. The logical deduction from
this view would be that an international army should be
established for the enforcement of peace under the direct
auspices of the League, and not responsible in any way to
any national State. But even the French recognise that the
establishment of such a force would involve the abroga-
tion of the principle of national State sovereignty, for
which they stand equally with other nations, and that it is
quite impracticable in the present condition of national
opinion. They therefore advocate a half measure which is
plainly unworkable. Their proposal, so far from furthering
the cause of disarmament, would in practice add to the

AAR

77O EUROPEAN INTERNATIONAL RELATIONS

armed forces at the disposal of each State concerned, and,
instead of excluding the use of certain weapons which it is
desired to abolish by agreement upon qualitative disarma-
ment, would perpetuate the existence of these weapons
and make their use inevitable in the event of war actually
breaking out. The French proposal will not work ; but
despite its unworkability, it has to be recognised as the
nearest approach that any Great Power has been prepared
to make towards a real attempt to render the League an
effective instrument for the enforcement of peace, and to
transcend the limitations imposed upon its action by the
insistence on national sovereignty.

There is in the last resort no halfway house between
absolute national sovereignty and the recognition of a
supra-national authority with the right to issue decisions
upon which individual nations are under an obligation to
act. Nor, as long as the use of armed forces continues to be
regarded as a final resort when persuasion and non-military
sanctions have failed, is there any halfway house between
the recognition of the right of national States to make in the
last resort war without limit and the setting up of a supra-
national armed force under supra-national control, powerful
enough to apply coercion to any national State or combina-
tion of States which attempts to resist its authority. As long
as war is still to be contemplated as a possible contingency
by the Governments of the separate nations, no inter-
national authority can be assured of the power to prevent
it or to override the limits of national sovereignty, unless
that authority is so equipped as to be able to make war
itself with a convincing superiority of force. But there is
absolutely no possibility of a supra-national force, armed
with power of this order, being brought into existence. For
if the States of the world were prepared to allow such a force
to come into being this could be only because they had
already given up the claim to resort to national war, and
were already prepared to recognise the right of a supra-
national authority to override their national views.

As long as States continue to insist upon State sovereignty

THE LEAGUE OF NATIONS 77!

they cannot agree to the creation of a super-State.;
As long as they continue to believe in the necessity for
national armies capable of making war they cannot agree
to the creation of a supra-national army strong enough to
defeat their own forces. If the conditions existed for bringing
into being a supra-national military power strong enough
to enforce peace, those conditions would of themselves
have made the existence of any such supra-national power
unnecessary. The French policy, which attempts to
approach the idea of a supra-national armed force without
going outside the limitations of State sovereignty, is self-
contradictory ; but any attempt to remove the contradic-
tion by proposing the establishment of a real supra-
national authority would be doomed to defeat because
within the nations the conditions required for the accept-
ance of such a proposal do not yet exist.

If, then, there is no real question of arming the League
itself either with a supra-national force powerful enough to
coerce the national States or with a force based on national
contingents restricted to use under the auspices of the
League, what advance is possible beyond the highly
unsatisfactory situation which exists under the terms of the
present Covenant ? The most obvious answer is that the
League can become a real organ of international govern-
ment, even in the sense of preventing war, only to the extent
to which in each country and above all in each of the Great
Powers the spirit of nationalism can be conquered, and so
strong a spirit of internationalism substituted for it in the
minds of the peoples as to compel the Governments to
abandon the idea of national sovereignty, to accept the
principle that national rights and claims should be subject
to the overriding rights of the world as a whole, and accord-
ingly to give up armies and navies as the logical conse-
quence of the abandonment of the idea of national sover-
eignty and of the thought of a resort to war in support of
national claims. In other words, the obvious answer is that
the League can be made effective as an organ of interna-
tional government, even in the limited sphere of preventing

772 EUROPEAN INTERNATIONAL RELATIONS

war, only in as far as public opinion in the great States
turns pacifist and internationalist, and is prepared to
subordinate national to world considerations and to accept
the overriding authority of some body representing not one
nation alone but the comity of civilised peoples. When we
speak of pacifism in this connection we are thinking not of
that extreme form of pacifism which repudiates altogether
the resort to force, but only of a pacifism which definitely re-
jects the idea of international war under any circumstances.
Accordingly we are not suggesting that public opinion
must reach a point at which it would refuse to tolerate the
maintenance by the Governments of any armed forces at
all, but only one at which it would definitely insist on
disarmament down to the point — already reached in
Denmark — of preserving only the minimum forces required
for the preservation of internal order and only those forms
of armament required for this purpose, to the exclusion of all
forms of armament designed for other than police purposes.
Is it possible to contemplate in the near future so great
an advance of pacifist sentiment in the leading countries of
the world as this large approach to complete disarmament
would connote ? The answer clearly is that it is not ; for
the conditions required for the development of such a
pacifist attitude on the part of the peoples of the great
States are not fulfilled within the existing framework of
European society. In the first place, the peoples of Europe
are not, in the existing State system, prepared to accept the
present frontiers of the various States as permanent. It is
true that, under the Locarno Pacts, Germany joined with
the other Western Powers in guaranteeing not to resort to
war for the alteration of her existing western frontiers — in
other words, not to make war for the reconquest of Alsace-
Lorraine and the smaller areas taken from her under the
Peace Treaty. But she has given no similar guarantee
concerning her frontiers in the east — that is to say, in
relation either to Upper Silesia or to the Polish Corridor.
Nor have the other Powers defeated in the Great War given
any guarantees corresponding to those given by Germany

THE LEAGUE OF NATIONS 773

at Locarno. Hungary, for example, is certainly not pre-
pared to accept as final the manifestly unjust territorial
settlement forced upon her after the war. Turkey may be ;
for Turkey has successfully reconstructed her State on a new
basis within her amended frontiers, and the exchange of
populations has done much to remove the menace of
Turkish irredentism. But Bulgaria is no more prepared than
Hungary to bind herself permanently to the acceptance of
the territorial status quo.

Moreover, it is highly uncertain whether the undertakings
entered into by Germany at Locarno can be regarded as
preserving their value in face of the dramatic change in the
German political situation, and of the wave of nationalist
sentiment which has swept over the German people during
the past year. Everyone knows that the existing territorial
settlement in Europe is inherently unstable, and that no
peace based upon its absolute and unqualified maintenance
stands any chance of being so accepted by the peoples of
Europe as to be compatible with the development in their
minds of a pacifist spirit that can serve as a basis for a real
internationalist attitude. Nationalism will continue to
menace the peace of Europe and to sustain the idea of
State sovereignty as long as the existing States of Europe
remain in being with their existing frontiers and their
existing political relationships.

It must not of course be forgotten that in an exceedingly
cautious fashion the League Covenant does recognise that
the necessity for territorial readjustments may arise. It is
not based on the absolute assertion of the permanence of the
existing European frontiers. Thus, Article 19 of the Coven-
ant lays down that " the Assembly (not, it should be
observed, the Council) may from time to time advise the
reconsideration by members of the League of treaties which
have become inapplicable, and the consideration of
international conditions whose continuance might endanger
the peace of the world." But these cautious words clearly
contemplate the reconsideration of treaties and the readjust-
ment of frontiers only by mutual agreement, and subject

774 EUROPEAN INTERNATIONAL RELATIONS

to the unanimity rule which is the basis of the League
Covenant as a whole. The Covenant provides no means
whereby frontiers can be readjusted or the Peace Treaties
reconsidered save on this basis of unanimity. Article 10
binds all members of the League " to respect and preserve
as against external aggression the territorial integrity and
existing political independence of all members of the
League " ; and, in the absence of any special provision
permitting the reconsideration of existing treaties or
frontiers by a procedure not involving unanimity, the clause
of Article 5 which lays down the rule demanding agreement
of all members of the League represented when a question
is under discussion, clearly precludes any such reconsider-
ation in the absence of unanimity among the States con-
cerned.

The League is thus tied not absolutely, but in default of
agreed revision, to the existing territorial settlement of
Europe ; and the fact that it is so tied means that States
which are determined to bring about a readjustment of
their frontiers will be unwilling to bind themselves to a
greater extent than they are bound already under the
Covenant to observe the decisions of the League. The
difficulty which arises over this issue has come out very
plainly in consequence of Mussolini's action in raising the
question of Treaty revision in connection with the pact
proposed between the four Western Powers in the early
months of 1933. For, as we have seen, Mussolini's dictum
at once led to an insistence by certain of the League States,
and notably by France, Poland and the Little Entente, that
any pact which they could agree to recognise must be
arrived at " within the framework of the League " — in
other words, that it must be of such a sort as to preclude
territorial revisions of the Treaty except on the basis of
unanimity provided for in the Covenant. This, however,
by no means suits Germany or the other States which are
desirous of territorial readjustment ; for these States are
well aware that their claims are not in the least likely to be
accepted voluntarily by the Little Entente or Poland or

THE LEAGUE OF NATIONS 775

any of the countries at whose expense the territorial
readjustments are being sought. The fact that the League
is in its conception an instrument not merely for the pre-
vention of war in general, but specifically for the prevention
of any attempt by war to alter the territorial settlement
embodied in the Treaties of Peace, has been brought out
very plainly indeed by the discussions which have centred
round the Four- Power Pact of 1933.

Thus, while some members of the League see its chief
value in the guarantees which it gives them for the preser-
vation of the existing frontiers of Europe, other members
regard it as valuable only if it can be used for the purpose
of altering these frontiers, and regard it as a positive
nuisance to the extent to which it stands in the way of their
desire for territorial readjustments. But, it may fairly be
asked, if the existing frontiers of Europe carry no authority
which the nations of Europe are prepared to accept, would
any alteration of frontiers be likely to improve the situation ?
Are such problems as that of the Polish Corridor or the
drawing of frontiers through the territories occupied by
inextricably mingled national elements in Central and
Eastern Europe capable of solution at all on a basis of
mutual consent, or on any basis at all that will prevent
fresh attempts to alter them by war when occasion offers ?

The answer is that within the existing system of sovereign
States there is no possibility of a territorial settlement
which will remove the danger of wars aiming at territorial
readjustment. For there are numerous areas to which more
than one State can put forward a claim which is bound to
seem valid from the nationalist point of view ; and as long
as States continue to be regarded as ultimate sovereign
entities claiming the final allegiance of their subjects,
there is no arbitrament save that of war to which in the
last resort these rival claims can be submitted.

It does not, however, follow that the desire to abolish war
is merely Utopian, or that no political system that would
remove the danger of war from this cause is possible on the
European Continent. What does follow is that the danger

776 EUROPEAN INTERNATIONAL RELATIONS

of war can be removed only by changing the character and
the mutual relationships of the States of which Europe
must continue to be made up. It is of course out of the
question to propose that all Europe should be merged into
a single State governed from one common centre. The needs
and situations and the national traditions of the various
peoples are far too wide apart to admit of any such simple
solution. The problem must be solved, if it is to be solved
at all, along federal lines, under some system which will
allow each country to retain its internal autonomy in the
management of those affairs which are vital to its national
culture and traditions, while providing a common govern-
ment for the whole of Europe, or at least for a large part
of it, in respect of those matters which require co-ordinated
action over a wider field. There is no real impossibility in
looking forward to a European federation powerful enough
to take over from the separate States the administration of
many vital services, while leaving to each individual country
a degree of autonomy amply sufficient to safeguard its
special national needs. But the creation of any such Euro-
pean federation involves that it must be built round the
fulfilment of common services for the peoples of Europe,
and not concentrated upon purely political issues or upon
the attempt to prevent war.

The Foundations of Internationalism. Take for
example the position of the European system of transport.
Europe has already the nucleus of a system of international-
ised waterways ; and common action in respect of those
rivers, such as the Danube, which serve the needs of a
number of separate countries has been forced upon these
countries by the impracticability of treating each stretch of
the river that flows through the territory of a particular
State as its own special property, and still more by the
necessity of providing some form of common administration
where the river is itself the boundary between two States.
The Danube and a number of other rivers have accordingly
their international commissions, which have now been

THE LEAGUE OF NATIONS 777

brought under the auspices of the League of Nations. But
in no sphere save that of river transport has the process of
internationalisation even begun, unless account is to be
taken of the safeguarding of the rights of a number of
different nations in certain particular ports. It is, however,
clearly desirable in the common interest of all the European
peoples that the co-ordinated control of transport should
be pushed much further. Air services in particular are
clearly unsuitable for independent national control. Even
apart from the obvious danger that aeroplanes built for
civil transport may be turned to military uses in time of
war, there is a very strong case for the complete internation-
alisation of civil aviation, at any rate as far as the main
European airways are concerned. This has been actually
proposed at the Disarmament Conference, with the object
of preventing the use of commercial aeroplanes in time of
war ; but this is the wrong way of tackling the problem.
It ought to be envisaged from the standpoint of equipping
Europe with a common system of air services linking every
quarter of the Continent together.

Or take again the question of the railways. There are
necessarily arrangements between the railway systems of
the various countries for the regulation of through traffic,
both for goods and passengers ; but at present each country
maintains its entirely independent railway system, usually
under public ownership, though in some countries the
actual administration is entrusted to one or more private
companies. Many of the newer States are exceedingly ill-
equipped with railway facilities ; for the railway systems
built before the war were designed in relation to the pre-war
frontiers and are often both unsuitable and inadequate in
relation to post-war economic and political needs. Clearly
it would be very much to the advantage of Europe as a
whole if a unified railway system could be developed, and
if capital for the building of new lines and the improvement
of those already in existence could be provided on an
international basis against the security of the railway
receipts. For under present conditions the countries which

778 EUROPEAN INTERNATIONAL RELATIONS

stand most in need of improved railway facilities are
precisely those which have the greatest difficulty in raising
the capital necessary for financing the construction of new
lines. Apart from this, if the whole railway system of Europe
could be co-ordinated under international control it would
be possible greatly to improve the efficiency of services for
both passengers and goods ; and the certain consequence of
this improvement would be to make it harder for the
separate States to maintain many of the restrictions which
they now impose upon the free movement of goods and
persons. Nothing would have so great an influence towards
the unification of Europe as the internationalisation of
the main transport services by rail and air. At the same
time the existing international postal convention which
links together the national postal systems of the various
countries could be made the basis for a corresponding
internationalisation of the means of communication.

Any real advance towards European collaboration, and
incidentally towards removing the possibility of war
between nations, involves above all the development of
common economic services over the whole area of Europe,
or over as large a part of it as can be brought within a
comprehensive federation on these lines. Bnand's famous
project of European union was faultily conceived and
certain to prove abortive in that it attempted to bring about
a political union of the European States without giving it
any firm basis of common economic service. The French
plan was to begin with political unification, in the hope that
some form of economic unification would follow — at least
to the extent of the mutual lowering of tariff barriers and
the encouragement of trade between European countries.
But to begin in this way is to take hold of the wrong end of
the stick. Collaboration, if it is to be fruitful, must begin
in the economic field ; and if it can be made successful in
economic matters, political collaboration will follow. Even
the Committee for European Union, set up by the League
as a consequence of Briand's project, soon ceased to talk in
the barren terms of political unification and set itself to the

THE LEAGUE OF NATIONS 779

consideration of certain of the major economic problems
facing the European States. It began to discuss the pos-
sibilities of lowering tariff barriers, of creating an inter-
national Agricultural Mortgage Corporation in order to
relieve the indebtedness of the farming communities, of
taking steps for the revalorisation of cereals, through the
preferential admission of European wheat into the import-
ing countries and the creation of an international guarantee
fund. These plans have so far proved no less unrealisable
than the original project of political union ; but is not that
largely because they have attempted to take hold of the
economic problem precisely at those points at which the
apparent interests of the separate European States are most
divergent, instead of trying to find common services which
could be developed under unified European, or at least
Continental, control ?

It is not suggested that it would be at all easy to persuade
the European States to agree to hand over any of their vital
services to the control of an international authority. How
difficult this is has indeed been illustrated by the discussions
at the Disarmament Conference of the proposal to establish
an international control of civil aviation ; and any plan
for the internationalisation of the railways would certainly
encounter even stronger resistance. Yet railway inter-
nationalisation does offer to all the Continental States the
possibility of very great positive economic benefits and
offers these most of all to those smaller States in Eastern
and Central Europe whose economic difficulties are most
acute, and whose political antagonisms constitute a no less
constant threat of war than the mutual hostilities of the
greater Powers. Yet, despite all the advantages that projects
of economic unification may offer, they are not at the
present time in the least likely to be accepted. National
hostilities are just now too strong for any of the States of
Europe to agree to allow any vital service to pass, if it can
help it, out of its exclusive national control.

If, however, a solution of the European problem is at
present impossible, even on diese lines, are we not compelled

780 EUROPEAN INTERNATIONAL RELATIONS

to" go deeper and to question the entire validity of the
European State system as it at present exists ? If States,
organised as they are to-day, cannot overcome their
national antagonisms, or agree, in spite of obvious economic
and political advantages, on any constructive measures of
political unification, must there not be something radically
wrong with the entire European State system ? There is
something radically wrong ; and the wrong is that each
State, with the possible exception of Soviet Russia, is
governed to-day not in the common interest of the entire
community for which it professes to stand, but rather in the
interest of certain limited classes which rest their claims
upon vested interests and traditional rights. Jn effect, as
long as States are governed either by autocracies based on
hereditary privilege, or by plutocracies arising out of the
development of modern Capitalism, the vested interests
created or sustained by their existing constitutions are
certain to prove too strong for them to be induced to agree
to any real measure of internationalisation. Only if States
are administered in accordance with the interests of the
whole body of their inhabitants, and under the control of
Governments representing this communal point of view,
will real internationalism become possible. For only so will
forces be created in each State sufficiently powerful to
overcome the sectional interests which look askance at all
efforts to promote real international collaboration, because
the success of these efforts would prejudice their power to
administer the national affairs in accordance with their
sectional point of view. This means that the essential
prelude to any real collaborative commonwealth of Europe
is the establishment of some form of Socialism in each
European country, or at least in all those which are import-
ant enough to influence the general movement of European
affairs. For Socialism, putting first the interest of the
common people, would necessarily bring with it a willing-
ness to carry out those measures of economic unification
which are plainly calculated to make Europe as a whole
wealthier and better governed.

THE LEAGUE OF NATIONS 781

But at this point comes the objection that the very forces
which have of late destroyed the Socialist movements of
Italy and Germany claim, equally with Socialism, to put
the class point of view behind them, and to bring into being
Governments which do stand essentially for the point of
view of the nation as a whole. The claims of Fascism as a
doctrine of national solidarity have been discussed in an
earlier section. Here we are concerned with it solely in
connection with its effects on international relations. The
most profound difference between Fascism and Socialism
is precisely the difference between nationalism and inter-
nationalism which we have just been discussing. For,
whereas Fascism bases itself absolutely and without
qualification upon the idea of the Nation State as something
ultimate, with a right to command the entire and undivided
loyalty of its subjects, Socialism is at its very basis an
international doctrine, affirming the solidarity immediately
of the working classes throughout the world, but also, from
the moment of its successful establishment, of all peoples.
For Socialism recognises class differences only for the pur-
pose of abolishing them. There could, of course, arise a
bastard " National Socialism " Which denied this funda-
mental doctrine of world solidarity, and sought merely to
socialise the conduct of the essential economic services of a
particular State in order to strengthen that State as an
absolute authority. Nazism in Germany, for example, claims
to be National Socialism ; and though the Socialist part of
its doctrine was little stressed during the later stages of its
rise to power, undoubtedly the Nazis are capable, as the
Fascists have been capable in Italy, of increasing the
amount of State intervention in industry, and of affirming
the right of the State to take over essential economic services
for the purpose of strengthening the nation in relation to the
outside world. But this type of National Socialism is not
really Socialism at all. It is based not on the attempt to
abolish social classes and to establish a classless society,
but rather on the principle of admitting class differences
and recognising class privileges, provided they are made

782 EUROPEAN INTERNATIONAL RELATIONS

subordinate to the claims of the nation, which is regarded
not as a means of promoting human welfare, but essentially
as a metaphysical being, with power as its most valuable
attribute and its highest achievement in the attainment of
supreme military strength.

This bastard " National Socialism " has nothing in
common with Socialism, which is fundamentally interna-
tionalist and pacific, seeks to link together the workers of all
countries for the establishment of a classless international
community broken up only for convenience into territorial
divisions, and is totally uninterested in the conception of
national power. " National Socialism " is merely the so-
called Bismarckian " State Socialism " of the nineteenth
century re-written in terms appropriate to the class divi-
sions and political perplexities of the twentieth century.

If these contentions are correct, the one hope of making
the League of Nations into an effective instrument of inter-
nationalism lies in the victory of Socialism in enough of the
countries which make it up totally to change its character,
and to convert it from an instrument designed to prevent
war between sovereign States into an organ of interna-
tional government actually in charge of those vital economic
functions which need for their efficient conduct adminis-
tration upon an international scale. Just as the Nation-
States of Europe have gradually taken over from the
smaller communities out of which they have been built up
one vital function of economic organisation after another,
and have been compelled to do this because the evolution
of the economic powers of mankind has irresistibly de-
manded the creation of larger administrative units, so now
in the twentieth century the time is ripe for the creation of
still larger organs of economic administration. Nationalism,
with its cherished doctrine of State sovereignty, may once
have been an instrument of economic progress, in that it did
help to bring about the unification of territories too small to
stand by themselves under the economic conditions of the
modern world. But Nationalism in its turn has now become a
fetter upon the developing productive powers of mankind ;

THE LEAGUE OF NATIONS 783

and it too is destined in due course — not to pass away
any more than localism has passed away with the coming
of the Nation-State — but to be superseded in a large
number of the functions which are at present organised
on a national basis by larger forms of administration more
suitable to the conditions of our time.

How this will come about it is of course impossible to
predict. If Socialism is able peaceably to conquer power in
each of the great States of Europe, it will be possible for
Socialist Governments to turn the League of Nations from
what it now is into an effective organ of positive economic
collaboration, or to create within it a real European union
having this object. If, on the other hand, Socialism comes
not by a process of peaceful conquest of power in each
country, but as the result of a further world convulsion
brought about by the inability of one nationalism to live at
peace with another, the course of evolution will probably be
quite different ; for the coming of such a convulsion will
certainly sweep away the League of Nations and all the
elaborate structure of pacts and treaties built up since the
conclusion of the Great War. Europe will then have to
make a new start ; and this new start will have to be made
far more in the sphere of economic realities and far less in
terms of obsolete and obstructive nationalist ideas than the
attempt to which President Wilson pinned his faith but not
his country in 1919.

We have spoken so far of Europe in an inclusive sense, as
if we were envisaging the advent of a single federation wide
enough to embrace the entire European Continent. This
may indeed be the form in which European internationalism
will be realised ; but not even an approach towards an
inclusive federation of this type is possible under existing
political conditions. For, apart from the difficulties which
have been considered already, two countries stand in so
different a relation to the rest of the world from the remain-
ing States of Europe that their position raises special
difficulties and calls for special comment. These countries
are Great Britain and the U.S.S.R.

784 EUROPEAN INTERNATIONAL RELATIONS

Great Britain and the League. The position of Great
Britain is obviously complicated, because, while on the
one hand she is linked up with Europe by close ties both of
economic intercourse and of cultural relations, she has also,
by virtue of her possession of an Empire scattered over every
Continent, extra-European connections which she cannot
afford to sacrifice as long as this Empire remains in being.
Whenever the question of European collaboration comes up
she is divided between her deep interest in European affairs
and her desire to strengthen as far as possible her existing
imperial connections. When, for example, the European
countries meet in order to discuss common action for the
lowering of tariffs and other barriers in the way of trade,
Great Britain has a deep interest in getting these tariffs
lowered and the strongest possible reason for wishing not to
be excluded from any preferential arrangements which the
European countries may make among themselves for the
admission of one another's goods. But Great Britain is not
prepared to admit the goods of other European countries
on more favourable terms than goods coming from Empire
countries ; nor, since the Ottawa Conference, has she been
prepared or able, in view of her imperial commitments, to
admit European goods even on the same terms. The
Ottawa decisions in fact commit Great Britain for a period
of years to imperial tariff preference, and thereby shut her
out from even the possibility of becoming a member of a
European tariff union. This may seem to be the less im-
portant because there appears to be no early prospect of the
European countries agreeing to create such a union, ready
as they may be to discuss it from time to time. But if the
European States did show some real disposition to lower
their tariffs against one another's goods, so as to grant
preferential treatment to European products, Great
Brtain would inevitably be torn between her fears of
exclusion from the European market and her desire to
maintain the preferences accorded to her by the Empire
countries. She was so divided in mind at the time of the
World Economic Conference of 1927, and again when

THE LEAGUE OF NATIONS 785

Briand's plans for European union were under discussion';
and the fact that she has, under the National Government,
committed herself temporarily to a thorough-going policy
of Empire preference by no means proves that the question
is settled once and for all.

For Great Britain, despite the decline in recent years of
her trade with the European Continent, still sells a highly
important proportion of her exports in the European
market, and, what is more important, looks to this market,
even more than to the Empire market, for an expansion
of her exports in the event of any substantial recovery in
world trade. It is arguable that in the long run the sparsely
populated Empire countries may so increase their demand
as to afford a sufficient outlet for British manufactures ; but
no one in his senses supposes that this can be true in the
short run, and it is with the short run that British commer-
cial interests are inevitably most concerned. They are quite
prepared to make concessions to the Empire, to the extent
to which these concessions can be made without involving
exclusion from the markets of Europe ; but if such exclu-
sion did really threaten, there would be a considerable
cooling in British commercial circles of such enthusiasm as
at present exists for the Ottawa agreements.

Somewhat similar considerations arise when the coun-
tries of Continental Europe begin discussing any system of
mutual guarantees of peace on the lines of the French
proposal for mutual pacts of security. For in this case again
Great Britain is torn between her desire not to lose her
political and economic influence in Europe, and not to be
faced with a bloc of European countries from which she is
excluded, and her equally strong desire to keep free of
Continental entanglements and to maintain close political
connections with the countries of the Empire. The French,
recognising the impossibilitity of inducing Great Britain to
join in any comprehensive European pact involving mili-
tary guarantees, proposed in their second scheme laid
before the Disarmament Conference in 1932 that there
should be a Continental Pact, which Great Britain would

786 EUROPEAN INTERNATIONAL RELATIONS

fact be asked to join, as a complement to a wider and looser
pact based upon the League as a whole. But this project
was only less unwelcome to Great Britain than the request
to join a Continental Pact ; for, if she does not wish to
become involved in such a pact, neither does she desire
a pact to be made without her, on terms which might
possibly result in an alliance of European States detrimental
to her special interests.

Thus both politically and economically Great Britain
stands poised between a policy of full collaboration in the
affairs of Europe and one of imperial unity in an exclusive
sense. She has been enabled so far to walk this tight-rope
successfully, in the first place because she is an island, and in
the second because the Continental States have not so far
succeeded in reconciling their own differences sufficiently
to present a united front. If they did this, she would have to
determine her attitude one way or the other ; and at
present she would almost certainly decide, however
reluctantly, to remain outside a bloc formed in Continental
Europe, while endeavouring to make the best terms she
could for her commerce with the countries forming the bloc.

Thus for the present at least the idea of a confederal
Europe has to be conceived in terms which leave out Great
Britain on the west ; but this is solely due to the continued
existence of the British Empire as a political and economic
unit. If Great Britain lost India, if a number of her colonies
fell away or were taken from her, if the self-governing
Dominions pressed somewhat further their established
right to take their own line in international affairs as well as
in matters of internal government, Great Britain, reft of her
imperial sovereignty, would be inevitably drawn into the
circle of the Continental system. There is no likelihood of
these things happening at the moment ; but if another
world war did break out, no one can prophesy that Great
Britain would be able to come through such a war with her
Empire intact or even surviving at all.

Moreover, Socialism is inconsistent with Empires as they
are now conceived. It is not in the least inconsistent with the

THE LEAGUE OF NATIONS 787

existence of federations of self-governing countries bounci
together solely upon a basis of mutual consent ; and to the
extent to which the British Empire can survive this test
there is no reason why Socialism should modify in any way
the relations at present existing between Great Britain and
the self-governing Dominions. But in such a reformed
Empire India would have to be a member, if at all, on
terms of political and economic equality ; and the other
colonial possessions of the British Grown could be retained
only to the extent to which their retention could be justified
in the interests of their own inhabitants. In Africa, for
example, the victory of Socialism in Europe would almost
certainly bring with it the sweeping away of the separate
colonial administrations at present maintained by the
various European countries in favour of some sort of inter-
national administration within which the existing colonies
and mandated areas would be re-grouped, irrespective of
their present imperial affiliations. The British Empire
might survive ; but an Empire so reconstituted as this
survival would imply would no longer possess the character
of an exclusive political or economic unity, or bar out
a country belonging to it from entering into the closest
political and economic associations with countries standing
outside. Great Britain might be a member of the British
Empire, and yet at the same time belong to a European
group of States ; and Canada might retain political
affiliations with Great Britain, and yet build up close
economic and political relationships with the United States.

The U.S.S.R. and the League. At the opposite end of
Europe from Great Britain is the Soviet Union, stretching
across the Continental frontier without a break to the Far
East. The mass of the population of Soviet Russia still lives
in Europe ; but the larger part of Russian territory lies
beyond the Urals, and the development both of Russian
industry and of Russian agriculture is being so carried on
under the Soviet Government as to remove the centres of
economic activity further from the western frontiers and

788 EUROPEAN INTERNATIONAL RELATIONS

nearer to the huge undeveloped tracts of the east. Russian
industries are being developed in and beyond the Urals, and
a steadily increasing population is being settled in Asiatic
Russia. It will inevitably take a long time for this great
shifting of the centre of Russian economic and political life
to produce its full effects. But there is no doubt at all that it
is going on, or that it is being done deliberately by the
Soviet Government as a means both of opening up the vast
new territories remote from western Europe, and of lessen-
ing the danger to the Russian system from war upon the
western frontiers. Russia, confronted by a hostile Europe
determined to maintain the capitalist system and protect
itself from the infection of Communism, is reciprocating by
such withdrawal from European complications as lies
within her power.

The Russians, of course, cannot, and would not if they
could, disinterest themselves in the affairs of Europe ;
they are inevitably interested very closely in the settlement
of European affairs and in the maintenance of the peace of
Europe, as well as in finding outlets for their exports, and
the means of purchasing manufactured goods in the
markets of Western Europe. Nor can the western countries
afford to ignore Russia, both because they too are interested
in the Russian market and because, even apart from their
unwillingness to disarm as long as they feel the menace of
Communism in the east, Russian ideas can percolate across
their frontiers even without the aid of Russian soldiers.
But, though Russia must interest herself in the affairs of
Europe, and other European countries must interest them-
selves in the affairs of Russia, though Russian delegates
must be invited to attend, and must actually attend, inter-
national conferences on questions of disarmament and
economic relations, there is no real possibility, as long as
the rest of Europe remains capitalist, of the entry of Russia
into any closer union with the European States. The
difference between the Communist form of Socialism which
is now dominant in Russia and the Capitalism which still
holds the field over the rest of Europe is far too profound

THE LEAGUE OF NATIONS 789

to be bridged by any merely mechanical union. The Rus-
sians, as we have seen, do still stand for the idea of world
revolution, though they have abandoned the notion of
fostering it by active intervention in the affairs of the
European States ; and the capitalist Powers still hope for
the disappearance of Russian Communism, though they
have abandoned for the time at least, in face of their own
troubles and antagonisms, the idea of trying to overthrow
it by force. Between these two divergent points of view there
can be no accommodation ; and it would be impracticable
for a Socialist Russia to be administered under the same
international control with a capitalist Europe. Socialist
Russia could not hand over any vital service to an inter-
national control, to be operated mainly under the auspices
of a federation of capitalist States ; nor politically could
Russia join in guaranteeing the integrity of a State system
and of State frontiers whose validity she denies. Of course
the triumph of Socialism in Europe would alter this situa-
tion so as to make collaboration possible. But for the present
Russia is bound to go her own way in the East to an even
greater extent than Great Britain in the West. Such imme-
diate approaches as can be made towards closer European
union have therefore to be thought of in terms of the
Continental States which lie between the Russian frontier
and the Atlantic Ocean.

It has, however, to be remembered that the U.S.S.R.,
under its existing Constitution, is not a closed but an open
federation. The draughtsmen of the Russian Constitution
deliberately left the way open for fresh units to join the
U.S.S.R. if they were prepared to accept the principles of
Communism and the overriding control of the Soviet
Union as a whole in matters of general policy. It is there-
fore quite within the bounds of possibility that the result
of any upsetting of the present European State system
would be among other things the voluntary linking up of
new territories in Eastern Europe with the U.S.S.R. ; so
that Russia might on a federal basis regain part at least of
the territory which was lost to her through the creation of

79° EUROPEAN INTERNATIONAL RELATIONS

hew States at the conclusion of the war. Just as the small
Republics of Georgia, Azerbaijan and Armenia have dis-
appeared and been merged into the Soviet Union as one
of its constituent Republics, so some of the border States
might, if they underwent Communist revolutions of their
own, prefer to forgo their present independent status, and
link up with Soviet Russia. For there is no essential element
of permanence in the existing frontiers between the
U.S.S.R. and the rest of Europe. Peasants on the Russian
side of the frontier, especially in the southern part of
Poland, are, as we have seen, much the same as the peasants
of the Ukraine ; and if the smaller States of Eastern Europe
went Communist, without a similar change to some form
of Socialism in Europe as a whole, they would be com-
pelled to seek the support of their great eastern neighbour,
probably to the extent of accepting some form of political
unification, subject to autonomy in the management of
their own local affairs. In that event, Communism, even
if it did not fulfil the hopes of the Third International by
conquering Europe as a whole, would be brought far more
closely into contact with the West by the disappearance as
separate entities of the smaller States which at present bar
off Soviet Russia from the Great European Powers.

§ 3. THE INTERNATIONAL LABOUR
ORGANISATION

THE INTERNATIONAL LABOUR ORGANISATION
was set up in 1919 as a part of the Peace settlement ; and
the statutes by which it is governed form Part XIII of the
Versailles Treaty. This part of Jthe Treaty opens with a
preamble declaring the motives which have led the " high
contracting parties, moved by sentiments of justice and
humanity as well as by the desire to secure the permanent
peace of the world," to establish the Organisation. The
preamble declares that " conditions of labour exist involving

INTERNATIONAL LABOUR ORGANISATION 791

such injustice, hardship, and privation to large number*
of people as to produce unrest so great that the peace and
harmony of the world are imperilled and the improvement
of those conditions is urgently required." The International
Labour Organisation was established as a means of remedy-
ing these evils. In amplification of these objects certain
principles which are to govern the action of the I.L.O.
are set out in Article 437 of the Versailles Treaty. First
among these comes " the guiding principle . . . that labour
should not be regarded merely as a commodity or article
of commerce " ; and further principles are designed to
safeguard the right of association by both employers and
workers. These include the payment of adequate wages
and the limitation of the working day, the abolition of child
labour, equal pay to men and women for work of equal
value, the protection of the rights of foreign labour, and
the setting up of an adequate system of inspection for the
enforcement of industrial laws.

It is nowhere clearly laid down in the statutes of the
International Labour Organisation how wide the scope
of its activities is meant to be. Thus there arose at an early
stage the question whether the regulation of conditions in
agriculture as well as industry came within its province.
The French Government among others desired to exclude
agriculture ; but in the end this objection was overridden,
and the conventions and recommendations adopted at
subsequent International Labour Conferences have dealt
with the condition of agricultural workers, seamen and
other special classes of labour as well as with industry in a
narrower sense. A further question arose at an early stage
about possible overlapping between the International
Labour Organisation and the Economic Section of the
League of Nations. The I.L.O. was established in order to
deal with questions of labour and employment. It was
clearly impossible to isolate these questions from other
matters relating to industry ; and one of the earliest
activities of the International Labour Office, the permanent
machinery set up within the Organisation, was to institute

792 EUROPEAN INTERNATIONAL RELATIONS

in ambitious " Enquiry into Production." To this strong
objection was taken on the ground that, in the questions
asked, the Office was travelling far outside its limited terms
of reference. But the matter was never settled by any
formal decision, the I.L.O. agreeing to restrict its enquiry
in order to avoid a ruling which -might have seriously
limited its future work. Since then on a number of occasions
the International Labour Organisation has collaborated
with the Economic Section of the League in particular
pieces of work, notably in the attempt to deal with the
coal-mining situation in Europe. Where necessary, confer-
ences are convened jointly by the two bodies ; and the
I.L.O. is called into consultation when the Economic
Section of the League is dealing with matters of direct
concern to Labour.

In general, the International Labour Organisation con-
sists of the same States as are members of the League of
Nations, and membership of the League automatically
carries with it membership of the International Labour
Organisation. But there is nothing to prevent the I.L.O.
from admitting countries which are not members of the
League. Thus Germany and the other Central Powers
belonged to the International Labour Organisation for
some time before their admission to the League ; and when
Brazil withdrew from the League she retained her member-
ship of the I.L.O., to which she still belongs. With the
single exception of Brazil the membership of the two bodies
is at present the same.

There is, however, a very notable difference between
these two related international organisations. The League
is in form purely an association of Governments, whereas
the International Labour Organisation, though its mem-
bers are States, includes provision for the representation
not only of Governments but also of the organisations of
employers and workers in each country. Each State which
belongs to the I.L.O. has four representatives at the
International Labour Conferences. Two of these are
appointed by the Government as its own representatives ;

INTERNATIONAL LABOUR ORGANISATION 793

but the other two have to be appointed by the Government
" in agreement with the industrial organisations, if such
organisations exist, which are most representative of em-
ployers or workpeople as the case may be, in their respec-
tive countries." The Conference as a whole is thus made
up as to one half of Government representatives and as to
the other half of representatives of employers and workers
in equal numbers.

Usually no difficulty arises in carrying out the provisions
for the appointment of employers' and workers' represen-
tatives ; but a peculiar problem exists in those countries
in which there is no Trade Union movement in the ordinary
sense. Thus there have been difficulties over the appoint-
ment of Labour representatives in Japan ; and, when
Fascist Italy destroyed the largely Socialist Trade Union
movement and substituted for it a system of Fascist Unions
as an integral part of the " Corporative State," the workers'
representatives at the International Labour Conference
challenged the right of the delegate appointed from the
Fascist Union to serve as a working-class representative
and refused him admission to the discussions of the workers'
group. This protest was overridden at the Conference itself;
for under the Statutes of the International Labour Organi-
sation it requires a two-thirds majority of the votes cast to
exclude anv delegate who has been duly appointed by his
Government, and this majority could not be secured. But
the workers' group has maintained its position of refusing
to select an Italian representative upon any committee, or
to act with the Italian " workers' representative " in any
way. A similar situation has now arisen in the case of Ger-
many, and obviously it is bound to be reproduced in the
event of any other country passing under Fascist domination.

The Governing Body of the International Labour
Organisation reproduces the structure of the Assembly, in
that it too consists as to one half of Government representa-
tives, while the other half is appointed by and from the
employers' and workers' delegates at the Conference.
In making these appointments the representatives of the

794 EUROPEAN INTERNATIONAL RELATIONS

eihployers and workers vote as separate groups ; so that
their representatives sit upon the governing body not as
national representatives but as representing the employers'
and workers' groups as a whole. A significant departure is
thus made from the principle adopted in the League of
Nations that the whole structure should be built up on the
representation of separate sovereign States ; for the consti-
tution of international groups of employers and workers
inside the I.L.O. involves the recognition of claims of class
solidarity cutting across national boundaries. In practice,
both on the Governing Body and at the Conferences of the
International Labour Organisation, the workers' and
employers' groups do as a rule take collective decisions
and vote solidly for or against particular resolutions or
conventions, though occasionally a particular delegate
dissents from the views of the majority of his class colleagues
and casts an opposing vote. In the composition of the
Governing Body, apart from this question of the special
representation of workers and employers' interests, much
the same problems have arisen as in the case of the League
of Nations. In the International Labour Organisation as
in the League, a differentiation is made between the
principal and the less important countries ; but in the
I.L.O. the countries to be accorded special representation
on the governing body are selected in accordance with their
industrial importance rather than with their position as
Great Powers in a political sense.

The Governing Body consists in all of twenty-four
members. Twelve of these, as we have seen, are selected in
equal numbers by the employers' and workers' groups
acting internationally. The remaining twelve seats have to
be allotted to the Governments. Eight of these seats are at
present reserved for the leading countries. In the list
originally drawn up at the Washington Conference of
1919 the countries selected for special representation were
Belgium, France, Germany, Great Britain, Italy, Japan,
Switzerland and the United States. The United States, how-
ever, was no more prepared to join the International Labour

INTERNATIONAL LABOUR ORGANISATION 795

Organisation than the League ; and in order to secure
American representation on the Governing Body Canada
was accorded a seat in its place. India also put forward
strong claims for representation, and succeeded in dis-
placing Switzerland from the group of countries enjoying
special treatment. With these two changes the original
suggestions were accepted, and these eight countries
accordingly are always represented upon the Governing
Body. Only four seats are therefore left to be allotted among
all the remaining Governments. These are at present occu-
pied by Brazil, Denmark, Poland and Spain. At an early
stage strong complaints arose from the smaller countries,
and especially from the countries of South America, that
they were accorded no adequate representation ; and at
the Conference of 1922 it was proposed to amend the
Constitution so as to increase the membership of the
Governing Body from twenty-four to thirty-two, thus
allowing four extra seats for Governments and two each
for the employers' and workers' groups. Moreover, it was
proposed to do this without increasing the number of
countries granted special representation, so as to give half
the Government seats on the Governing Body to the smaller
countries. This amendment, however, required, in accord-
ance with the Constitution of the I.L.O., the ratification of
no less than forty-two separate States. Forty-one of these
ratifications have now been received, but up to the end of
1932 Italy was still blocking the amendment, which has
therefore not so far come into force.

The International Labour Organisation is often loosely
described as a body for the purpose of passing international
labour laws. But in the true sense it has no legislative
powers ; for in labour matters as in political affairs each
State insists on reserving its separate sovereignty, and is not
prepared to surrender power to any international body.
The International Labour Conference can only propose
and cannot enact. It can pass recommendations and urge
their adoption by the various States ; and it can draw up
Draft Conventions which the Governments of the member

796 EUROPEAN INTERNATIONAL RELATIONS

S fetes are under an obligation to submit to the competent
legislative authorities in their countries within a definite
period of time. But the obligations of the Governments are
limited to this act of submission ; and if the legislative
authority in a particular country does not choose to ratify
the Conventions proposed by the International Labour
Organisation it is perfectly free to reject them, or to take no
action. Indeed any Government is itself perfectly free to
advise the rejection of a convention, even if its own represen-
tatives at the International Labour Conference have
previously voted in its favour. On a number of occasions
Conventions formally adopted by the International Labour
Conference have been subsequently rejected outright by
certain of the member States. But more often what happens
is that either the Government merely submits the Draft
Convention to its Parliament or similar body without any
recommendation, and no action is taken either to accept or
reject it, or else ratification is postponed or adjourned or made
conditional on prior ratification by those countries which
are most directly in competition with the State concerned.

The Work of the I.L.O. Between 1919 and the end
of 1931 the International Labour Conference adopted 31
separate Conventions, apart from recommendations and
resolutions ; and all these have been submitted for ratifica-
tion to the member States. Of these 3 1 Conventions there
had been, in June 1933, 505 ratifications by member
States, less than 9 ratifications per Convention as against
a total of 58 member States. It thus appears that a large
number of States have failed to ratify any considerable
number of Conventions. Actually 20 States are not recorded
as having finally ratified even a single Convention. But all
these States are non-European, unless Turkey be counted
as a European State, no less than 14 of them being situated
in Central or Southern America. Thus, Great Britain and
France have each ratified 18, Italy, Poland and Roumania
17, Germany and Sweden 16, and Holland 15. Spain has
the highest record, with 30 ratifications, but is apparently

INTERNATIONAL LABOUR ORGANISj

soon to share this record with Uruguay

agreed, as we write, to ratify 30 convenjjDriSftJfHn a lump^

having previously ratified none at

Bulgaria come next, with 27 each, fd

Yugoslavia and the Irish Free Statef

Slovakia, with 12 ratifications, comes l\

list, level with Japan. Denmark sur

only 10 Conventions in all, Switzerlaft

Albania only four. The Swiss difficulty

the federal structure of the Swiss State.

Lithuania are also low, with only five ratifications; but
most of the remaining European States have ratified much
the same number as the greater European Powers. Natur-
ally the number of ratifications is as a rule greatest in the
case of the Conventions adopted during the earlier years of
the International Labour Organisation's existence ; for it
often takes a long time to get a Convention embodied in
the national law even of a State which is prepared to ratify
it. But some of the earlier Conventions, even of those
adopted in 1919, still fall very far short of complete ratifi-
cation— notably the Convention on hours of work in in-
dustry, under which the establishment of a universal maxi-
mum working week of 48 hours was proposed. This is by far
the most important Convention yet adopted by the Inter-
national Labour Conference ; and the difficulties over its
ratification have been the most serious setback encountered
by the International Labour Organisation during its
fourteen years of activity.

The Washington Hours Convention was the first measure
adopted by the International Labour Organisation at its
inaugural conference at Washington in 1919. After many
years of effort only nine European countries and two
outside Europe have definitely ratified it. The only impor-
tant industrial countries included in this list are Belgium
and Czechoslovakia, the others being Luxembourg, Spain,
Portugal, Greece, Roumania, Bulgaria and Lithuania.
The non- European countries are Chile, the Dominican
Republic, and India. In this last case ratification does not

798 EUROPEAN INTERNATIONAL RELATIONS

iihply the adoption of the 48 hours working week, as special
provision was made in the Convention for the recognition
of an appreciably longer working week in Asiatic countries.
Four other States — France, Italy, Austria and Latvia —
have agreed to ratify the Convention only on condition of
its acceptance by the other leading countries. A number of
other countries have approved the Convention, but have
not yet brought it into effect ; while five — Great Britain,
Germany, Poland, Denmark and Estonia — have reserved
action, and five others have either rejected the Convention
outright or in some other way successfully shelved it, the
absolute rejections being those of Sweden and Switzerland.
Since the Convention was adopted, there have been
numerous attempts by the I.L.O. and also by certain
Governments, under strong pressure from the workers'
group, to secure general ratification ; and on several occa-
sions special conferences of the Labour Ministers of the
leading countries have been held in order to see whether
agreement for simultaneous ratification could be secured.
The employers, on the other hand, have been for the most
part strongly opposed to ratification, even in those coun-
tries in which the existing working week does not in most
trades exceed 48 hours. Just before the coming of the world
slump a further attempt at ratification was being made,
largely on the initiative of the British Labour Government ;
and the employers, backed by certain of the Governments,
were pressing for modifications relaxing the severity of the
clauses relating to overtime. These modifications were
strongly resisted from the workers' side ; but the world
slump swept away the hope of securing early ratification
in any form. For although it meant that in practice a large
proportion of the workers in the various countries were
working much less than 48 hours a week, the employers,
with the support of most of the Governments, became
increasingly reluctant to see the Convention passed into
law because it would have meant difficulties with the Trade
Unions over the readjustment of wage-rates in accordance
with the shortening of the working hours, and in some cases

INTERNATIONAL LABOUR ORGANISATION 799

payment for overtime where this was not already being
made. Thus, at a time when the countries' situation made
possible, and even imperatively called for, a reduction in
working hours, it became paradoxically far more difficult
than when industry was busier to secure an agreed limitation.
An attempt was, however, made in 1932 to approach the
question of the limitation of hours in a somewhat different
way. Among the workers especially it was being urged that
in view of the world depression steps ought to be taken for
a fairer sharing out of the available amount of employment
among the employed populations of the various countries.
For this purpose it was proposed that, at any rate for the
duration of the slump, a maximum working week of 40
hours should be accepted by all States in accordance with
the terms of a new Convention to be drafted by the Inter-
national Labour Organisation. The Italian Government,
with a few others, gave its support to this proposal, which
came up for consideration at a special International Labour
Conference. At this gathering the employers strongly
resisted the proposal, on the ground that it would have the
effect of raising costs of production and thus further
hampering industry at a time when it was already labouring
under considerable difficulties. For it was strongly insisted
by the workers' group that the reduction in hours must not
involve any reduction in earnings, and that accordingly
wage-rates must be left intact where they were fixed on a
weekly basis, and scaled up where hourly payment or
piecework is at present in force. The majority of the Govern-
ments, while they were not prepared to accept the workers'
proposal that no reduction in wages should be permitted
in any case, gave a general endorsement to the workers'
point of view, to the extent of urging that if an agreed
reduction of hours was brought about steps must be taken
to safeguard wage rates. Finally, by the joint action of the
Governments' and workers' representatives and against
the opposition of the employers' group, it was decided that
further consideration should be given to the whole proposal,
and a resolution was passed referring the matter for inquiry

8OO EUROPEAN INTERNATIONAL RELATIONS

by the International Labour Office, with a proviso that
the inquiry should include the problem of safeguarding
wages as well as that of bringing about a reduction in
working hours. In the middle of 1933 the project came up
for further consideration at the International Labour Con-
ference ; but with the British Government, backed by
Nazist Germany, taking the lead against it with the full
support of the employers' group, the requisite majority
for carrying it further could not be secured, and it was
shelved for another year.

There the matter now stands. It will presumably come
up for consideration at subsequent meetings of the Inter-
national Labour Conference ; but in view of the divergence
of attitudes and especially of the strong hostility expressed
by the British Government to any Convention at all, it
seems most unlikely that an agreed solution will be reached.
Indeed, even if a Convention is in the end drafted the
situation which arose over the Washington Hours Conven-
tion of 1919 seems likely to be reproduced, and the British
Government may perhaps be again the principal obstacle
to its adoption by the leading industrial nations.

The Conventions adopted by the International Labour
Organisation are of very unequal importance. Some of them
relate only to particular classes of workers, or to industrial
problems of secondary importance. In especial, the prac-
tice has grown up of devoting special sessions of the Con-
ference to questions affecting seamen ; and two confer-
ences have been largely specialised to dealing with agri-
cultural questions. After the Washington Hours Conven-
tion the most important general Conventions are those
dealing with unemployment and the minimum wage. The
Unemployment Convention, which provides for the setting
up by each State which ratifies it of some form of provision
by way of insurance or otherwise for the maintenance of the
unemployed, has been ratified by 25 States, including most
of the leading industrial countries. But the Minimum Wage
Convention, which was adopted in 1919 and provides for
the establishment of some sort of minimum wage-fixing

INTERNATIONAL LABOUR ORGANISATION 8oi

machinery in each country, has so far received in all only
10 ratifications, though its obligations are by no means
onerous. In general, while the output of Conventions has
been considerable, very great difficulty has been experi-
enced in securing their acceptance by the member States ;
and even where they have been adopted this has often been
because they went no further than the States concerned had
gone already on a basis of purely national legislation.

The actual influence of the International Labour Or-
ganisation in improving standards of labour legislation
in the more advanced industrial countries has been ex-
ceedingly small. Such valuable results as it has so far
achieved in this field have been mainly in pulling up certain
of the less advanced countries to a standard somewhat
nearer to that of the more advanced nations than they
would probably have reached if the I.L.O. had not existed.
But even in this field the achievements up to the present
have been disappointingly meagre, especially outside
Europe ; and there is no doubt that the principal cause
of this slow rate of progress is to be found in the unrespon-
sive attitude of the leading industrial countries to those
Conventions which would involve any improvement in
their own national laws. In particular the failure of the ad-
vanced countries to accept the Washington Hours Con-
vention has immensely weakened the prestige of the I.L.O.
among the lesser States, and has made the task of securing
ratifications far more difficult than it need have been.
Moreover, the refusal of the United States to enter the I.L.O.
was almost as serious a blow to its prospects of effective
work as the corresponding refusal to enter the League of
Nations was to the wider cause of international collaboration.

Nevertheless, it is beyond dispute that the I.L.O. has
done much useful work, though this has been rather in the
field of promoting international discussion and spreading
information about the various countries than in the direct
improvement of industrial legislation by means of its Con-
ventions. Undoubtedly in such fields as inspection, factory
legislation and administration, the regulation of child

BBR

802 EUROPEAN INTERNATIONAL RELATIONS

labour, the prevention of night work, and the promotion
of industrial hygiene, the existence of the I.L.O. has been
an important factor in inducing countries to make at least
some elementary provision in their own national codes of
law. In addition the existence of the I.L.O., with the dis-
tinct recognition accorded to the international solidarity of
interests among workers' as well as employers' representa-
tives, has to some extent helped to promote common action
by the Trade Unions in the various countries, and thus to
supplement the activities of the International Federation
of Trade Unions. It would be foolish to expect that action
in the sphere of labour legislation by international agree-
ment could advance much faster than international con-
sciousness among the nations, or that the I.L.O. could
successfully transcend that spirit of insistence on national
State sovereignty which, as we have seen, has been so fatal
an obstacle in the way of the development of the League of
Nations as a real organ of international government. More
clearly than the League of Nations, the I.L.O. is worth
while. Even if its achievements are small, they make de-
finitely in the right direction and have some effect in im-
proving the condition of the workers in those countries which
are most backward in safeguarding the interests of labour.
Like the League Covenant, the constitution of the I.L.O.
makes provision for the application in certain cases of
sanctions against a State which fails to comply with the
obligations of membership. The case for sanctions can arise,
however, only if a State fails to comply with obligations
into which it has voluntarily entered. In joining the I.L.O.
a State undertakes, as we saw, the definite obligation to
submit for consideration by its own legislative authority any
Convention adopted by the International Labour Con-
ference, whether its own representatives at the Conference
have voted in favour of the proposed Convention or not.
Failure to submit a Convention is accordingly an offence
against the constitution of the Organisation. But in effect
this obligation can be easily complied with in such a way
as to procure the rejection or shelving of any Convention

INTERNATIONAL LABOUR ORGANISATION 803

which the Government in question does not like ; and there-
fore no Government is likely to be particularly anxious to
evade it. A State cannot become guilty of any sort of default
by refusing to accept a Convention, for there is no obliga-
tion upon any State to accept any Convention unless it
wishes to do so. In practice therefore default is only likely
to arise where a State, having voluntarily ratified a par-
ticular Convention, thereafter fails to secure its enforcement.

If this happens, a complaint can be lodged by any other
State concerned against the offending State. The matter
has then to be referred to a special commission of Inquiry
constituted on the suggestion of the Governing Body of the
I.L.O. by the Secretary-General of the League of Nations
from a panel of representatives of Governments, employers
and workers. This Commission may report to the Inter-
national Labour Organisation what its recommendations,
if any, are in respect of the complaint, and may include in
its report a proposal for the application of sanctions of an
economic character against a defaulting State. When such
a report has been made, it is open for the Government
accused of default to refer the question to the Permanent
Court of International Justice, which can then issue a
binding award. The Permanent Court, moreover, may
itself recommend the application of economic sanctions
against a State guilty of breach of its international obliga-
tions. But the enforcement of these economic sanctions is
left purely to the voluntary initiative of the other member
States, any of which is free if it so chooses, but is in no way
compelled, to put into force the economic measures sug-
gested by the Commission or by the Permanent Court.
Clearly these hesitant provisions are not very likely to be
invoked in practice, and there would be extreme difficulty,
even if sanctions were recommended in a particular case,
in getting them applied by agreement between the countries
which are members of the I.L.O.

We have seen in the case of the Washington Convention
that special provisions were included for the modification
of the 48 hours week in its application to Asiatic countries.

804 EUROPEAN INTERNATIONAL RELATIONS

This was in accordance with the general scheme laid down
in the Constitution of the I.L.O. Article 405 provides that
" in framing any recommendation or draft convention of
general application the Conference shall have due regard
to those countries in which climatic conditions, the im-
perfect development of industrial organisations, or other
special circumstances, make industrial conditions sub-
stantially different, and shall suggest the modifications,
if any, which it considers may be required to meet the cases
of such countries." It is further provided in Article 421
that the member States must apply those Conventions
which they themselves ratify to their own colonial posses-
sions which are not fully self-governing, subject to similar
modifications to those laid down in Article 405. This last
provision is one of the most valuable embodied in the
International Labour Organisation's Constitution ; for it
does at least make a beginning of applying some sort of
industrial legislation to the colonial empires of the Great
Powers. Unhappily, this has not so far meant much in
practice, owing to the very slow progress which has been
made in getting Draft Conventions accepted by the leading
countries.

It may seem remarkable that a large part of the opposi-
tion to Conventions proposed at the successive International
Labour Conferences and to the ratification of Conventions
actually approved has come from the more advanced
industrial nations, in which economic conditions are on the
whole more satisfactory than in the less developed countries.
This arises partly from the fact that these countries have for
the most part their own codes of industrial legislation and
that sometimes a Convention, even if it does not in general
lay down standards as high as those already in force in the
country concerned, differs in certain material particulars
in the methods which it prescribes from the provisions of
the existing national legislation, so that it seems to involve
inconvenient changes in national law without any corres-
ponding advantage. But the objections raised by the
advanced countries are also influenced in many cases by

INTERNATIONAL LABOUR ORGANISATION 805

their fears that, even if a particular Convention is generalfy
ratified, there will be great differences between one country
and another in the extent to which it is actually observed
and enforced. The more advanced countries, and especially
Great Britain and Germany, have had higher standards than
most other countries in the actual enforcement of the laws
which they place upon their Statute Books, though even in
the most developed countries labour inspection still leaves
much to be desired. A country like Great Britain may
therefore express a fear that other countries which agree to
ratify a particular Convention will not in fact enforce its
observance to anything tike the same extent as it will be
enforced if Great Britain embodies it in her national code
of law. Again, the advanced industrial countries are often
unwilling to accept a particular Convention unless there is
an assurance that it will be simultaneously ratified by their
chief industrial competitors ; and these fears are apt to
result in each country waiting for others to act first, with the
consequence that in the end no one acts at all, and the
Convention remains a dead letter.

But these excuses are by no means sufficient to explain the
extraordinary attitude adopted by Great Britain in relation
to the Washington Hours Convention of 1919 ; for Great
Britain had of all countries by far the most to gain from the
acceptance of a limitation of hours which had been secured
in the great majority of her own industries. There is little
doubt that, if she had promptly ratified the Washington
Convention, most other countries, including her leading
competitors, would speedily have followed suit, and that the
48 hours week would have become a general standard at
least over Western Europe, with the safeguard of national
legislation behind it in each of the leading countries. It was
indeed suggested in support of the refusal or ratification that
the drafting of the Washington Hours Convention was such
as to make difficult its reconciliation with the industrial
agreements reached by certain British Trade Unions with
their employers, and particularly that acceptance of its
terms would upset the railwaymen's agreements. But this

806 EUROPEAN INTERNATIONAL RELATIONS

difficulty could in fact easily have been overcome within
the framework of the Convention ; and it seems clear that
the real opposition to ratification came from the British
employers, who, though they had conceded the 48 hours
week in the period of industrial unrest immediately follow-
ing the war, were not prepared to regard this victory of the
Trade Unions as permanent to the extent of allowing it to be
embodied without opposition in the national code of law.
This attitude on the part of the British employers was
extraordinarily short-sighted ; for by their failure to secure
the ratification of the Convention by Great Britain, and
thus to make easier its acceptance by other countries, they
have imposed on themselves competitive handicaps which
have become more severe in the course of the present world
depression.

Throughout its career the International Labour Organ-
isation has owed a great deal to the forcible person who was
placed in 1919 at the head of the International Labour
Office. M. Albert Thomas, a former French Socialist leader
who had been Minister of Munitions in France during the
war, showed extraordinary energy and resource both in
developing the authority of the I.L.O. and in beating back
assaults upon it by Governments and employers' associa-
tions desirous of diminishing its influence. To him is due to
a great extent the authority which, in face of much opposi-
tion, the International Labour Organisation has actually
succeeded in building up ; and his death in 1932 was a
serious blow to the cause of international action for the
safeguarding of the rights and conditions of labour in
accordance with the principles laid down in the Treaty of
Peace. For it is clear that under less energetic and skilful
management in its early years the I.L.O. might speedily
have been reduced to insignificance in the slump of 1921
and the following years, and that, although M. Thomas
often provoked criticism by his outspoken and autocratic
methods, his presence at the head of the Organisation 'was
one of the chief factors compelling Governments to respect
its activities.

PART VI: THE EUROPEAN
OUTLOOK

ONLY FOOLS venture, in the present situation, upon con-
fident prophecy about the economic outlook. So far, among
those who have ventured upon prophecy since the world
depression began, the pessimists have always been right,
and it is tempting to assume that they will go on being
right, and to say that there is no prospect of an early
recovery from the slump, or even of any sustained upward
turn. But we are not prepared to make so confident a
prophecy even about the immediate future ; all we will
venture to say is that there is as we write no clear sign of an
improvement calculated to lead directly to a real world
recovery. It is true that there has been a big improvement
in prices and production in the United States since the
suspension of the gold standard, that some small reduction
has occurred in the surplus stocks of raw commodities, and
that agricultural output has begun in some measure to
decline in response to the sharp fall in prices. There is
probably a greater reduction in the volume of stocks of
finished and semi-finished goods held by traders ; and to
this extent the situation is more favourable, in that the
stimulus given to production by any favourable conjuncture
would be more rapidly passed on to the producing industries
and would lead to a more rapid expansion of employment
than at any time since the slump set in.

This, however, is only to say that the conditions would be
more favourable if forces making for durable recovery were
present and able to assert themselves. We look in vain for the
clear emergence of such forces. Indeed the last few months
have brought in Europe, largely as a result of economic
adversity, political complications and new threats of war
which make strongly against that revival of confidence on

8o8 THE EUROPEAN OUTLOOK

Which the upholders of Capitalism rely for an improvement
in world trade and production. Moreover, although the
United States, where the world depression began, has
emerged without positive collapse from the banking crisis
of the opening months of 1933, and has been able to en-
gineer, under President Roosevelt's astute leadership, a
considerable upward movement of a speculative sort, the
effect of this crisis and of the measures taken to deal with it
is still too uncertain for any confident prediction to be made
either about the future course of American economic policy,
or about the long-run repercussions on the American
economic system. Great Britain indeed has escaped far more
lightly than most other countries during the later phases of
the world slump ; for her departure from the gold standard
in 1931 did give her a substantial measure of relief. But such
advantages as she enjoys are purely relative ; and there is
no sign of the coming from Great Britain of any force lead-
ing in the direction of world recover)'.

Nor are the hopes once based upon the World Economic
Conference now anywhere confidently held ; and although,
the Conference is actually in session as we write, and a
whole series of discussions about the economic future is
taking place between the representatives of the leading
countries, it does not appear, at any rate on the surface,
that the participants in the conference are equipped with
any agreed or workable plan for promoting a general
revival. In these circumstances there is assuredly no suffi-
cient reason for prophesying a speedy end of the slump ;
but we hesitate to say with any assurance that it is bound to
continue. What we are prepared to assert is that, even if
recovery does come in the near future, that will be by no
means the end of Europe's economic problems ; for any
such recovery as is foreshadowed by the measures at present
proposed is likely, so far from being permanent, to lead on in
the not distant future to a new depression fully as disastrous
as that through which the world is passing to-day.

THE EUROPEAN OUTLOOK 809

Capitalist Combination and State Control. To tMs
point we shall recur ; but before we attempt to discuss the
future of European Capitalism, it seems best to deal with
those tendencies which have emerged during the post-war
years both before and after 1929. If the present organisation
of the capitalist system is compared with its organisation in
1914, certain very large differences at once come into view.
There has been in the first place a very great increase in
industrial combination. Employers were drawn or driven
together into large combines or associations during the
years of war because such combination was absolutely
necessary in order to secure a co-ordinated effort for the
supplying of war needs. The organisations thus brought into
being to a great extent survived the emergency, and were
reconstituted after the war as private combinations and
associations of business firms. But the large element of
control which had been exercised over them by the various
States between 1914 and 1918 was for the most precipitately
removed under suspicion that it was tainted with Socialism.
Since 1918, combination in industry has been the rule rather
than the exception, though the forms of combination differ
widely from case to case, and are of very varying intensity,
from the great trusts under completely unified financial
control, through the cartels which are the characteristic
feature of the German economic system, to much looser
trading associations among firms which preserve their
independence.

But this growth of combination, while it has sometimes
created organisations of international scope, has for the
most part proceeded along national lines and even on
a basis of nationalist and imperialist policy. It has resulted
in the creation in most of the leading industries of powerful
national or imperialist groups of producers, often in sharp
rivalry one with another throughout the markets of the
world ; and these combined groups of producers have been
able to a far greater extent than before the war to rely on
their respective States for support in their commercial
adventures and antagonisms. Thus business combination,

8lO THE EUROPEAN OUTLOOK

stf far from unifying the world and making more remote the
danger of national wars, has become for the most part an
ally of nationalism and imperialism, and has helped to
increase national antagonisms by binding them up more
closely with private capitalist interests. This tendency has
both strengthened and been strengthened by the movement
towards higher tariffs and increasing restrictions upon
international trade ; and the two forces combined have
helped to create a series of State systems administered by
Governments more directly responsive than before the war
to the economic claims of large vested interests organ-
ised upon a national scale. Such tendencies towards inter-
nationalism as do exist in the capitalist world have been far
too weak to stand up against these nationalist forces. They
have been for the most part either inclusions of smaller
countries within the spheres of influence of the industries of
the great imperialist Powers, or arrangements almost in the
nature of commercial treaties between great national
capitalist groups. The Continental Steel Cartel, for ex-
ample, is an arrangement between a number of groups of
steel producers each organised upon a purely national
basis. The Royal Dutch Shell, with its ramifications in
many parts of the world, represents rather a penetration
of British imperialist influence in the petroleum industry
than any movement towards international capitalist action.
Side by side with this growth of capitalist combination
upon a national basis there has gone a great increase in the
amount of State control over industry and of State inter-
vention in the economic field. The countries which pre-
cipitately abolished in 1919 the forms of control over
industry which they had established during the war have
been compelled by force of circumstances to reintroducc
them to a substantial extent, or to impose new controls in
the interests of more efficient industrial organisation. In
Great Britain a large part of the electrical industry has been
socialised in the hands of the Central Electricity Board ; and
the industry as a whole has been brought under public
control. Railway rates have been regulated on a more

THE EUROPEAN OUTLOOK 8l I

comprehensive basis than before the war ; and a substantial
beginning has been made with the State control of road
transport. The mines have remained in private hands ;
but the mine-owners are now organised into State-
controlled associations for the fixing of output and prices.
The British agricultural industry is also passing under
a form of State regulation through a whole series of market-
ing schemes for particular products. Sugar-beet growing
and wheat growing are subsidised by the State. The
import of dyestuffs is regulated by a licensing system
designed in the interests of maintaining an industry sup-
posed to be vital for military purposes ; and, finally, the
new British tariff is being used, at any rate to a certain
degree, as an instrument for bringing about the compulsory
reorganisation of industry. There is a Commission with
compulsory power to amalgamate coal mines ; and it looks
as if there would be another soon for the compulsory
regulation of iron and steel. Yet Great Britain is one of the
countries less affected than most by the post-war movement
towards State control in industry.

This movement has gone further in Italy, where the
Government, through the Institute Mobiliare Italiano and the
Socictd Finanziaria Industrial, has taken a large share in the
task of financing Italian industry ; and large schemes of
land reclamation and improvement have been undertaken
by the Fascist State. But it is in Germany that the process
has advanced to the furthest point. There the threatened
collapse of the entire banking system compelled the Govern-
ment to come to the assistance of the banks and to put up
new capital for them under conditions which involved
bringing them under a drastic form of State control. The
Prussian State was before the war a large colliery owner ;
and, since the war, State ownership and operation of coal
mines has been supplemented by many other ventures of
the State into the field of industrial ownership, either as
sole owner or as part owner of " mixed " enterprises in
partnership with other agencies. The great German steel
industry has passed to a substantial extent under State

8l2 THE EUROPEAN OUTLOOK

cbntrol ; and almost the entire German economic system
has come, during the past few years, to be regulated by a
most drastic system of emergency decrees to which the
Nazis, with their doctrine of " National Socialism," have
now fallen heirs. In the smaller countries, too, there has
been a substantial amount of taking over by the State,
especially in the sphere of banking and industrial financing
and of the disposal of agricultural produce. If State control
of industry were Socialism, Europe would be to-day a far
more socialistic Continent than before the war.

Nor has State intervention spread only or even mainly in
this field of the control of industry. There has been also
a very large development of social services and of the use of
the tax system as a means of redistributing incomes. State
after State has been compelled, usually much against the
will of its Government, to make provision on a large scale for
the maintenance of the unemployed ; and there has been a
considerable extension also in the sphere of public health
services and of insurance against sickness and incapacity.
Far larger sums than before the war are paid out now in
the budgets of most European countries for the social ser-
vices. But this form of redistribution of the national income
by taxation is by no means the only form of which account
has to be taken ; for over against it as a factor tending in
the opposite direction there is the enormous increase in the
volume of national debts, which compels States to levy
greatly increased taxes and to hand back a large part of
the product of these taxes in the form of interest to the
debt-holders. Thus, whereas social service expenditure tends
to redistribute incomes through taxes to the poorer sections
of the community, national debt interest, despite the diffu-
sion of holdings, has on the whole the opposite effect ; and
the pressure of the debt burden upon the national finances
has been one of the factors aggravating the tendency
towards high protective duties in order to raise larger
sums from the poorer sections of the community by means
of taxes on commodities.

The burden of national debts is of course very unevenly

THE EUROPEAN OUTLOOK 813

spread over Europe, in accordance with the terms on
which the post-war stabilisation of currencies took place.
Thus, whereas Great Britain by the terms of her return to
the gold standard involved herself in an enormous burden
of interest to the holders of the debt, Germany, by practi-
cally wiping out her old currency, largely released herself
from this burden ; while France, by reducing the franc to
one-fifth of its pre-war value, also largely relieved the
budget at the expense of the debt-holders. In 1930 the
National Debt of Great Britain was more than ten times,
and that of the United States nearly fifteen times, as great
as before the war ; whereas the French National Debt,
allowing for the depreciation of the currency, was less than
three times as great, and the German debt only twice as
great, and in Italy the increase was only 6 per cent. This
German figure, however, makes no allowance for repara-
tions, which had, up to 1 93 1 , taken the place in the German
economy of the debt burden displaced by inflation and the
change in the currency system. In absolute terms Great
Britain had in 1930 by far the heaviest debt per head, not
far short of twice that of France, more than six times that of
the United States, and more than seven times that of
Italy, while Germany's burden in pounds per head was less
than one-twentieth of the British burden.

All these changes, whatever their social consequences,
involved increased State intervention in the affairs of the
individual citizens. The individual taxpayer became more
conscious of the existence of the State as his burdens in-
creased ; and the individual recipient either of debt in-
terest or of social services also took an increased interest in
the problems of public finance. Moreover the State,
through its intervention in industry both internally and
through the regulation of foreign trade by tariffs and by
other methods, far more directly and constantly affected
the position of both employers and workers than under
pre-war conditions. Many people have regarded these
manifestations of increasing State interference as forms of
Socialism ; and it is perfectly correct to say that they

814 THE EUROPEAN OUTLOOK

foreshadow a transition from a system of private enterprise
to one of national planning under the auspices of the State,
and thus anticipate the entry of the capitalist world upon
a new phase of development. But they certainly are not
Socialism in any sense in which it is advocated by Socialists,
but only in the sense in which men spoke in the nineteenth
century of the State Socialism of Germany under Bismarck.
For although they extend the power of the State they give
no guarantee that this power will be used in the interests of
the working class ; and, so far from being based on the
internationalist principles on which Socialism rests, they
have been for the most part aggressively nationalist in their
conception and administration. State intervention is not
Socialism : indeed, up to a certain point it is the very nega-
tion of Socialism, for the State needs to intervene in the
affairs of industry and commerce at many points precisely
because these affairs are in private and not in public hands.

Where industry and trade are socialised, as they are in
Russia, there is no need for tariffs. Indeed, the entire tariff
system becomes meaningless ; for the State, if it did impose
tariffs, would only be taxing itself. Similarly, if industry
were carried on under a Socialist system a large part of the
existing codes of industrial legislation would come to be, if
not unnecessary, at any rate rather internal acts of State
administration than legislative measures to be enforced
upon employers.

Moreover, even where industries are actually taken
over by the State either wholly or in part, their opera-
tion under present conditions is usually so organised
as to make them minister as much as possible to the
service of other industries which still remain in private
hands. The British Central Electricity Board has been so
designed as to involve the minimum of actual public
operation, and to leave both the generation of electricity
and its retail distribution in the hands of private concerns
where they were not already publicly owned by municipal
bodies.

To a great extent, the State intervention of recent years

THE EUROPEAN OUTLOOK 815

has been not a step taken because those who took it actually
desired or thought it desirable to increase the element of
State control in the economic life of society, but because,
much against their will, they were driven to its adoption
by the threatened breakdown of the institutions of private
enterprise. Governments have advanced towards State
control unwillingly, and often regarding it purely as an
emergency measure on which they would like to go back
at the earliest possible moment. Consequently, driven to
administer a system in which they do not believe, they
have often administered it very badly, and this has tended
to give State control a bad name. Nor is this the only cause
tending to make it unpopular ; for, as it is usually intro-
duced in order to deal with a serious breakdown in some
part of the economic system, it is commonly regarded as
responsible for the bad condition of the enterprises which
it has taken over, even if this condition would in fact have
been much worse, or the enterprises have ceased to exist
at all, in the absence of State action. Above all in the field
of the regulation of international commerce, the increase in
State intervention has obviously had the effect over the
world as a whole of strangling and not of stimulating indus-
trial activity and the exchange of goods. For here, too, its
object has been essentially the combating of an emergency ;
and each country has found itself driven into expedients
for which there was no defence save that they were neces-
sary measures of self-protection against similar steps taken
in other countries, or against the complete collapse of the
national currency.

It is in these circumstances not surprising that there has
gone up from a considerable section of the middle-class
public, with the backing of many of the theoretical econ-
mists, a loud demand for a return to laissez-faire, not only
in the sphere of external trade, but over the whole indus-
trial field. Economists in many countries have argued that
if only the nations of the world would remove their restric-
tions on international trade, repeal their minimum wage
laws and much of their recently enacted social legislation,

8l6 THE EUROPEAN OUTLOOK

and leave economic forces freedom to assert themselves, the
disequilibria which exist in the economic world to-day
would speedily disappear, and industry and trade be every-
where re-established before long upon a sound footing.
This would involve, in the view of those who advocate this
policy, a drastic scaling down of wages, which would
speedily come about if the protective social laws at present
in force were swept away. For the pressure of unemploy-
ment, in the absence of any public system of maintenance,
would cause such a scramble for jobs as to compel the
workers to accept lower wages. In an earlier chapter we
have examined the fallacies involved in this doctrine, and
we need not repeat the argument now. What concerns us
here is that, even if this policy were sound in itself and
not, as we believe it to be, radically unsound, there would
be very formidable obstacles in the way of its adoption.

Rentiers and Workers. The two outstanding obstacles to
the return to pure laissez-Jaire are the creditor classes and
the working classes. The creditor classes would put up a most
formidable resistance to any attempt drastically to scale
down their claims. But in the absence of such a scaling
down the laissez-faire system could not possibly work out
to a new equilibrium. For it involves an even further fall
in prices, and would thus make the burden of debt even
more intolerable than it is to-day. The creditor classes are,
however, an exceedingly influential element in practically
every State, and above all in France and in Great Britain ;
and it would need a Government very different from any
which has yet held power in either of these countries effec-
tively to challenge their determined opposition. The
second obstacle lies in the working classes, who would
strongly resist both any drastic reduction in wage-rates and
any attempt to go back on a large scale upon the social
services developed since 1914. The resistance of the work-
ing classes to lower wages might perhaps be overcome;
for this would have to express itself through industrial
action, and the effect of depression and rationalisation alike

THE EUROPEAN OUTLOOK 817

has been to weaken the Trade Union movement. Bdt
really drastic economies in the social services would call
out the determined opposition of the working classes
not merely in their Trade Unions but also as voters. It
would therefore be exceedingly difficult to carry through
in any country working under a system of Parliamentary
democracy.

Both Great Britain and France as well as many of the
lesser countries have, it is true, had their " economy cam-
paigns " during the world depression, and have scaled
down the social services to some extent ; but the amount
which they have dared to do in this field is infinitely smaller
than would be required if the policy of a whole-hogging
return to laissez-faire were seriously in contemplation.
Even the National Government in Great Britain, though
it came to power with large ambitions of " national
economy," has of late shown a growing tendency to go
slow in this field of retrenchment.

Largely, the relative decline in the power of the workers'
industrial organisations is in the democratic countries
balanced by the growth of their political power. In as far
as European countries remain under a system of Parlia-
mentary democracy, the pressure from the working-class
electors for improved social services will be maintained ;
and it is even bound to increase to a substantial extent,
especially as rationalisation in industry advances, and there
is growing need for new protective measures in the in-
terests of the older workers who are thrown upon the
industrial scrap-heap.

Capitalism and the Standard of Life. Can Capitalism,
in the countries where Parliamentary democracy exists,
meet these increasing political claims of the poorer sections
of society ? There is clearly no reason in terms of the power
to produce wealth why it should not. For the power to
produce in all countries has increased, is increasing, and
in the opinion of many capitalists ought to be diminished.
But this is of course no answer to the question ; for events

8l8 THE EUROPEAN OUTLOOK

have already abundantly illustrated the truth that an
increasing power to produce does not necessarily mean an
actual increase in production. In fact, the ability of Capi-
talism to grant an improving standard of life to the workers
depends, however much productive capacity may increase,
upon international co-operation. For no one capitalist
country can, under the existing conditions, easily advance
its working-class standards far beyond the others, either by
raising wages and so directly adding to the costs of produc-
tion, or by improving the social services, which will have to
be financed partly at least by the imposition of add-
itional taxes upon the capitalist producers. International
competition between capitalist countries at present bars
the way to an improvement in the standard of living,
and indeed impels each country to set about reducing
wages where it can in order to improve its competitive
position.

What, then, are the prospects of international capitalist
co-operation for the common improvement of living stand-
ards among the working classes ? The road to this obviously
sensible course of procedure seems to be increasingly
blocked by those countries in which the institutions of
Parliamentary democracy have been destroyed. One fruit
of Mussolini's power in Italy has been the maintenance of
an exceedingly low wage standard among the Italian
workers. Italy, it is true, matters comparatively little be-
cause her products do not enter largely into competition
with those of the great industrial nations. But Germany
matters a great deal ; and the new German Revolution
may easily lead to an intensification of the efforts which
Germany has made in recent years to improve her com-
petitive position in the markets of the world by lowering
the standard of life of the German people. The Nazis have
no doubt made large promises of economic concessions in
the course of their climb to power ; but now that they have
got the German working classes by the short hairs, nation-
alist feeling will probably be used to justify low standards
of living in the interests of the extension of German overseas

THE EUROPEAN OUTLOOK 8ig

trade. Political rivalry with the other great industrial
nations will moreover probably accentuate this tendency
towards lowering the German cost of production at any
expense to the working-class standard of life.

The Outlook for European Socialism. One capita-
list country, we have said, cannot afford to advance far be-
yond its rivals in improving the standard of living, and can
therefore find no way of escape from the present economic
impasse. Nor does there seem to be much prospect of capi-
talist countries combining to find a way out. What, then,
would be the position of one advanced industrial country
if it went Socialist ? Gould it, by applying Socialism on a
national scale, escape from the limiting conditions of
capitalist competition and raise the standard of living of its
people in accordance with the growing magnitude of its
productive power ? To a certain extent it could, provided
that its Socialist system was introduced under conditions
admitting of its efficient operation and not as the result
of a devastating civil war involving large destruction of
economic values. For there is no reason why Socialism in
some countries and Capitalism in others should not exist
temporarily side by side. The experience of Russia in
recent years has shown, despite the extreme challenge
which Communism presents to the capitalist world, that
this can be done ; and both Russia and many of her neigh-
bours have recognised the fact during the past few years
by the mutual signing of pacts of non-aggression. Of course
any Socialist system applied within a single nation could only
achieve this raising of the standard of life, up to the level
made possible by its productive power, on condition that it
worked with the aid of a complete monopoly of foreign
trade in all essential commodities, and developed in place
of the existing methods of restricting trade new methods of
bulk purchase, international barter, and regulated ex-
change of commodities. But these controls would not need
to be merely restrictive, as tariffs inevitably are, but could

820 THE EUROPEAN OUTLOOK

be made the foundations of a system of regulated inter-
national economic co-operation. Clearly, then, the success
of any one country in escaping from the impasse of
international competition by applying Socialist measures
will depend on its adopting not merely a few socialistic
measures but a thoroughgoing Socialist system ; and
nothing short of thoroughgoing Socialism will enable it to
go far ahead of other countries in improving the standard
of life.

Thoroughgoing Socialism, however, does not imply
Communism in the Russian sense. We have given reasons
in earlier chapters for holding that Communism in its
Russian form is unlikely to prevail in Western Europe,
though it might extend much further than it has yet done
in the countries of Eastern Europe — for example in Poland,
Roumania, and the predominantly agricultural States of the
south. Perhaps the destruction of German Social Democ-
racy may now have made it, over at any rate a large part
of Germany, the sole alternative to the Nazi dictatorship.
There is only one condition on which Communism would
be likely to prevail in other western countries without a
radical change in its form and methods of action. That
condition is the coming of a new world war sufficiently
devastating to break up the capitalist economy of the West,
and leave no other alternative. What is implied, then, in
the insistence that only a thoroughgoing Socialism could
achieve the desired result is not Communism in the Rus-
sian sense, but a thoroughgoing Socialism appropriate to
the conditions of Western Europe.

The Danger of War. Something must be said at this
point about the possible exception just indicated. Is a new
world war likely ? It is clearly impossible to base much hope
of an assured European peace upon the League of Nations,
or upon those separate pacts and treaties, such as the
agreements made at Locarno, which have been designed
to prevent war. For the Peace Treaties and the European
settlement which emerged from them in the first place were,

THE EUROPEAN OUTLOOK 821

and remain, unjust in themselves in many of their mdst
vital features, and in the second place have created ex-
ceedingly powerful vested claims, both political and
economic, whose consequences it is bound to be exceedingly
difficult to undo. It is certainly out of the question in the
present state of European feeling to seek to remedy the
territorial abuses created by the Peace Treaties by any
method of agreed readjustment of national frontiers ; for
countries are far too jealous and fearful one of another to
admit of any increase in one another's national strength if
they can possibly help it. Accordingly, both the injustices
created by the Peace Treaties and the vested interests and
nationalistic sentiments which they have entrenched have
permeated Europe to-day with a spirit of militarism far too
strong to yield to the treatment prescribed for it in draft
disarmament conventions and draft treaties of international
security.

Moreover, the Nazi revolution in Germany does almost
certainly mean German rearmament ; for, though the
Germans profess their willingness to remain disarmed if
other countries will disarm to an equal extent, there is
obviously little chance of this condition being satisfied, and
the inevitable concession of equality to the Germans there-
fore means that Germany will be allowed to rearm. Nor,
if rearmament in Germany does begin, is there likely to be
any effective way of keeping it under control. In these cir-
cumstances, German rearmament is practically certain to
lead to a renewed demand for the increase of armaments
elsewhere. A straw sometimes shows which way the
wind is blowing ; and it is significant that in the French
Socialist Party, which has been strongly pressing for
disarmament for some time, a crisis should have arisen on
this issue in April 1933. A majority of the French Socialist
Deputies on this occasion voted, against the wishes of the
leaders of the Party, in favour of a modification in the
proposals for disarmament put forward a month or two
before.

But after the experience of the years before 1914 no one

822 THE EUROPEAN OUTLOOK

is fikely to doubt that the greater the armaments the greater
the danger of war. The danger of a new European war on
the grand scale is not perhaps immediate, for the com-
batants are not yet ready for it ; but it is very real. More-
over, the next war looks like being even more terribly
destructive than the last, especially to the civilian popu-
lations and to the industries of the belligerent countries —
unless, of course, the use of the more destructive weapons
can be limited in advance by some effective form of inter-
national agreement. But how much prospect is there of
qualitative disarmament being agreed to, or of any such
agreement being actually preserved if war does break out ?
As we have said, when countries believe themselves to be
fighting for their national existence, conventions limiting
the use of arms are likely to be speedily overridden.

The course at present adopted by the statesmen of Europe
is to play for time in the hope of something turning up, and
of European countries somehow settling down again. But
what signs are there that this is likely to happen ? It is
perfectly true that a substantial economic recovery would
for the time being greatly reduce the danger of war, in that
most countries would be too busy trying to take full advant-
age of it to think quite so much about national glory or
national grievances. But in the present state of Europe this
would be only a respite ; for economic recovery would have
the effect of making it easier for the nations to rearm, and
in the present state of European relationships only poverty
prevents them from being far more heavily armed than they
are to-day. If we are successfully to prevent war we must
remove the causes of war, which lie fundamentally in
capitalist nationalism and capitalist imperialism. By
removing these causes we may succeed in separating the
question of territorial rearrangements from questions of
national prestige and power and national economic
advantage. This involves the establishment of Socialism,
not merely as a national, but above all as an international
force. But how can we set to work to bring this force into
effective operation ?

THE EUROPEAN OUTLOOK

Nationalism and Internationalism. Evidently, although
the Socialism which is needed must be international
Socialism, it will have to be worked for largely along
national lines. The international spirit is vital to it ; but the
Socialists of the world are under the necessity of acting,
until they achieve power, largely within the framework of
the existing national States, with the object of conquering
power in each country as a means to breaking down the
isolated sovereign independence of each national group.
An immense mass of cosmopolitan feeling exists in the world
to-day, especially among the younger members of the
European community. It is true that a vast mass of nation-
alist feeling exists as well, and that internationalism, or
rather cosmopolitanism, as a world force cannot expect
an easy victory over militarist nationalism and the capitalist
imperialism with which it is intimately connected. But this
mass of cosmopolitan feeling can become a most important
ally as well as a driving force for the international working-
class movement, for it is potentially Socialist, and will
become actually Socialist as soon as it can be convinced
that Socialists mean by Socialism a force making definitely
for world peace and international collaboration.

The working-class movements of the world, which alone
can provide the necessary instruments for the achievement
of Socialism, are not at present giving an effective lead to
these cosmopolitan forces. The Communists are trying to
give such a lead ; but their methods are self-destructive
because, by working for a revolution of violence in each
country, they positively increase the strength of nationalist
feeling and create an ever-increasing danger of nationalist
counter-revolution in the shape of Fascism. What is needed
is the permeation of the working-class movement with die
cosmopolitan spirit of Socialism — in other words, a new
cosmopolitan driving force, Socialist in its aims and basing
itself upon the working-class movement in the widest sense
of the term as the necessary instrument for the achievement
of its purpose.

Mr. H. G. Wells has done good service by stressing the

824 THE EUROPEAN OUTLOOK

vidal importance of cosmopolitanism as a basis for thinking
in terms of the new world order. But he has so far shown an
inadequate sense of the need for something more than
thinking and personal devotion to the cosmopolitan cause.
Thought and idealism, if they are to be effective, must find
a body, must embody themselves in an institution strong
enough to enable them to count in the world of practical
affairs. Mr. Wells's cosmopolitanism wanders round the
world to-day as a disembodied spirit. But clearly the one
body in which it can hope to find an instrument to its
purpose is the international working-class movement,
broadened and deepened so as to bring within its range not
only the manual workers but also all those among the
technical and professional groups who put constructive
activity before profit, and are prepared to ally themselves
with the manual workers on the basis of a cosmopolitan
appeal.

Production and Consuming Power. The building up
of such a movement requires firm economic and philo-
sophical foundations. In an earlier section we have attempted
an analysis of the fundamental doctrines of Marxism with-
out there essaying any criticism of these doctrines. Broadly
speaking, we believe the Marxian philosophy to be essenti-
ally true, though its expression needs at many points to be
modified in the light of later thinking and of practical
experience. Above all, it is true that in the world of to-day
the " powers of production " upon which the whole Marx-
ian conception depends are fast advancing beyond the
possibilities of the economic system within which their
operation is still confined. The plain evidence of this is in
the failure of the system of distribution characteristic of the
present economic order, and based on monopoly and class
privilege. For the present economic order, pursuing above
all things the profit of the owners of capital, is compelled to
seek scarcity and not abundance, because out of scarcity
alone comes the value of which the capitalist is in search.
Manifestly the overmastering need of our time is to release

THE EUROPEAN OUTLOOK 825

the powers of production from their present thraldom by
means of a new and more adequate system of distributing
wealth. The world must have a system of distribution which
will enable it to make full use of all the opportunities for
production which lie ready to its hand.

This must involve changes not only in the distributive
system but also in the control of production. For to alter
the system of distribution without altering the control of the
productive forces would be to establish a new and irrecon-
cilable contradiction in the working of the economic
order. If distribution is to be arranged on such a basis as
to make plenty and not scarcity the object of men's econ-
omic activities, the powers of production and distribution
must be brought under a co-ordinated control in the hands
of the entire community. Incomes must be distributed and
production arranged for so as to establish a balance
between consuming power and the volume of goods that
can be made available for consumption. Ihis, however,
clearly cannot be accomplished in a satisfactory way upon
a merely national scale, for to shut up each country within
a rigidly drawn economic frontier of its own is to deny the
basic principle that the object of social organisation must
be plenty and not scarcity. Economic nationalism is
essentially based upon the maintenance of scarcity, because
it involves denying men the greatly increased total pro-
ductivity which arises out of international exchange. Not
merely Socialist control within a single country, therefore,
but international or rather cosmopolitan Socialism is the
logical next step in the evolution of the economic order — the
step corresponding to the point which the powers of pro-
duction have already reached.

Parliamentarism and Revolution. Evidently the next
question is that of means. If cosmopolitanism is to be made
the basis of the new economic system, the capitalist State
must be broken, for the capitalist State is essentially nation-
alist in its foundations. If Socialism is to be achieved the
capitalist State must be broken no less, for it rests upon the

826 THE EUROPEAN OUTLOOK

assumption of monopolistic property rights. The coming of
the age of plenty demands a new way of organising the
communities of the world. The Soviet system, as it has
developed in Russia, may be, and we think is, largely
inappropriate to the conditions of Western Europe. It was
not, even in Russia, something thought out in advance by
the theorists of Communism, and then applied to the
practical circumstances of 1917 in accordance with a
preconceived theory, but something which arose spon-
taneously, and even to a large extent unexpected by the
Communists themselves, in the Russian situation of 1917.
Not for some time after the first Russian Revolution did the
Communists raise the cry " All Power to the Soviets."
They were thinking in the earlier stages far more in terms
of factory committees, and were even in the midst of the
Revolution largely unconscious of the new forms which the
State was destined to assume in their hands. If Socialism
comes in Western Europe, the appropriate forms for the
organisation of the West European sections of the new
cosmopolitan society will have to be developed in the course
of the change itself : they cannot be worked out in advance
with any certainty.

If, for example, Socialism comes, as we hope it will in
Western Europe, not through violent revolution but by a
transition devoid of bloodshed, the first stages towards it
will in all probability be parliamentary, in the sense that
the Socialists will begin by using the parliamentary machine
built up by capitalist democracy, and applying this machine,
unsuitable as it will doubtless prove to be in the long run,
to the achievement of their immediate purposes. This may
not now be the case in Germany, where the parliamentary
machine has perhaps been too utterly shattered by the
events of the past two decades to serve or to be needed as
the instrument of constructive change. But unless the
dissolution of parliamentary institutions in Great Britain
and France and in some of the smaller western countries
goes much further than it has gone as yet, the coming of
Socialism in these countries is likely to take in the first

THE EUROPEAN OUTLOOK 827

instance the form of a parliamentary change. The apprfi-
priate organisation of the new States of the transition period
and of the new Society which is to arise out of this period
will have to depend on the circumstances under which the
transition actually occurs, and not on any preconceived
theory of the detailed strategy of the advance towards
Socialism.

The Devolution of Functions. Nevertheless, certain
elements in this new Society can be foreseen. It is clear that
under the new conditions there will have to be much
devolution of powers ; for otherwise the new functions
collectively assumed by the community will involve an
impossible degree of congestion in the working of the central
administrative machine, which is over-burdened already
with the tasks which fall upon it under the existing system.
This devolution of responsibility will have, however, to
proceed even more upon functional than upon local lines.
It will have to consist largely in entrusting the conduct of
particular services to responsible bodies, appointed in
accordance with the requirements of the whole Society
and then left free in the detailed working out of their
administrative methods. Within this system of functional
devolution there will have to be a very large element of
workers' control, not merely in the sense of entrusting wide
powers to chosen leaders of the working class, but in the
fuller sense of permeating the entire body of workers with
a sense of responsibility for the successful operation of the
new regime. This will be indispensable ; for the bad in-
centives upon which the world has relied for getting work
done under the capitalist order cannot be simply swept
away : they must be replaced by new incentives more
powerful in getting men to give of their best. These new
incentives will have to rest upon the principles of communal
service and responsibility ; and there can be no sense of
responsibility without a large element of self-government.
At the same time there will have to be strong central co-
ordination ; for all the different industries and services,

828 THE EUROPEAN OUTLOOK

afcd indeed every branch of the new system of socialised
industrialism, will have to be closely related to every other,
and there will be required a very close relationship between
the working of industry and the financial mechanism as a
whole, if the indispensable adjustment of production and
consumption is to be secured. Thus the banking system and
public finance will have to be closely linked up with the
industries and services supplying consumers' needs in order
to achieve the correct balance. Moreover, while each
country will doubtless retain administrative autonomy both
in general and in the operation of each industry and service,
there will have to be a very high measure of international
co-operation — nay more, an actual breaking down of
national barriers and an administration of an increasing
number of services under international control. Finally, in
the new order, means will have to be found of removing
from democracy the reproach that it involves the govern-
ment of the old ; for the new Society will have to base itself
upon the control of those whose powers are developing and
whose minds are receptive to new ideas and methods of
work.

If, however, this is the Society which is clearly needed for
the building up of a \\orld Organisation corresponding to
the stage already reached by men's productive power, there
is still an arduous road to be travelled towards its establish-
ment. We have said earlier that we do not predict as a neces-
sary outcome of the present situation the immediate break-
down of the capitalist order, or even an indefinite prolonga-
tion of the present world slump. We have then to ask again
whether Capitalism cannot in fact so reconstruct itself as to
meet the demand for plenty in place of scarcity, and so
bring itself into adjustment with the growing productive
powers of mankind. This involves attempting to answer two
questions : first, what stands in the way of immediate
capitalist recovery, and secondly, how far is Capitalism,
even if it can recover from the present slump, capable of so
altering its character as to meet the needs of the coming
generation.

THE EUROPEAN OUTLOOK 829

The Obstacles to Capitalist Recovery. The immed-
iate obstacles to the recovery of Capitalism have been
stressed in earlier sections of this book. The first and most
obvious of them is the burden of debt : indeed debts occupy
so large a place in creating the present difficulties of the
capitalist world that one is tempted to say that nothing else
really matters. Secondly there is the problem of prices, of
price-levels too low to enable production to be carried on
upon a sufficient scale under capitalist conditions. But the
fall of prices during the past few years is essentially a symp-
tom rather than the disease from which the capitalist world
is suffering. It is true enough that by concerted action the
capitalist countries could take steps which would be effec-
tive in raising the levels of world prices, and that the gal-
vanic effect of these measures would, at any rate if the debt
problem were also successfully dealt with, bring about a
substantial recovery of capitalist industry. But it is no less
clear that such a recovery would be highly precarious, and
that the measures taken in order to raise prices would be of
such a nature as to lead on to a new world crisis, to be fol-
lowed by a new and prolonged depression, unless steps were
taken to bring the distributive system and the consuming
power of the world's peoples into harmony with the mag-
nitude of the world's productive forces. The only way sug-
gested for the effective raising of world prices is some form of
monetary inflation ; but monetary inflation under Capi-
talism, while it may achieve its immediate objects, results
inevitably in rebuilding industry upon unsound founda-
tions and will bring into operation again the very forces
which led in 1929 to the outbreak of the world depression.
Thirdly, the capitalist world, as a step towards even
temporary recovery, will have to get rid of, or greatly to
reduce, the present obstructions in the way of international
trade. The tariffs, restrictions, quotas, embargoes, exchange
controls, and all the other manifestations of economic
nationalism which have been discussed earlier in this book
are also symptoms of the disease of Capitalism rather than
the disease itself. They would disappear or be greatly

830 THE EUROPEAN OUTLOOK

modified if any revival of capitalist prosperity were to take
place ; but it is no less certain that they would be speedily
reimposed if a new crisis developed. Fourthly, there is the
problem of the relations between Europe and the United
States. But this is only the problem of debts and the problem
of tariffs over again ; for it is manifestly impossible for
European countries to go on making large payments to a
creditor who is unwilling to receive his due in the form of
goods. Fifthly, there is the question of peace ; for manifestly
even a temporary capitalist recovery could not be en-
gineered under the permanent threat to confidence in-
volved by the constant fear of the outbreak of a new war.
Capitalism, then, in order to achieve even a temporary re-
vival, would have to succeed somehow in damping down at
least for a rime the threat of war. If this could be done even
for a brief period the existence of more favourable economic
conditions would, as we have seen, at least for a short time
tend to diminish the war danger by diverting men's thoughts
from national grievances to immediate economic opportu-
nities. Yet in the long run, in the present condition of
Europe, greater economic prosperity would probably lead
to still heavier armaments, and thus recreate the danger of
war.

It will be admitted that the obstacles in the way of a suc-
cessful tackling even of these immediate problems, which
must be successfully tackled if Capitalism is to achieve even
a temporary world revival, are very formidable. But formid-
able as they are, they are not finally insuperable. Let us
assume that they have been overcome, and that by a variety
of methods co-operatively pursued by the leading nations,
Capitalism has got back to where it stood, say, ten years
ago. What is to happen then ? If economic forces are al-
lowed to develop as they developed between 1923 and 1929
the world will merely be heading towards a new crisis based
on the mal-distribution of consuming power and the in-
ability of the present system to find means of distributing
the volume of commodities which it is equipped to produce.
Can Capitalism find any remedy for this situation ? There

THE EUROPEAN OUTLOOK 8$I

are numerous voices now upraised in favour of a planned
national economy still retaining the salient features of
Capitalism. Each industry, it is urged, or at least each vital
industry, should be organised into a closely knit national
corporation, while remaining under capitalist ownership.
All industries should be closely knit together in terms of
a general plan drawn up under the auspices of the national
State, and through the instrumentality of capitalist repre-
sentatives from each industry. Both national States and the
organised industries within them should make with other
States and with similar groups in other countries collective
arrangements for the sharing out of markets and for the
carrying on of international exchange. There should be
international combinations governing the operations of
world Capitalism and dealing in particular with the steps
necessary for opening up fresh markets in the less devel-
oped countries by means of international lending. In other
words, there should be a sort of Bismarckian " State
Socialism " in each country, linked together by means of
international arrangements between capitalist States and
capitalist industrial groups.

Is world Capitalism likely to adopt such a system, or at
all events to adopt it in time ? There have been abundant
illustrations during the past dozen years of the slow progress
made by capitalist rationalisation in face of the obstruction
of individual property owners and of the pronounced in-
dividualism which is characteristic — which has indeed been
in the past the strength — of the business world. To achieve
the collective organisation even of a single industry is a
painful process involving intense opposition among those
whose position is to be disturbed by the change. It is some-
times possible to achieve this in a single industry, where the
interests of capitalists in other industries lie in getting it
done ; but to achieve it for the whole world of capitalist
industry is surely a task far beyond the powers of any State
under capitalist domination, let alone of all the leading
States of the world acting in unison.

Moreover, even if capitalist planning of this sort could be

THE EUROPEAN OUTLOOK

achieved both nationally and internationally, to what
purposes would it be applied ? Where industries have been
closely combined under Capitalism up to the present the
chief use to which they have put their new power has been
that of restricting supply in order to maintain prices. In
other words, they have continued to act in the spirit of
the gospel of scarcity and to seek the value which comes of
scarcity rather than the plenty which the world requires.
Planned Capitalism under the auspices of capitalist States
would be likely to press this policy still further. More-
over, Capitalism and nationalism are, as we have seen, close
allies ; and it is far more likely that Capitalist States
adopting a planned economy would then proceed to com-
pete and dispute bitterly one with another than that they
would join together in any widespread system of economic
collaboration.

Capitalism and Imperialism. For Capitalism in its
latest manifestations is imperialism as well ; and the last
thing an imperialist is willing to believe is that an empire
can prosper save at the expense of its rivals. Above all, we
find it inconceivable that even the most intensely planned
Capitalism would take the indispensable step of setting to
work deliberately to raise the purchasing power of the mass
of the peoples of the world in order to secure an outlet for
the highest possible production. For this course simply
could not be made consistent with the active interests of
the capitalists in whose hands ex hypothesi industries would
still be left. Planned capitalism on a world-wide scale
seeking plenty rather than scarcity and abandoning im-
perialist rivalries in favour of cosmopolitan co-operation
is a contradiction in terms. Yet only on a basis of cosmo-
politan planning can the world hope for a permanent
escape from the contradictions in its present situation.

The world, then, can recover temporarily even under
Capitalism ; but any such capitalist recovery as is at present
projected will sow the seeds of new depressions and new
imperialist and nationalist rivalries in the future. Capitalist

THE EUROPEAN OUTLOOK 833

reconstruction gives no assurance of any recovery that can
be lasting, and no sign of any ability to achieve world
peace. But, some people will say, is Socialism in these
respects any better ? Is it not fully possible for Socialism
to establish itself on a national basis, and to pursue on
such a basis the policy of economic nationalism, thus deny-
ing the world the plenty which is within its grasp, and
perhaps sowing the seeds of war and imperialist rivalry as
surely as Capitalism has sown them during the past fifty
years ? We agree that, if Socialism could be conceived as a
purely national movement, arising simply as a change in
the mechanism of particular national societies and not as
a change in the mind and spirit animating the peoples of
the world in which it arises, Socialism in this sense would be
no cure for the world's ills. But Socialism, in the minds of
all those who believe in it and are prepared to work for
it in all countries, is essentially and absolutely an inter-
national doctrine, repudiating the limitations of the national
sovereign State and aiming at the creation not of a limited
system of collectivism within one country, but of a world-
wide system of economic and political collaboration. There
is and can be no real and sufficient cause of quarrel between
the workers, or between the main masses of the people,
in different countries. The conflicts of nationalism and
imperialism arise not from real causes of quarrel between
the peoples of one country and another, but from a playing
upon the passions and ignorances of the mass of the people
by powerful economic interests cloaking their search for
wealth and power under national and imperial forms, or
from that sheer despair — the product of economic adversity
— which arises in men's minds when everything seems to
be going wrong and they must ease their spirits by finding
someone or somebody whom they can blame for their
misfortunes. The passions of nationalism are fed on the
one hand by imperialist Capitalism and on the other by
economic adversity. Displace imperialism, and set the
world's feet firmly on the path towards a fuller use of the
productive resources at its command ; and the main sources
CCR

834 THE EUROPEAN OUTLOOK

oV national hatred and suspicion will at once disappear,
setting the world free to embark upon a course of con-
structive collaboration. This, to our mind, is the moral of
the present situation in Europe ; but whether the forces
making for cosmopolitan Socialism will be strong enough
to build up the new Society before sheer disaster overtakes
the peoples of Europe — that remains to be seen. We can
only hope and strive to bring this about : we cannot con-
fidently predict success.

BIBLIOGRAPHY

Needless to say, this book-list is highly selective. Those who want
further references may be referred to the bibliographies contained in :

(a) for the History The Encyclopaedia Britannica, the Cambridge
Modern History

(b) for the Separate Countries The Statesman's Year Book, the
Encyclopaedia Britannica

(c) for the Economic Section G. D. H. Cole The Intelligent
Man's Guide through World Chaos

(d) for the Political Section Works there listed, by Headlam-
Morley, Laidler, and as under (b)

(e) for the International Section Works there listed, by Bailey, Woolf

The most useful atlas is The Times Atlas. See also the valuable maps in
I. Bowman, The New World, Philips' Historical Atlas, Bartholomew and
Lyde's Atlas oj Economic Geography, and the Plebs Atlas.

Part I. HISTORICAL OUTLINE

H. G. WELLS The Outline of History revised edition 1923

M. M. KNIGHT Economic History of Europe n.d.

W. CUNNINGHAM Wrestern Civilisation in its Economic Aspects

(Vol. II. : Medieval and Modern Times) 1904
P. BOISSONNADE Life and Work in Medieval Europe lysj
J. W. THOMPSON History of the Middle Ages 1931
D. OGG Europe in the Seventeenth Century 79*5
G. N. CLARK The Seventeenth Century 1929
G. SLATER The Growth of Modern England 1932
H. SEE Esquisse d'une Histoire du Regime Agraire en Europe

aux 1 8 and 19 Siecles 1921

C. DAY Economic Development in Modern Europe 1933
L. KNOWLES Economic Development in the Nineteenth

Century 1932

F. A. KIRKPATRICK, ed. Lectures on the History of the Nine-
teenth Century 1904

S. HERBERT Modern Europe, 1789-1914 1916
J. A. HOBSON Evolution of Modern Capitalism revised edition

1926
A. VIALLATE Economic Imperialism 1923

836 BIBLIOGRAPHY

P. ASHLEY Modern Tariff History 1910
H. FEIS Europe the World's Banker 1930

[Reference can be made throughout to the Cambridge Modern Histoiy,
the Histoire Generate of Lavisse and Rambaud, the old and new editions
of the Encyclopedia Bntannica, and to old editions of the Statesman's Tear
Book]

POST-WAR HISTORY

C. DEI ISLE BURNS A Short History of the World, 1918-1928

R. L BUELL Europe, A History of Ten Years

A. J. TOYNBEE The World after the Peace Conference igsfi

I BOWMAN The New World revised edition 1930

S. D SCHMAI.HAUSEN, ed. Recovery through Re\olutiou 1933

Part II. THE COUNTRIES OF EUROPE

GENERAL

The Statesman's Year Book

The Statistical Year Book of the League of Nations (and the

Monthly Bulletin)
The Europe Service (loose-leaf)
The Annual Register

The Survey of International Affairs, annual (ed. A. J. Toynbee)
Documents on International Affairs, annual (eel J. W V\ heeler-

Bennett)

The Encyclopaedia Britannica (old and new editions)
Department of Overseas Trade, Reports on Economic Conditions

in the various countries, published at irregular intervals,

annual for the leading countries

[See also the Statistical Year Books published by the various Govern-
ments, also the Guide Books such as the Guide Book oj the Soviet Union
and numerous others ; numerous publications of the League of Nations,
the International Labour Organisation, the International Institute of
Agriculture, the United States Department of Commerce, the Royal
Institute of International Affairs, and the (American) Council on
Foreign Relations; the volumes of the Carnegie Social and Economic
History of the World War, H. W. V. Temperley's History of the Peace
Conference. Of special value for current information are the Economist
(London), Monde (edited by H. Barbus&e, Paris), Current History (New
York), the Monthly Summary of the League of Nations (Geneva), the
Board of Trade Journal (London), the International Labour Review (Geneva),
the Federal Reserve Bulletin (Washington), Notre Temps (Paris), and the
Manchester Guardian}

BIBLIOGRAPHY 837

BALTIC STATES

O. RUTTER The New Baltic States and Their Future
F. WESTERINEN Agricultural Conditions in Estonia 79.23
P. MEYER Latvia's Economic Life 1925
E. J. HARRISON Lithuania 1928
H. SPAULL The Baltic States 1931

POLAND

COUNT SKRYNSKY Poland and Peace 1923
F. BUJAK Poland's Economic Development 1926
W. K. KOROSTEWITZ The Re-birth of Poland 1928
R. MACHRAY Poland, 1914-1931 7937

ROUMANIA

V. CLARK Greater Roumania 1922
T. W. RIKER The Making of Roumania, 1931
J. L LVANS 'I he \grarian Revolution in Roumania 1924
D MITRAN\ The Land and Peasant Reform in Roumania
'930

BULGARIA

J. BUCHAN, ed. Bulgaria and Roumania 1924

L. PASVOLSKY Bulgaria's Economic Position 1930

YUGOSLAVIA

J. BUCHAN, ed. Yugoslavia 1923

BFARD and RADI N The Balkan Pivot — Yugoslavia 1929

GREECE

W. MILLER Greece 1928

A. ANDRE ADES Les Effets Economiques de la Guerre en Grece

1929
JOHN MAVROGORDAI o Modern Greece 1931

AUSTRIA

W. T. LAYTON and C. RIST The Economic Situation of Austria

1926

C. A. MCCARTNEY The Social Revolution in Austria 1926
J. D. NEWTH Austria 1931

838 BIBLIOGRAPHY

HUNGARY

O. JASZI Revolution and Gounter-Revolution in Hungary

*9*4
B. KALMAN The International Position of Hungary 1931

SWITZERLAND

R. C. BROOKES Government and Politics of Switzerland 1920

CZECHOSLOVAKIA

J. C&SAR and F. PARKENY The Czechoslovak Republic 1922
T. G. MAZARYK The Making of a State igs6
J. O. CRANE The Little Entente

GERMANY

H. STROEBEL The German Revolution and After n.d.

W. H. DAWSON Germany under the Treaty 1933

M. SERING Germany under the Dawes Plan 1929

J. W. ANGELL The Recovery of Germany 1929

H. R. KNICKERBOCKER Germany, Fascist or Soviet ? 1932

H. G. MOULTON and C. E. McGumc Germany's Capacity to

Pay 1923

H. G. DANIELS The Rise of the German Republic 1927
J. KING The German Revolution, its Meaning and Menace

'933

SCANDINAVIA

P. DRACHMANN and H. WESTERGAARD The Industrial Develop-
ment and Commercial Policy of the Three Scandinavian
Countries

G. G. HARDY Norway 7925

D. HEATHCOTE Sweden 79.27

H. JONES Modern Denmark 1927
K. GILMOUR Finland 7,937

BELGIUM

T. H. REED The Government and Politics of Belgium 1924

E. MAHAIM La Belgique Restor6e 1926

HOLLAND

A. J. BARNOUW Holland under Queen Wilhelmina 1923
L. NEMRY Les Pays Bas aprcg la Guerre

BIBLIOGRAPHY 839

FRANCE

A. SIEGFRIED France, a Study in Nationality 1930

R. H. SOLTAN French Parties and Politics 1930

W. F. OGBURN and W. JAFF^ The Economic Development of

Post-war France 1930

D. S. SAPOSS The Labour Movement in Post-war France 1931
A. FONTAINE French Industry during the War 1926

SPAIN

S. DE MADARIAGA Spain 1930

F. B. DEAKIN Spain To-day 1924

H. R. G. GREAVES The Spanish Constitution 1933

ITALY

F. L. FERRARI Lc Regime Fasciste Italien 1928

C. HAIDER Capital and Labour under Fascism 1930

C. E McGuiRL Italy's International Economic Position 1926

G. SALVFMINI The Fascist Dictatorship in Italy 79.27
T. SILLANI, ed. What Fascism Is, and Why 1931

L. VILLARI The Expansion of Italy 1930
L. VILLARI The Fascist Experiment 1926

GREAT BRITAIN

A. SIEGFRIED England's Crisis 1931
A. SIEGFRIED Post-war Britain 1923
G. D. H. COLE British Trade and Industry, Past and Future

G. D. H. COLE A Short Historv of the British Working-Class

Movement re-issued 1932
W. DIBELIUS England revised edition 1930
F. A. OGG English Government and Politics 1929

RUSSIA

J. MAVOR Economic History of Russia revised edition 1925

C. B. HOOVER The Economic Life of Soviet Russia 1931

G. T. GRINKO The Five- Year Plan of the Soviet Union n.d.

M. H. DOBB Russian Economic Development since the Revolu-
tion revised edition 11931

M. S. MILLER Economic Development of Russia, 1905-1914
1926

L. TROTSKY History of the Russian Revolution, 3 vols. 1932-3

M. HINDUS Humanity Uprooted 1929

M. HINDUS Red Bread ?

840 BIBLIOGRAPHY

M. HINDUS The Great Offensive 7933
M. I. COLE, ed. Twelve Studies in Soviet Russia 1932
A. W. FIELD Protection of Women and Children in Soviet
Russia 1932

Part III. ECONOMIC CONDITIONS

G. D H. COLE The Intelligent Man's Guide through World

Chaos 1932
G. D H. GOLF, ed. What Everyone Wants to Know About

Money 1933
G. D H COLE British Trade and Industry, Past and Future

'932

A. L. BOWLEY The Economic Consequences of the War 2930
J. M. KFYNES The Economic Consequences of the Peace 1919
A. LOVED AY Britain and World Trade 1931

J H. RICHARDSON Economic Disarmament 1931

LFAGUE OF NATIONS The Course and Phases of the World

Economic Depression revised edition 1932
LEAGUE. OF NATIONS World Economic Survey 1932
SIR A. SALTLR Recovery 1932

SIR A. SALTER and others The World Economic Crisis 1932
SIR A. SALTER The United States of Europe 1933
ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS Agriculture, a

World Survey 1933

LEAGUE OF NATIONS The Agricultural Crisis, 2 vols. 1931-2
H. G. MOULTON and L. PASVOLSKY WTar Debts and World

Prosperity 1932

J. W. WHEELER-BENNETT The Wreck of Reparations 1933
L. PASVOLSKY Economic Nationalism of the Danubian States

1928

R. G. HAWTRIY The Art of Central Banking 1932
D. T. JACK The Restoration of European Currencies 1927
T. E. GREGORY The Gold Standard and its Future 1932
F. W. HIRST Wall Street and Lombard Street 1931
C. H. KISCH and W. A. ELKIN Central Banks revised edition 1932
H. H. TILTMAN Slump, a Study of Stricken Europe 1932
H. R. KNICKERBOCKER Can Europe Recover ? 1932
F. HENDERSON The Economic Consequences of Power-Produc-
tion 1931

H. V. HODSON Economics of a Changing World 1933
R. F. HARROD International Economics 1933

B. WHALE International Trade 1932

R. A. HODGSON An Introduction to International Trade and

Tariffs 1932
INTERNATIONAL LABOUR ORGANISATION Year Books

BIBLIOGRAPHY 84!

INTERNATIONAL LABOUR ORGANISATION Unemployment Prob-
lems in 1931 1931

[There are many important reports published by the League of
Nations and the International Labour Organisation in addition to those
mentioned above. Among the periodical publications of these bodies
may be mentioned the annual Review of World Trade and Production
(League of Nations). See also the Year Book of the International
Institute of Agriculture, and its yearly Reports on the Agricultural
Situation. There are also many useful supplements published by the
Economist, especially those dealing with German Debts and with the
World Economic Conference]

Part IV. POLITICAL SYSTEMS

A. HEADLAM-MORLEY The New Democratic Constitutions of

Europe 1929
M. W. GRAHAM The New Governments of Central Europe

H. J. LASKI Democracy in Crisis 1933

H. J. LASKI Liberty in the Modern State 1930

H. J. LASKI Communism 1927

J. S. BARNES The Universal Aspects of Fascism 1927

F. L. FERRARI Le Regime Fasciste Italien 79.27

J. STRACHEY The Coming Struggle for Power 1932

A. ROTHSTEIN, cd. The Soviet Constitution

N. LENIN The State and Revolution (various editions)

J. STALIN Leninism, a vols. 1932 and 1933

H. W. LAIDLER A History of Socialist Thought 1927

KARL MARX Capital (ed. G. D. H Cole) Everyman's Library

'933

SOCIALIST LEAGUE Problems of a Socialist Go\ernment 1933
H DL MAN The Psychology of Socialism 1928
G D. H. COLL The Next Ten Years in British Social and

Economic Policy 1929

F. DELAISI Political Myths and Economic Realities 1925
L. S. WOOLF After the Deluge 1931
[See also under the various countries]

Part V. INTERNATIONAL RELATIONS

The Peace Year Book

LEAGUE OF NATIONS Armaments Year Book
L. BLUM Peace and Disarmament 1932
P. J. NOEL BAKER Disarmament 1928

INTER-PARLIAMENTARY UNION What Would Be the Character
of a New War ? 1932

842 BIBLIOGRAPHY

D. P. MYERS World Disarmament 1932

N. ANGELL The Unseen Assassins 1932

N. ANGELL The Great Illusion new edition 1933

J. W. WHEELER-BENNETT Disarmament and Security since

Locarno 1932
UNION OF DEMOCRATIC CONTROL The Secret International

H. N BRAILSFORD The War of Steel and Gold 1914

H. N. BRAILSFORD If We Want Peace 1932

LEONARD WOOI.F, ed. The Intelligent Man's Way to Prevent

War 1933

S. H BAILEY The Framework of International Society 1932
R. L. BUELL International Relations 1931
P. B. POLTLR Introduction to International Organisation 1928
LEAGUE OF NATIONS Ten Years of World Co-operation 1931
F. V. MORLEY The Society of Nations 1932
J. L. BRIERLY The Law of Nations 1928
INTERNATIONAL LABOUR ORGANISATION The I.L.O. . The First

Decade 1931

INDEX

AALAND ISLANDS, 155
Abyssinia, 1 1 3
Agadir, 1 1 8
Agricultural exports, 441

— Mortgage Corporation, 779
Agriculture in various countries,

i39ff., 409 ff., 437 ff. See also

under each country
Air Fleets, 7 1 1 ff .
Albania, 188, 206 ff.

— agriculture, 206 f., 451, 453

— armaments, 707

— Fan Noli, 208

— history, 52, 118, 126, 207 f.

— l.L.O and, 797

— politics, 1 29, 1 30, 566

— population, 1 37

— religions, 207

— William of Wied, 207

— Zug, King, 208
Alsace-Lorraine, 30, 31, 103, 125,

129, 245 f., 303, 304, 306, 314
America, discovery of, 60 ii.

— South, and I.L.O., 795 ff.

and L. of N., 750 If, 756

monetary conditions, 497

Andorra, 129, 138

Argentine, 349, 441

Armaments, 14, 478, 480, 698 ff.,

821 f.

— expenditure, 699, 703

— socialisation of, 720 ff.

— traffic, 7 1 3 ff.

— See Disarmament
Armies, size of, 706 ff.
Arteveldes, van, 50

Australia and British Empire,
349, 350

— financial crisis, 481

— wheat, 440, 441
Austria, 216 ff.

— agriculture, 450, 452

— Anschluss, 2 1 8, 2 1 9, 65 1 f.

— armaments, 141, 703, 707, 708

— balance of trade, 458 f.

Austria, conditions after war, 399

— Constitution, 568

— Credit Anstalt, 274

— debts, 457 ff.

— Dollfuss, 220, 638, 647

— economic position, 457 ff., 746

— Fascism, 638

— foreign exchanges, 462

— Germany, relations with, 241,
651 f.

— Heimwehr, 220

— history, 46, 49

— imports and exports, 217,
428 f., 439, 459 f., 517

— industrial production, 51 1

— industrialisation, 140

— monetary conditions, 433, 469,

47 i > 474

— Nazis, 220, 651 f.

— Peace Treaties, 2 1 7

— political conditions, 129, 218 ff.,
566, 638, 651

— population, 137, 2i6f.
occupations,* 142

— prices, 431 ff., 441

— public finance, 217 f., 459

— railways, 517

— Socialism, 218 f., 220, 566

— tariffs, 539, 544, 546 f.

— unemployment, 509, 510

— Vienna, 54, 126, 131, 141,

2l6f., 2l8f.

— wages, 552
Austria-Hungary, break-up of,

125 ff., 188, 193 ff., 208 f., 218,
240, 248, 565, 745

— history, 76, 77, 90, 92, 100,
101, 102, 103 f., 105, 117, n8f.,
121, 123

Austro-German Customs Union,

219,546
Avars, 32
Aviation, civil, 742, 778, 779

BAKUNIN, M., 676

844 INDEX

i

Balkan States, 27, 103 f., H7ff.,
i86ff.

— Wars, 118 f., 180, 181, i88ff.
Baltic Barons, 49, 1 58, 1 60 f.

— States, 147, 753

Bank for International Settle-
ments, 489

Banks, Central, 150, 478, 489,
491 ff. See also Monetary policy
and under countries

— State control of, 81 1 f.
Barley, 445 ff
Belgium, 291 ff.

— agriculture, 293, 450, 452

— armaments, 707, 708, 7 1 1

— Bonus, Dr., 295

— Communism, 566

— conditions during war, 295, 396

— Congo, 113, 296

— history, 76, 92, 99, 100, 292,
293 f. See also Flanders

— import restrictions, 467

— imports and exports, 293, 429,

438 f-, 455, 517, 523, 534

— industrial development, 1 04 f ,
I39f>> 292 f., 520 ff.

production, 406, 51 1

— I.L.O. and, 794, 797

— machine trades, 526 f.

— monetary conditions, 433, 469,

47i, 497

— nationalities, 129, 294 f.

— Peace Pacts, 723

— Peace Treaties, 125, 294

— political conditions, 129, 295 ff.,
566

— population, 137, 292, 344
occupations, 142

— prices, 431 ff.

— Socialism, 295 f., 366

— steel trade, 524 ff.

— tariffs, 539, 540, 544, 550

— transport, 517

— unemployment, 508 ff.

— wages, 551 ff., 554 ff.

— wealth, national, 345
Bentham, J., 80
Bergen, Treaty, 7609, 58
Berlin, Treaty, 1878, 104, 112, 117,

180

Bessarabia, 92, 103, 104, 125,
179, 1 80, 182, 183, 1 86, 375

Black Bourse, 469
Bohemia, 48, 59, 76, 225
Bosnia-Herzegovina, 52, 104, 118,

126, 1 88, 193, 194
Bourgeoisie, petite, 302, 607 f., 694
Brest-Litovsk, Treaty, 1918, 123,

153, 160, 163, 379, 565
Bucharest, Treaty, 1913, 1 1 8
Bulgaria, 188 ff.

— agriculture, 139, 189 f., 438 f.,
446,451,453,454

— armaments, 703, 707

— balance of trade, 459 f.

— Communism, 192, 566

— debts, 457 ff.

— Dedeagatch, 189

— economic position, 457 ff.

— foreign relations, 745, 773

— history, 27, 36, 104, 117, 118,
124, 126, i88f., 191 f.

— imports and exports, 190, 429,
459> 4^0

— I L.O. and, 797

— Liupchev, 192

— minorities, 1 92

— monetary conditions, 433, 471

— political conditions, 129, 1 92 f ,
566

— population, 137 f
--- occupations, 1 42

— prices, 431 ff.

— public finance, 459

— refugee problem, 128, 191

— religions, 192

— Socialism, 192, 566

— Stambuhski, 132, 192 f.

— tobacco trade, 474

— Tsankoff, 192
Butter trade, 450, 454 ff.

CALVIN, 59 f.

Canada, agriculture, 412, 441,
444, 445

— and British Empire, 7$., 349,

— British investments in, 367

— I.L.O. and, 795

— L. of N. and, 756

— prices, 412,415,431

— wages, 552

Capital movements, 109 f., 421 ff.,
457 ff., 464 f., 489

Capitalism, growth of, 63 ff.,
104 ff., io8ff.

— outlook for, 817 ff., 829 ff.

— planned, 831
Catholic Parties, 260, 566 f.
Cattle trade, 452, 454
Cecil, Lord, 749
Charlemagne, 26, 27, 29 ff., 32,

34,35
Charles V, 46, 58

— Martel, 26
Cheese, 450, 455

Chemical industry, 527 f, 718 f.

— warfare, 7 1 8 f.
Chile, 797

China, armaments, 721

— cotton industry, 529

— and gold standard, 537

— and Great Powers, 114, 115

— and L. of N., 750, 754
Church. See Papacy, Greek, etc.
Class-divisions, 692, 694 ff.

Coal production, 51 1, 513

— stocks, 4 1 7

— trade competition, 305

— wages, 555
Cobbett, W., 89, 95
Coffee, 417

Combination, industrial, 434,

531 ff., 809 ff.

Commercial Treaties, 542 ff
Communism, 14, 145, 504 f.,

568 ff., 592, 601, 652 ff., 751 f.

See separate countries

— and peasants, 662 ft.

— and Socialism, 670 ff., 684,
692 ff.

— and the State, 667 ff

-- and world revolution, 665 ft.
Communist Manifesto, 100, 675, 68 1
Communist Parties, 566 f. See

Russia
Constantinople, 26, 27, 28, 32,

46» 52

Constitutions, post-war, 565 ff
Co-operative Movement, 659
Copper, 41 7

Cosmopolitanism, 823 f , 832 ff.
Cotton industry, 527 ff.

— raw, 417, 447
Credit, 477 ff.
Crimean War, 103, 106

INDEX 845

Crusades, 35, 36, 47, 51 •

Currencies, movements of, 433,

435

— stabilisation, 311, 400, 433, 536

— See Monetary conditions and
under each country

Cyprus, 104
Czechoslovakia, 224 ff.

— agriculture, 140, 229, 450, 452

— area, 224 f., 226

— armaments, 706, 707, 711

— balance of trade, 459

— Benes, Dr., 225, 230, 725, 735

— Communism, 232 f., 566

— Constitution, 568

— debts, 457 ff.

— during war, 123, 124, 225 f.

— economic position, 457 ff.

— foreign policy, 226 f., 728

— Germany, relations with, 241

— history. See Bohemia

— import restrictions, 467

— imports and exports, 228, 229 f.,
428 f., 459 f., 517, 520 ff., 534

— industrial development, 140,
228 f., 520 ff.

production, 406 f., 51 1

— I.L.O. and, 797

— Masaryk, 123, 225

— minorities, 148, 230 f.

— monetary conditions, 433, 469,

47i

— Peace Pacts, 725

— political conditions, 129, 231 ff.,
566, 578

— population, 136 f., 224
occupations, 142

— prices, 41 5, 43 1 ff., 435

— public finance, 459

— railways, 517

— religions, 230

— Socialism, 232 f., 566

— steel industry, 514

— Stefanik, 225

— textile trades, 530

— unemployment, 508 ff.

— wages, 553, 555, 556

— wheat trade, 438, 439, 441,
446

DANUBIAN STATES, TARIFFS, 542,
545 ^

846 INDEX

Dalizig, 126, 129, 137, 138, 170 ff.
Dawes Plan, 266 ff., 276 f., 408,

426, 644
Debts, European, 14, 278, 419,

424 ff., 436 f., 456 ff., 469,

470 ff., 480 f., 484, 495, 779,

812 £.,830

Deflation, 399 f, 485 ff.
Defoe, D., 69, 70, 85
Denmark, 280 f., 287 ff.

— agriculture, 140, 289 f.

— armaments, 707, 709, 7 1 1

— bacon prices, 449

— butter, 449, 450, 454 ff.

— Canute, 35, 281, 288

— Communism, 566

— Co-operation, 289 ff.

— economic conditions, 348,
454 ff.

— Grundtvig, Bishop, 289

— history, 92, 100, 102, 124, 125,
288

— imports and exports, 290 f.,

429,439,517

— I.L.O. and, 795, 797, 798

— meat trade, 452, 454

— monetary conditions, 290, 433,

469,471

— politics, 129, 291, 566

— population, 137, 288
occupations, 141 f.

— prices, 431 ff.

— religions, 288

— Socialism, 291, 566

— Sweyn, 288

— tariffs, 539, 540, 544

— unemployment, 509

— wages, 553, 554, 556

— women's suffrage, 573
Devolution, 827 f.
Dictatorship, 129, 412, 565, 569
Disarmament, 698, 701, 748, 767

ff., 821. See Armaments

— Conference, 14, 704 f., 723 ff,
734 ff., 752, 768 ff., 777, 779,

785

— L. of N. and, 722 ff.
Dissolution, right of, 575
Dominican Republic, 797
Dorpat Treaty, 1920, 154, 158
Drug traffic, 798
Dyestuffs Act, 528

ECONOMIC NATIONALISM, 537 ff.
Economy, public, 478 ff., 503, 60 1
Eggs, trade in, 450
Electrical industry, 512, 515
Engels, F. See Marx
Entente Cordiale, 117, 361
Estonia, 157 ff.

— agriculture, 139, 157, 451, 453,

455

— armaments, 707, 709, 7 1 1

— Communism, 1 58

— Constitution, 571

— foreign relations, 147, 159

— history, 127, 157

— imports and exports, 157, 428 f.

— I.L.O. and, 798

— monetary conditions, 1 59, 433,

469».47i

— nationalities, 148, 157

— politics, 129, 159, 566

— population, 137 f., 157
occupations, 1 42

— prices, 431 ff.

— Reval. See — Tallinn

— Socialism, 566

— Tallinn, 151, 158

— wages, 553

Europe, agriculture, 20 f., 23, 105,
107, 139 f., 149, 152, 410, 437 ff.

— area, 135

— armaments, 698 ff

— coalfields, 22

— Constitutions, post-war, 565 ff.

— description ot, 17 ff., 124 ff.

— Eastern, 143 ff., 148, 362, 402,

404, 457 ff., 790

dictatorships in, 569

monetary conditions, 469 ff ,

498 ....

— economic conditions during
and after war, 13, 23 f., 362,
396 ff.

— Governments and parties, 566 f.

— history, 25 ff.

after Waterloo, 90 ff.

Dark Ages, 27 ff.

Medieval, 35 ff.

— industrialisation, 104 ff, 519 ff.

— industries during slump, 598 ff.

— L. of N. and, 755 ff.

— monetary conditions, 433,

467 ff.

INDEX

847

Europe, overseas expansion, 72 ff.

— political status of countries,
129

— population, 1 35 ff.

occupations, 22 f., 139 ff.

— prices, 433

— production, post-war, 401 ff.,
408

— railways, 1 50 f.

— trade, post-war, 402, 408,

427 ff., 520 ff.

— transport, 21 f., 150 f, 776 ff.

— United States of, proposed,
143 ff., 366, 778 ff., 785 f-

European Union, Committee for,
143, 547 ff., 778

— War, 1914-18, 121 ff.

FASCISM, 14, 132, 145, 333, 336,
504 f., 569, 584 f., 781 ff. See
Germany and Italy

Federalism, 139

Feudalism, 39 f., 47, 50, 64

Finland, 152 ff.

— agriculture, 139, 155, 455

— armaments, 156, 707, 709, 711

— Civil War, 1918, 153

— Communism, 1 53 f.

— Diet, 152, i53f.

— eastern frontier, 147

— foreign relations, 1 56

— history, 76, 92, 127

— imports and exports, 1 55 f ,

428 f.

— lakes, 1 9 f.

— Mannerhein, Gen., 153 f.

— monetarv conditions., 1 56, 433,

435>469»47I

— National Strike, /ooj, 1 52

— nationalities, 148

— political conditions, 129, 566

— population, 137
occupations, 141 f

— prices, 431 f.

— Republic, proclamation of, 153

— Russia, relations with, 152 f.,

154 ..
• — Socialism, 153 f., 566

— Swedes in, 155

— tariff, 155

— timber trade, 1 55

— wages, 553

Finland, White Terror, 153 •

— women's suffrage, 573
Flanders, 29, 40, 41, 43, 46, 50 f.,

58. See Belgium and Holland
Flax trade, 447
Foodstuffs, demand for, 416 ff. See

Agriculture
Foreign exchange, control of,

461 ff., 538 ff.
Four-Power Pact, 1933. 775
France, 299 ff., 602 ff.

— Action Franfaise, 576, 603

— African possessions, 114, 117,
1 1 8, 303, 305, 367

— agricultural conditions, 140,
301 f., 305, 459, 452, 454

-- co-operation, 303

-- imports, 438 ff., 450, 452,

— Alsace-Lorraine. See Alsace

— armaments, 699, 701, 702 ff.,
706 ff.

— and Austro-German Customs
Union, 547

— balance of trade, 430

— Bank of France, 309

— birth-rate, 303

— Blanc, L., 101

— Blanqui, A., 676

— Bloc National, 3 1 3

— Bordeaux, 301

— Bnand, 120, 143 f., 313, 602

— Camelots du Rot, 586, 603

— capital exports, 367

— Cartel des Gauches, 603

— Charles X, 99, 300

— chemical industry, 305, 528

— Clemericeau, 602

— coal imports, 305
-- industry, 304

— Gomitf des Forces, 301, 607, 716

— Commune, Paris, 1871, 112,
300, 652, 677

— Communism, 300, 566, 606,
608 f.

— C.G.T., 687

— Constitution, 133, 573

— cotton industry, 304, 306

— currency, 310 ff.

— Daladier, E., 309, 314, 602,
605, 691

— debts, 308, 313, 813

848 INDEX

France, depression, effects of, 306

— disarmament policy, 3 1 2
723 ff., 733, 740 if.

— electricity, 305

— Empire, Second, 300

— foreign policy, 116 f., 143,
728

— Germany, relations with, 3 1 3 f.

— gold, 309, 311

— Governments since war, 602

— Henry IV, 57, 75

— Hernot, E., 313, 604, 691

— history, 29, 32, 39, 44 f., 49,
54, 56, 57, 74 f-» 76 ff., 90 ff.,
98, 99 ff., 102 f., 299 f., 360 f.

— Huguenots, 57

— immigration, 303

— import restrictions, 467

— imports and exports, 305, 306,
428 f., 517, 520 f., 523,534

— industrial development, 104 f.,
1 08, 140, 301, 304, 520 ff.

production, 406, 510 ff.

— inflation, 310 f., 399

— I.L.O. and, 794 ff.

— iron deposits, 304

— Joan of Arc, 45

— Laval, 313, 603 f., 6oG

— Lille, 306

— Louis XI, 45

XIV, 57, 75, 314

-- XVI, 77, 78

XVIII, 84, 90, 92

Philippe, 99 f., 300

— Lyons, 41, 300, 301

— machine industry, 512, 526 f.

— Marseilles, 301

— monetary conditions, 310 ff.,

433,469*471,497
policy, 484, 486 f.

— motor-car industry, 306, 527

— Napoleon I, 48, 75, 77, 82 ff ,
90, 104, 105, 243, 292 f., 299

Ill, 101 ff , 106, 300, 677

— Parliamentarism, Go6 ff.

— parties, 603

— Paul-Boncour, J , 691

— peasantry, 302 f.

— petite bourgeoisie, 302, 607 f.

— Poincare, R., 133, 313, 602,
605, 728

— Poland, treaty with, 726

France, political conditions, 129,
I31, S6^, 575 ff., 602 ff, 691

— population, 136 f., 300, 303,

304
-- occupations, 141 f., 301

— potash deposits, 303, 304

— prices, 310, 415, 431 ff, 435

— Proudhon, P. J., 676

— public finance, 308 ff.
-- works, 307

— Radical-Socialists, 313, 603 f.,
608

— railwavs, 5 1 7

— rentiers, 302, 310 f, 606, 816

— Republic, Third, 300

— Revolution, 77659, 67, 68, 77 ff ,
299, 302

-- 1830, 300
-- 1848, 300

— Royalists, 606

— Ruhr, occupation of, 313, 602.
See Germany

— Russia, investments in, 311

— Saar. See Saar

— Schneider, 716. See Schneider-
Creusot

— security, demand for, 312, 314,

— shipping, 517

— silk industry, 306

— Socialism, 300, 566, 603, 604 f ,
608 f, 676, 682, 691 f., 821

— steel industry, 304 f., 524 ff.

— sugar, 305

— Syndicalism, 688

— Tardicu, 313, 603, 606

— tariffs, 1 06, 1 08, 308, 539 f.,

546

— tax system, 309

— textile industries, 306, 512,

529 *•

— Thiers, 300

— Trade Unions, in, 120, 687

— unemployment, 304, 306 f.,
508 fl , 608

— wages, 551 ff, 554 ff.

— water-power, 305

— wealth, national, 345

— wheat production, 305

— wine trade, 305, 306
Franchise in post-war Europe,

573 ^

Franco-Prussian War, /5/tf, 103,

1 08, 112, 245, 300
Frederick Barbarossa, 47
— II, Emperor, 48 ff.
Free Trade, 94, 97, 105 f., 245,

351 ff., 521 f. See Tariffs
Frontiers, political and economic,

150
Fruit, production and trade, 447,

450 f.

GENERAL ACT, 730 if
Geneva Protocol, 725 f.
Genoa Conference, 546
Germany, 233 ff., 638 ff.

— agricultural imports, 438 f.,
450, 452, 454 ff.

— agriculture, 107, 140, 236 ff.,
239, 243 f., 245, 450, 452, 454

— Alsace-Lorraine Sec Alsace

— Anschluss, 651 f.

— area, 238

— armaments, 1 16, 699, 700, 703,
705, 706 ff , 716, 721, 821

claim to equality, 649, 739,

744, 821

— Armistice, 233 f.

— Austria, relations with, 241,
245, 647, 651 f.

— Axelrod, 257

— balance of trade, 270, 430, 463,

4&5

— banking crisis, 274 ff., 466, 81 1

— Bauer, G , 256, 258

— Bavaria, 92, 98, 24 o, 263, 269,

<>43

— Bavarian People's Party, 271,
273» 647

Revolution, 131, 256 f.

— Bebel, 677

— Bismarck, 102, 103, 106, 117,
245, 814

— Brandenburg, 49, 65

— Brown Army, 640

— Bruning, 133, 273, 274, 645 f.

— Brunswu k, 239

— capital, export of, 367, 464
import of, 267 11 , 270, 277,

422, 425, 464 f., 644

— cartels, 809

— Catholicism, 240, 642, 647

INDEX 849

Germany Centre Party, 254, £56,
260 ff., 271 ff., 645, 647

— chemical industry, 527 f.

— coal industry, 239, 246, 513

— colonies, 1 25, 247, 294, 367

— Communism, 257 ff., 261 f.,
270 ff., 566, 640, 643

— co-operation, 237

— Cuno, 261, 263

— Danat bank, 275

— Dawes Plan. See Dawes Plan

— debts, 265, 267 ff , 463 ff,

813

— Democratic Party, 254, 257,
259 f., 271 ff.

— Deutsche Volkische-Freiheits-bewe-
gung, 643

— Ebcrt, 250, 255, 273

— economic conditions, post-war,

270 f-, 399> 464 ff.

— Eisner, K., 256

— Elbe, 237, 243

— emigration, 238

— Empire, pre-war, 102, 103,
114, 234, 242 ff.

— enclosures, 244

— Erzberger, 262, 263

— Evangelical Church Union,
240, 647

— Farbemndustrie, I. (7., 718

— Federalism, 139

— Fehrenbach, 258, 261

— Franco-Prussian War. See
Franco-Prussian

— Frederick the Great, 76, 243,
244

— Frederick William, 243

— French Revolution, effects of,
243 f.

— General Strike of 1920, 257

— geography, 236 ff., 240

— German Working Men's Associ-
ation, 676, 677

— Gessler, 269

— Gilds, 242, 244

— Gobbels, 642

— Goring, 642, 647

— Great Britain, rivalry with, 36 r

— Hamburg, 240

— Hilferdmg, 645

— Hindenburg, 251, 273, 641,
645 f.

850 INDEX

Germany, history, 36, 46, 47 f.,
49 £> 55 f-» 59, 76, 92, 102 f.,
116, 117, 118, 241 fF.

— Hitler, 130, 131, 269, 640 ff.,
644, 646 ff.

— Hoover Moratorium. See
Hoover

— Hugenburg, 647

— import restrictions, 466, 646

— imports and exports, 239, 246,
247, 270, 278 ft, 409, 428 ff.,
463 ff., 517, 520 ff, 523, 534 f.,

645

— industrial development, 1 05,
140, 238 f., 242, 245 f.

production, 406, 408 f.,

510 ff.
resources, 239

— inflation, ^64 ff, 399 f., 813

— I.L.O. and, 792 ff, 796, 798,
800

— iron resources, 239, 245, 246

— Jews, and Nazis, 642, 647

— Junkers, 237, 246

— Kahr, von, 269

— Kapp Putsch, 257 f., 259, 262,

643

— Kiel Naval Mutiny, 249, 252

— Lassalle, 676 ff.

— Lausanne Agreement. See
Lausanne

— L. of N. 'and, 726, 756, 772,

773

— Liebknecht, K., 251 ff.

- W.,677

— Lipp, 256

— List, F., 1 06, 245

— Locarno. See Locarno

— Ludendorff, 269, 643

— Luther, 267

— Luttwitz, von, 257

— Luxemburg, Rosa, 252

— machine industry, 513, 526

— Marx Government, 262, 267

— Max of Baden, 249, 250

— military strategy, 247, 252

— monetary conditions, 264 ff,
433*466,469,471,474

— motor-car industry, 527

— Miiller, 258, 272

— Munich, 256 f., 262, 643
•"• municipal reform, 244

Germany, Napoleon, influence of,
243 f.

— National Assembly, 254 f.

— Nationalist Party, 254, 271 ff,
646 f.

— Nazi coup, 1933, 234, 361,

646 ff.

— Nazis, growth of, 261, 269 ff.,
569, 643 ff.

policy of, 279 ff, 640 ff.,

647 ff, 781 f., 818, 821

— Noske, 249, 254, 256 ff.

— Otto I, 38, 48

— pan-Germanism, 643

— Papen, von, 646 f.

— Peace Pacts, 726 ff.

— Peace Treaties, 255 f., 262, 263,
268, 426, 649 f.

— Peasants' War, 55

— People's Party, 254, 261, 263,
271 ff, 645

— Poland, relations with, 167 ff.

— Polish Corridor. See Poland

— political conditions, 1 29,
250 ff, 566, 579 f.

— population, 136 ff, 238, 239
occupations, 141 f.

— potash, 239

— Preuss, 255

— prices, 264 ff, 415, 431 f.

— Prussia, 65, 76, 77, 92, 234,
238 ff, 242 ff., 260

— Raffeisen banks, 237

— railways, 516 f.

— Rapallo Treaty. See Rapallo

— Rathenau, 262 f., 264

— rationalisation, 267 f., 270, 276

— Reichsbank, 264, 274 f., 466

— Reichsbannery 263

— Reichsmark, 266

— Reichstag Peace Resolution, 248,
262

— Reichswehr, 641

— religions, 239 f.

— Rentenmarky 266

— Reparations. See Reparations

— Republic, post-war, 133, 234,
237» 250 ff, 255, 258 ff, 271 f.,
568, 643, 648 f.

proclamation of, 250

— revolution of /p/#, 249 ff.,
252 ff, 261, 565, 660 f.

Germany, Rhineland,g2, 240,267

— Ruhr, industries, 239

occupation of, 263 ff., 267,

269, 727, and see France
rising in, 258

— Saxony, 48, 239, 269
rising in, 262

— Schacht, 642, 645

— Scheidemann, 250, 255, 256

— Schleicher, von, 646

— Seeckt, von, 270

— serfdom, 105, 242 ff.

— shipping, 516 f.

— Social Democrats, 250 ff.,
257 ff., 270 ff., 660, 677 f., 681 f.,
690 f.

— Socialism, 252 ff, 255, 566,
640, 643, 648 f., 676 ff.

— Socialists, Independent, 252 ff.,
256, 258 f., 271, 661

— Spartacists, 252 ff, 255, 259,
66 1

— Stahllielm, 641, 647

— Standstill Agreements, 275,
276, 466

— State control, 275 f , 81 1 f., 814

— steel industry, 245 f., 514,
524 ff., 811

— Strasser, G., 642

— Stresemann, 261, 267, 426

— strikes, wartime, 252

— submarine campaign, 248

— tariffs, 1 06, 107 f , 244 ff.,

539 f-» 545 ^

— territorial losses, 124 ff., 238

— textile industiies, 512, 328 ff.

— Thirty Years' War, 56, 59, 243

— Thurmgia, 239

— Trade Unions, 1 1 1, 252, 257 f.,
566 f , 647, 793

Catholic, 258, 260

— unemployment, 276, 279,
501 f., 505, 507 ff, 560, 645

— Upper Silesia, 150, 239 f., 262,
264, 650

— wages, 265, 279, 551 ff., 818

— war, internal conditions dur-
ing, 248 f., 396

policy during, 121 ff., 247

— wealth, national, 345

— Weimar, 255

— wheat prices, 441, 442

INDEX 851

Germany, wheat production, ^.41

— Wilhelm II, 103, 114, 117,

— Wirth, 261,262

— Workers' and Soldiers' Coun-
cils, 255, 257, 259

— Young Plan. See Young Plan

— Zeii^ner, 269

— Zollverein, 102, 242, 244. f.
Gilds, medieval, 40 ff, 64 f., 245
Gold Exchange Standard, 497

— Standard, 488 ff. See Cur-
rency and Monetary policy

— supply, 496 ff.
Goltz, von der, 158, 160
Gradualism, 593 ff.

Great Britain, 344 ff., 585 ff.

— agricultural imports, 438 ff.

— agriculture, 86 f., 140, 346,

352, 44i
regulation of, 357, 81 1

— Alfred the Great, 30

— area, 136, 344

— armaments, 699, 701, 702 ff.,
705, 706 ff.

— Asquith, H. H , 589

— Baldwin, S., 592

— balance of trade, 354 f.

— Boer War, 1 14

— Capital exports, 367 ff.

— Chamberlain, J., 353

— Charles I, 57, 69

— Chartism, 96 f., 695

— chemical industry, 347, 527 f.

— Civil War, 56 f.

— class divisions in, 69 ff., 694 ff.

— coal industry, 305, 347, 513,
811

— Communism, 586, 60 1

— Conservatism, 353, 358 ff.,

587 ff.

— Constitution, 574

— deflation, 408

— disarmament, 723 ff., 733,

737 ^

— Dyestuffs Corporation, 718

— economic conditions during
war, 395 f.

— Edward I, 43, 44

— Egypt and, 100, 1 14, 1 1 7

— electrical industry, 347, 810,

852 INDEX

Groat Britain, Emergency Powers
Act, 133

— Empire trade, 348, 349 ff., 433,

448 f-, 455> 784 f-

— Fascism, 586

— Foreign policy, 360 ff.

— George, Lloyd, 589 f.

— Germany, investments in, 466

— gradualism, 593 ff.

— Hardie, Keir, 591, 679

— history, 43 f., 56 f., 68 ff., 73 f.,
78 f., 85 ff., 35 iff., 359 ff,
366 ff.

— Imperial Chemical Industries,
718

— imports and exports, 346 ff.,
428 f., 517, 520 ff., 523, 534, 535

— Imperialism, 349 ff., 353, 362,
364 f., 366 ff.

— I.L P., 580, 589,591,679

— industrial development, 1 39,
140, 345 ff., 520 ff.

production, 406 f., 408,

510 ff.

— Industrial Revolution, 85 ff.

— I.L.O. and, 794, 796, 798, 800,
805

— John, King, 39, 44

— Labour Go\ ernments, 593 ff.
Party, in, 359 f, 574,

587 ff., 591 ff., 679, 691

— Liberal Party, 353, 358 ff,
587 ff, 590 f., 594

— loans to Europe, 367, 423

— MacDonald, J. R., 594 ff

— machine production, 347, 512,
526 f.

— Maxton, J., 60 1

— monetary conditions, 357, 433,
469, 47% 4?7, 488 ff.

— Mosley, Sir O., 60 1

— motor-car industry, 527

— National Debt, 69, 813

— Parliamentarism, 565 ff., 596 ff.

— Peace Pacts, 725 ff.

— political conditions, 1 29, 566,
574 ff., 585 ff.

— Pollitt,H.,6oi

— population, 136 f., 344
occupations, 140 ff.

— prices, 119, 414, 415, 431 ff.,
435

Great Britain, railways, 517, 810

— Reform struggle, 88 ff., 94 f.

— Russia, relations with, 362,
379 f., 382, 386 f., 592, 594

— shipping, 517

— Socialism, in, 360, 566, 677,
679 f., 682, 686 ff, 691 ff.

— steel industry, 347, 81 1

— Stephen, King, 44

— tariffs, 107, 1 08, 350 f., 351 ff,

537, 539> 540, 541, 543> 592,
811

— textile exports, 346 f.
production, 512, 528 ff

— unemployment, 408, 501 ff.,
508 ff, 560

— wages, 1 19, 357, 551 ff, 554 ff.

— war, gains in, 1 25

— wealth, national, 345

— wheat prices, 43 1 f.

production, 346,, 441

quota, 357

— William I, 43, 44
Ill, 69

— working-class conditions in
nineteenth century, 95 fl , 1 1 1 ,

"9
Greece, 199 fl.

— agriculture, 139, 204 f., 450,

452

— Alexander, King, 203

— area, 200 f.

— armaments, 707, 709, 71 1

— Constantine, King, 202 ff.

— Crete, 117, 1 1 8, 202

— debts, 457 fl.

• — economic position, ^57 ff.

— George I, 202
II, 204

— history, 26, 52, 98, 117, 118,
200 ff.

— imports and exports, 429, 450,

452, 459

— industries, 205

— Italy, relations with, 199 ff.,

336

— minorities, 201

— monetary conditions, 433, 462,
469 ff.

— Pangalos, Gen., 204, 205

— peace settlements, 125, 199 ff,,
203

Greece, political conditions, 129,
130,204,566

— population, 137, 201
occupations, 141 f.

— prices, 431 ff.

— public finance, 205 f., 459

— Refugee Loan, 205
problem, 128, 201, 203

— tobacco industry, 474

— Vemzelos, E., 202 f., 204

— wheat imports, 439
Greek Orthodox Church, 27
Gregory VII, 48

Group system, 575 ff.

Guild Socialism, 120, 687 ff.

HAGUE COURT, 725, 729, 731, 760
Hansa towns, 49, 51, 65
Health, public, 798
Henderson, Arthur, 723, 734
Henry IV, Emperor, 48
Holland, 291 f., 296 if.

— agriculture, 140, 296 f., 450,

452

-- - armaments, 703, 705, 707, 709,
711

— butter trade, 454 f.

— colonies, 298

— Communism, 566

— history, 62, 73 f., 75, 99> !<*>,
124, 298. See also Flanders

— import restrictions, 467

— - imports and exports, 297, 429,

45°> 452, 5*7

— industrial development, 140,

-'97, 520
production, 51 1

— I L O. and, 796

— investments in Germany, 466

— machine industry, 526

— meat trade, 455, 456

- - monetary conditions, 433, 469,

47^497 or

- - political conditions, 129, 290 1.,

566, 581

— population, 137, 296, 344
occupations, 140 ff.

prices, 431 ff., 435
—- religions, 299

— shipping, 517

— Socialism, 566

- tariffs, 539 f., 544» 55"

INDEX 853

Holland, Trade Unions, 299 '

— unemployment, 508 ff.

— wages, 552, 555

— wheat imports, 439

— William of Orange (III), 298
I, 298

the Silent, 58, 298

— women's suffrage, 573
Hoover Moratorium, 276 ff., 466
Hours of labour, 797 ff.
Hungary, 2 1 o ff.

— agriculture, 139, 213 f., 445 ff.,

45i, 453*-

— area, 2 1 2

— armaments, 703, 707, 708

— balance of trade, 458 ff.

— Buda-Pesth, 215

— capital imports, 422

— Communism, 2 1 1

— Constitution, 568, 571

— economic position, 457 ff.

— foreign exchange, 462

— Hapsburg restoration, attemp-
ted, 211 f., 728

— history, pre-war, 49, 51, 76,
93, 100, 101, 208, 210

post-war, 131, 2 1 o ff.

— Horthy, 1 30, 2 u

— imports and exports, 214, 428 f.,

459 f. A .

— industrial production, 51 1

— Karolyi, 210

— Kossuth, 100, 210

— Kun, Bela, 2 1 1

— L. of N. loan, 2i4f.

— minorities, 2 1 2 f.

— monetary conditions, 433, 469,
471

— Peace Treaties, I26f., 128,
212 f., 215 f., 773 •

— Peidl,2ii

— political conditions, 129, 566
position, 1 30, 746

— population, 137 f., 212
occupations, 142

— prices, 431 ff.

— public finance, 214 f., 457

— Socialism, 2 1 1 , 566

— tariffs, 539, 541

— unemployment, 509

— wages, 553

— wheat trade, 438 f., 441

854 INDEX

ICELAND, POLITICAL CONDITIONS,

129, 566
status, 127, 280, 287

— population, 137, 142

— Socialism, 566

— Socialist International boycott,
211

Imperialism, 24 f., 108 ff., 366 ff.,

669,810, 832 ff.

Import restrictions, 467 ff., 536 ff
Imports and exports. See under

separate countries
India, armaments, 706 f.

— British Empire and, 113, 349,
364 ff., 787

— cotton industry, 364 f., 529

— I.L.O. and, 795, 797

— Nationalism, 365 f.
Industrialisation in various coun-
tries, isgff.

Inflation, 264 ff., 310 f., 399 f.,

421, 493, 813
Innocent III, 39
Interest rates, 478, 481
International, First, 112, 676f.

— Labour and Socialist, 211, 684

— Labour Organisation, 758,
790 rf.

and wages, 552, 555

— Socialist Bureau, 120 f., 681

— Third, 385, 386, 683

— "Two and a Half, "684

— Working Men's Association,
1 12, 676 f.

Internationalism, 747, 776 ff.,

823 ff.
Ireland, 362 ff.

— agriculture, 107, 139, 363, 451,

453

— armaments, 707, 71 1

— butter trade, 455

— de Valera, 363 f.

— Free State Constitution, 362,

V1

— imports and exports, 263, 439,

520

— I.L.O. and, 797

— L. of N. and, 756

— meat trade, 453 f.

— political conditions, 566
status, 100, 121, 129, 138,

362 ff.

Ireland, population, 137, 142

— Socialism, 566

— unemployment, 363, 509

— wages, 553
Italy, 336 ff., 6ioff.

— Abyssinia, 1 1 3

— afforestation, 340

— agricultural conditions, 1 39,

337, 34i, 450, 452

development, 338, 342

exports and imports, 338

— Albania, relations with, 207 f.

— anarchism, 344

— armaments, 699, 701, 702 ff.,
706 ff.

— Avanti, 619

— balance of trade, 340

— Banco Commerciale^ 633

— Gaporetto, 619

— Catholics. See Popolan

— Cavour, 101, 614

— colonies, 336 f., 618

— Communism, 622, 623

— Consorzio Mobihare Finan&ario,

633

— Constitution, before Fascism,

343
under Fascism, 625 ff.,

634 ^

— Constitution of Carnaro, 628

— Co-operative Movement, 341

— Corporations, Fascist, 630

— Corporative State, 626 ff.

— Dalmatia, 125, 126

— d'Annunzio, G., 622, 628

— debts, 813

— disarmament, attitude to, 723,

733. 737

— Dodecanese, 118, 199 ff, 336

— Dopo Lavoro, Institution di,

342
— di

rainagc schemes, 338

— Emigration, 339

— Fascism and Guild Socialism,
628 f., 63 if.

and Nationalism, 620, 627

and Socialism, 628 ff., 631 f.

and the class-struggle, 629,

637 f.
economic policy of, 629 ff.,

811
early programme of, 620

Italy, Fascism, policy of, 339, 340,
342, 6i6ff., 624 f., 781 f.

philosophy of, 6 1 7 f.

rise of, 569, 6ioff., 616 ff.,

622

supporters of, 342, 619, 623,

633> 637

— Fascist coup d'Jtat, 132, 343

Grand Council, 634 f.

Party, 619, 623, 633, 634 ff.

Trade Unions, 341, 630 fi.

— Fiume, occupation of, 125, 622,
628

— Florence, 46, 47

— Garibaldi, 101

— Gentile, 628

— Giolitti, 584

— Grain Commission, National,

33«

— Hegehamsm, 628, 637

— history, 28, 32, 40, 46 f., 76,
99, 100, joi f., 1 16

— Idea Nazionale, 623

— illiteracy, 343

— imports and exports, 337, 338,
342, 428 f., 450, 452, 454, 517,
521 ff., 534

of capital, 340

— industrial development, 139,
520 ff.

— — resources, 337

— industrialists, attitude of, 343,
623,633 t

— Institute Mobiliare Italiano, 632,
811

— I.L.O. and, 793, 794, 796, 798,

799

— King, attitude of, to Fascism,
624

— March on Rome, 343, 624,

— Matteotti, murder of, 626, 630

— Mazzini, 94, 99, 614, 676

— metal factories, occupation of,
621

— Milan, 46, 47

— minorities, 1 25, 1 28

— monetary conditions, 433, 469,

471 ' . j

— motor-car industry, 337, 527

— Mussolini, B., 130, 131, 343,
344, 619 fi., 636

INDEX 855

Italy, Parliament under Fascism,
625 ff., 634 ff.

— Parliamentarism, 343 f., 584 f.

— Peace Treaties, attitude to,
124, 125, 126

— political conditions, 1 29, 566

— Popolari, 584, 618, 624

— Popolo d* Italia, 619

— population, growth of, I36f.,
338 ff.

occupations of, 142

— prices, 415, 431 ff., 435

— railways, 517

— Rhodes, 118, 199 ff., 336

— Sardinia, 76, 92, 100, 102,
336

— shipping, 517

— Sicily, 28, 32, 46, 100

— Socialist movement, 343, 621 f.,
623

— Societ^ Finanziaria Industrial,
632, 811

— strikes, post-war, 621

— Sturzo, Don, 584, 618

— Syndicalism, 344, 631 f., 688

— tariffs, 340, 545

— territorial gains after war, 336 f.

— textile industries, 337, 528 ff.

— trade disputes under Fascism,
341 f.

— Trade Unions, 341 f., 564,
629 f., 793

— Tripoli, 1 1 8, 337

— unemployment, 342, 508 ff

— unification of, 336

— Victor Emmanuel, 102

— wages, 341, 629

— wealth, national, 345

— wheat imports, 438 f.

prices, 441 f.

production, 441

JAPAN, ARMAMENTS, 699, 701 ff.,
706 ff, 72 if., 723, 733

— cotton industry, 364 f., 529

— development, 108, 1 14 f.

— I.L.O. and, 793, 794, 797

— L. of N. and, 722, 750, 754 f.,
764, 766

— U.S.S.R. and, 1 15, 375, 376 f.
Jenghiz Khan, 5if .

856 INDEX

KAfl rsKY, K., 654
Kellogg Pact, 730 ff., 741
Keynes,J. M., 125
Kienthal Conference, 682
Krupps, 715

Laissez-faire, 815 ff. See also Free

Trade

Land, re-distribution of, 409 f.
Latvia, 1 59 ff.

— agriculture, 139, 159, 451, 453

— armaments, 707, 709, 711

— butter trade, 455

— Civil War, 160

— Cdurland, 36, 49, 123, 160

— history, 127, 160

— imports and exports, 1 59, 428 f.,

45 i» 453 ,

— industrialisation, 1 59 f .

— I.L.O. and, 798

— Latgaha, 160

— Livonia, 49, 66, 160

— monetary conditions, 433, 469

— nationalities, 1 48, 1 39

— political conditions, 129, 160 f ,
566

— population, 137, 159
occupations, 142

— prices, 431 ff.

— religions, 1 59

— Riga, 151, 159

— Socialism, 161, 566

— tariff, 161

Lausanne Agreements, 1932, 277 f.
League of Nations, 749 ff.

— and armaments, 698, 700 ff.,
705, 722 ff.

— Austrian loans, 2 1 7 f.

— Covenant, 759 ff.

Optional Clause, 730 ff.

— Estonian loan, 159

— and European agriculture, 440,
442, 443 ff.

— and Great Britain, 784 ff.

— Hungarian loans, 214?.

— and Japan, 750

— and Manchuria, 722

— membership, 749 ff.

— and minorities, 1 29, 1 48

— and refugees, 201

— and security, 729 ff.

— and Treaty revision, 773 f.

League of Nations, and U.S.A.
750 f.

— and U.S.S.R., 385, 750, 751 f.,
787 ff.

— and United States of Europe, 1 43

— and war, 763 ff., 820
Liechtenstein, 129, 220
Linseed, 447
Lithuania, 161 ff.

— agriculture, 137, 162

— armaments, 707, 711

— butter trade, 455

— history, 36, 49, 51, 123, 127

— imports and exports, 162, 429,

451, 453> 455

— I.L.O. and, 797

— Kovno, 163

— Memel, 126, 149, 162 f.

— monetary conditions, 469

— politics, 129, 164, 566

— population, 137
occupations, 141 f.

— religions, 1 62

— Russia, relations with, I45f,
163 f.

— Socialism, 164, 566

— Valdemaras, 1 64

— Vilna, 1 49, i (>2

Little Entente, i8jf, 212, 215,

226 f, 728, 753
Litvinov, M., 547
Livestock, 449 f.
Locarno Pacts, 267, 362, 726 ff.,

772 f , 820
London, as financial centre, 488,

498

— Treaty of, 1839, 99, 121, 294
/<?/5, 122, 125

Low Countries. See Flanders,

Belgium, Holland
Luther, Martin, 55, 67
Luxembourg, armaments, 707

— Customs Union with Belgium,

524
— I.L.O. i

and, 797

— politics, 129, 566

— Socialism, 566

— steel industry, 524, 527

— wages, 554

MACEDONIA, 117, 118, 125, 130,
190 f., 192, 200 f., 204, 206

Machiavelli, 66 f.
Machine industry, 511, 512
Maize, 445 ff.
Manchuria, 722, 750, 754
Marx, Karl, 94, 100, 1 12, 654, 657,

668 f., 675 ff., 680 ff., 694 ff.,

824

Maurice, Sir F., 705
Maximilian, Emperor, 46, 51, 293
Meat trade, 452, 454
Metternich, 90, 133

Mill, J. S., 579
800 f.

Minimum Wage Convention,

Minorities, 138, 148, 159, 185 ff.

See also League of Nations and

separate countries
Mitsui combine, 716, 721
Mohammedans. See Moslems
Monaco, 129, 138
Monarchies, 129, 571 f
Monasteries, 29, 33, 36, 49
Monetary policy, 433, 462, 466,

467 ff., 476 ff., 488 ff. See also

Currency and under separate

countries

Monroe Doctrine, 98, 751, 754
Montenegro, 104, 126, 188, 193
Moratona, 436 f.
Moslems, 26, 27, 28, 29, 31 f., 52
Most Favoured Nation Clause,

541 ff.

Motor-car industry, 527
Mutual Assistance, draft Treaty

of, 724 f.

NAPOLEON. See France
Nationalism in Europe, 98 ff ,

i32f., 139, 148, 746 ff, 823 ff.

See Economic Nationalism
Navies, strength of, 709 ff.
Netherlands. See Flanders and

Holland

New Zealand, exports, 349, 456
Non- Aggression, Pact* of, 152,

1 86, 736, 753

— Economic, proposed Pact of,

547
Norsemen, 30 f., 32, 35. See

Scandinavia
Norway, 280 ff.

— agriculture, 140, 282, 451, 453

INDEX 857

Norway, armaments, 707, 709,^71 1

— economic conditions, 281 f.

— history, 92, 1 24, 283

— imports and exports, 282 f ,

4.29> 439, 45i»453

— industrialisation, 140, 283

— monetary conditions, 433, 469,
471

— Mowinckcl, 284

— political conditions, 129, 283 f.,
566

— population, 137, 283
occupations, 142

— prices, 431 ff.

— religions, 283

— Socialism, 284, 566

— tariffs, 544

— wages, 553

— women's suffrage, 573

OATS, 445 ff.

Olive oil, 447, 450 f.

Open market operations, 476

Oslo Convention, 1930, 544

Ottawa Conference, 1932, 350 f.,

364, 443, 448, 784 f.
Over-production, 419, 824 f.
Owen, Robert, 96, 675

PAPACY, 26, 30, 32 ff., 35, 36, 38 f ,
40, 42, 46, 47, 48 f., 54 f., 61, 102

Paris, Treaty of, 1816, 90, 92

Parliamentarism, 565 ff, 585 ff,
598 ff, 638 ff, 817, 825 ff.

Peace Treaties, 124 ff., 233, 255 f.,
426, and see under countries

— and disarmament, 698 ff.

— and nationalities, I28f., 148 f.

— revision of, 732, 745 ff., 773 ff.,
820 f.

Peasants during slump, 497, 498 f.,

and see Agriculture
Philip II, 293
Pig trade, 452, 454
Plebiscites, 126, 128, I7of., 262
Poland, 1640°.

— agriculture, 139, I74f., 438 f.,
441, 445, 451, 453, 455

— armaments, 169, 706 ff.

— balance of trade, 459 f.

— capital imports, 422

— Communism, 1 70, 566

858 INDEX

Poland, Corridor, Polish, 126,
130, lyiff., 745, 746,775

— Danzig. See Danzig

— debts, 457 if.

— economic position, 457 ff.

— France, relations with, 728

— frontiers, 164 ff.

— Galicia, 165, 167

— Gdynia, 1 72

— history, 36, 49, 51, 76, 90, 93,
99, 102, 123

— imports and exports, 1 75,
425 f., 4381:, 451, 453, 455,

459 ff-, 517 .

— industrial production, 407, 51 1

— I.L.O. and, 795, 796

— Korfanty, 1 50, 1 70

— Lemburg, 165

— Lithuania, relations with,
161 ff.

— machine production, 5 1 3

— meat trade, 454

— minorities, 165 ff., 746

— monetary conditions, 433, 462,

469, 471

— nationalities, 148

— partitions of, 77, 90, 166 f.

— Peace Treaties, 124, 127, 262

— Pilsudski, 130, 133, 167, 168,
i77f.

— political conditions, 129, 130,

» -f

— population, 1 36 f.
-- occupations, 141 f.

— prices, 415, 431 ff.

— Pripet marshes, 19, 147, 164,
165

— public finance, 459

— Russia, relations with, 547, 753
-- war with, 127, 148, 165, 168,

380, 382

— Socialism, 177, 566

— steel industry, 514

— tariffs, 175, 540, 541

— textile industries, 512

— transport, 151, 176 f., 517 f.

— unemployment, 509

— Upper Silesia, 150, i7of., 175,
262

— Vilna, seizure of, 149, 162 f,

— wages, 553, 555

— wheat prices, 441

Poland, wheat production, 441
trade, 438 f.

— Zeligowski, 163
Portugal, 334 ff.

— agriculture, 1 39

— armaments, 707, 709, 7 1 1

— Carlos, King, 1 19

— Fascism, 333, 336

— Henriques, Dom, 6 1

— history, 45, 58, 60 f., 72 f., 98,
99, 119, 121, 334 f.

— imports and exports, 335, 429,
439, 450, 452

— industries, 335

— I.L.O. and, 797

— monetary conditions, 469, 47 1

— political conditions, 1 29, 1 30,
335 f; 566

— population, 137, 335
occupations, 142, 335

— Socialism, 566

— wine trade, 450

Postal system, international con-
trol, 778
Potatoes, 447
Prices, agricultural, 411 ff., 449

— during and after war, 395 ff.,

399 ff-

— during slump, 427 ff., 431 ff.,

485, 538

— industrial, 413 ff.

— of materials, 412 ff.

— raising of, 475 ff., 495 ff.

— regulation of, 493

— retail, 413, 415 f.

— in U.S.A., 419 ff.

— wholesale, 413, 415 fl.
Production, 400 ff., 510 ff.
Property 658

Proportional Representation,

568 ff., 579 ff
Public works, 482 ff.
Purchasing power, 420 f., 824 f.

RAILWAYS, DURING SLUMP, 51 6 f.
— international control of, 777 f.
Rapallo, Treaty of, igast, 262
Rationalisation, 409, 532, 560 ff.,

8i6f.

Reflation, 483 ff.,
Reformation, 48, 54 i

INDEX

859

Refugee problem, 128, 191, 201,

203, 205
Rentier*, attitude of, 310 f., 486 ff.,

518 f., 816
Reparations, 262, 263 ff., 271,

276 ff., 424 ff., 464, 645
— Commission, 263
Republics in Europe, 129, 571 ff.
Revolutions of 1848, ioof., 300,

Rhodes, 1 18, 199 ff., 336
Riga, Treaty of, 1.920, 168
Roman Empire, 26, 27
-- Eastern, 26 f., 36, 51, 52
-- Holy, 26, 31, 38 f, 47 ff.,

51, 82, 241
Roumania, 1 79 ff.

— agricultural exports, 445 ff.,

454

— agriculture, 139, i8of., 182,

45 1 > 453

— armaments, 706 ff

— Averescu, 1 83 f.

— oalance of trade, 459 f.

— Balkan Wars. i8of.

— Bessarabia. Ses Bessarabia

— Bratianu, 183

— Bucharest, 182

— Carol, King, 130, 183 ff.

— conditions during war, 123,
181 f.

— debts, 457 ff.

— dictatorship, 130

— economic position, 457 ff.
- — Ferdinand, King, 184

— foreign exchange, 452
-- relations, 185 f., 728

— history, 52, 103, 104, 118

— imports and exports, 429, 451,

453, 459 £

— I.L.O. and, 796 f.

— monetary conditions, 467, 471

— nationalities, 148

— Peace Treaties, 125

— politics, 129, 182 ff., 566

— population, 1 36 f., 1 79
-- occupations, 142

— public finance, 459

— religions, 1 80

— Russian frontier, 147. Sec
Bessarabia

— Socialism, 566

Roumania, transport, 151

— Transylvania, I79f., 213

— Vaida-Voevod, 183

— wages, 553

— wheat exports, 438

production, 441

Royal Dutch Shell, 810
Rubber, world stocks, 417
Russia and U.S.S.R., 369 ff.,

652 ff.

— agricultural conditions, 139,
3?i > 45i» 453

exports, 445ff-> 45 '» 453

socialisation, 149, 152,

384 f., 444, 667 f.

— Alexander I, 90, 99

— area, I35f., 369

— armaments, 699, 703, 706 ff.

— and Border States, 145 ff.

— Brest-Litovsk Treaty. See Brest-
Litovsk

— butter trade, 455

— Cadets, 377

— Catherine II, 76, 80, 374, 375

— Cheka, 381, 392

— climate, 20

— " collectives," 389, 391

— Communism, 566, 652 ff., and
see Communism

— Communist Party, 131, 386,
389 ff., 655 ff., 661 ff., 668, 681,
826

— conditions during war, 396

— Constitution, U.S.S.R., 131,
37i, 387 ff.

— Counter-R e v o 1 u 1 1 o n, 133,

379 ?;

— Denikm, 133, 379 f.

— disarmament, 723, 729, 735 f.

— electrical industry, 5 1 6

— engineers* trial, 1933, 382, 386 f.

— Estonia, relations with, 157 ff.

— Finland, relations with, 152 f.,

J54, 375

— Five-Year Plans, 151, 383 ff.,
408, 515, 696

— foreign intervention, 158, 160,

379 ff-» 736

— G.P.U., 392

— history, pre-war, 27, 36, 50,
5'f-» 56, 65 f., 76, 77, 84, 92,
98 f., 101, 103 f., 105, 374 ff.

86o INDEX

Russia, illiteracy, 393

— imports and exports, 428 f.,
437 ff., 455, 517, 520, 535

— industrial development, 151 f,
376. See Five- Year Plans

-- production, 406 f., 408, 511,

5.1 5 f-

— infant mortality, 373

— international relations, 151 f.,

379 ff-, 385 f-, 73i, 7B7 ff.

— Ivan III, 52, 374
-- IV, 66, 374, 375

— Japan, war with, 115, 375,
376 f.

— Kerensky, 377, 378, 570

— Kharkov, 151

— Kiev, 27, 32, 36, 151, 374

— Kolchak, 133, 380

— Kornilov, 378, 379

— Kulaks, 384, 386, 388, 664

— land nationalisation, 379

— L. of N. and, 385, 750, 751 f,
787 ff.

— Lenin, 377 ff., 382 f, 388,
654 ff, 662, 664, 667, 669 ff,
682

— Leningrad, 152, 374, 377, 378

— Lithuania, relations with,
161 ff.

— livestock, 449, 454

— Lvov, 570

— Mensheviks, 66 1, 68 1

— Moscow, 152

— nationalities, 128, 370 f.

— New Economic Policy, 382 f.,
384, 388, 664

— Nicholas I, 1 03

— Nijni Novgorod, 32, 66, 374

— Peter the Great, 76, 374, 375

— Petliura, 379

— Poland, relations with, 127,
165 f., i68f., 380

— political conditions, 129, 566.
See Communist Party and Soviet
system

— population, 1356°"., 369 f.
-- occupations, 141 f.

— Pripet. See Poland

— production, 371 f., 406 ff., 511,

— Pskov, 66, 374

— Red Guard, 378

Russia, religions, 370 f.

— Reval, 151

— Revolution, 7005, 119, 152, 157,
160, 163, 376 f., 660

March /o/7, 123, 160, 377,

570, 826
October 19/7, 123, 132, 160,

377 ff, 565, 570 f., 652 ff.,

660 ff, 671

— Riga, 151

— Roumania, relations with, 1 79,
185, 1 86

— St. Petersburg. See Leningrad

— Social Revolutionary Party,
661, 680 f.

— Socialisation. See Agriculture

— Socialism, 66 1, 676, 680, 682 ff.

— Soviet Congresses, 377 ff., 388
Petrograd, 377, 378

system, 388, 665 ff., 826

— Spindonova, 66 1

— Stalin, 376, 386, 389

— steel industry, 514

— Stolypin, 377

— territories lost in war, 126, 127,
148

— transport, 372

— treaties, 152

— Urals, 152

— Vesyenka, 381
- wages, 553

— War Communism, 380 ff

— western frontier, 147 ff.

— wheat exports, 437 ff.
production, 441

— Witte, 376

— Workers' and Peasants' In-
spectorate, 391 f.

— — and Soldiers' Councils, 655,
660, 663, 665, 674

— Wrangel, 133, 380

— Yudemch, 133, 380
Rye, 445 ff.

SAAR, 126, 137 f, 305, 524, 555

Saint-Simon, 100, 675

San Marino, 1 29

Sanctions, 767 ff. See also Dis-
armament

Scandinavia, 51 , 280 f. See also
separate countries and Norsemen

— proposed tariff union, 543, 544

Scheldt, 292, 294, 298
Schleswig. See Slesvig
Schneider-Creusot, 104, 715, 720
Scotland, 44, 57, 141 f.
Security. See Disarmament

— Pact, proposed, 741 f.
Separation of powers, 574
Serbia, 51, 52, 68, 103, 104, 1 18 f.,

126
Serfdom, 28, 40, 50, 64, 105,

242 ff.

Shipping during slump, 5 1 6 ff.
Silesia, 76, 225. See under Germany

and Poland
Silk, artificial, 447, 450

— raw, 447

Skoda, munition works, 716
Slesvig-Holstein, 102, 125, 280,

288

Social services, 479 ff., 812, 817
Socialism, growth of, 578, 591 ff.

— "National," 781 f, 814, 831,
£33. See Germany, Nazis

— outlook for, Sigf., 823 ff.

— policy of, 591 ff., 658, 685 ff.,
780 ff. See also under separate
countries

Socialist attitude to Russian Revo-
lution, 653 ff.
war, 682

— parties in Europe, 566 f.
Spam, 3 1 5 ff.

— agricultuie, 139, 317 ff., 327 f.,

450, 452

— Alfonso XIII, 320, 321 f.

— Anarchism, 320, 331 ff., 688

— area, 315

— armaments, 706 ff.

— Azana, 319, 326,330

— Aznar, 324

— Berenguer, 322 f.

— Besteiro, 332

— Caballero, L., 332

— Catalonia, 129, 323 f., 326 f.

— Catholic Church, 320, 321,

324

— Communism, 333

— Constitution, 324 ff

— Cordova, 31

— de los Rios, 328

— economic conditions, 315 ff.

— education, 328 f.

INDEX 86l

Spain, Ferdinand and Isabella,

45 f-, 61, 319

— Ferrer, 329

— geography^ 1 5, 316 f.

— history, 29*29, 3* f-» 45 **•» 52,
56, 58, 6 1 f., 72 f., 75, 84, 92,
93> 98, 99> Joo, 103, 319 ff.

— imports and exports, 31 7 f.,
428 f., 450, 452

— industries, 317

— Inquisition, 45, 58

— I.L O. and, 795, 796

— Jesuits, 45, 58, 326

— Lerroux, 329

— Loyola, 58

— Maura, 326

— monetary conditions, 433, 469,

471

— Philip II, 58

— political conditions, 1 29, 566

— population, 136 f., 315
occupations, 1 42

— prices, 431 ff.

— Revolution, 1931, 130, 132,
316, 324 ff., 688

— Rivera, Pnmo de, 1 30, 320,
32 iff*., 639, 688

— Romanones, 324

— Sanjurgo, 327

— Socialism, 320, 322, 325 f.,
328 ff., 566

— tariffs, 539, 541

— Trade Unions, 320, 331 f.,688f.

— wages, 552

— wheat, 441

— Zamora, 319, 324, 326, 330
Spending and saving, 482 ff.
Spitzbergen, 280, 282
Stabilisation. See Currency and

Monetary policy
Standstill Agreements, 275 f.,

436 f., 466
State capitalism, 656

— nature of, 657 £

— sovereignty, 749, 759 ff.,
770 ff., 780 ff.

Steel cartel, 525 ff., 810

— industry, 511, 513 f., 524 ff.
wages in, 554

Stocks, commodity, 4i7ff.
Stresa Conference, 1932, 311,
443ff-> 457ff-> 474 £> 487

862

INDEX

Sugar, 417, 447
Sweden, 280 f., 284 ff.

— agriculture, 140, 285, 451, 453

— armaments, 707

— Bifors concern,

— Branting, 287

— butter exports, 4^5

— Charles XI J, 76, 281, 286

— Communism, 566

— Gustavus Adolphus, 59, 281,
286

Vasa, 286

— history, 58, 59, 76, 92, 286

— import restrictions, 467

— imports and exports, 285, 429,

451, 453, 5i7

— industrial development, 140
production, 51 1

— I.L.O. and, 796, 798

— Kreuger, 285

— machine production, 526 f.

— Match Combine, 285

— monetary conditions, 433, 469,

471

— political conditions, 129, 286 f.,

see

— population, 137 f., 284
occupations, 141 f.

— prices, 415,431 ff.

— religions, 287

— shipping, 517

— Socialism, 287, 566

— tariffs, 539, 540, 544

— unemployment, 509

— wages, 553, 554

— wheat imports, 439

prices, 441

Switzerland, 220 ff.

— agriculture, 450, 452

— armaments, 707 ff.

— Communism, 566

— Geneva, 59

— history, 50, 59, 101, 221 f.

— import restrictions, 467

— imports and exports, 221, 429,

439, 450> 452, 455>5i 7

— industries, 140, 221, 224

— I.L.O. and, 794, 795, 797, 798

— investments in Germany, 466

— languages, 223

— L. of N. and, 223 f.

— machine industry, 527

Switzerland, monetary conditions,

224,433,469,471,497

— political conditions, 1 29, 1 30,
131, 222 f., 566

— population, 137, 223
occupations, 142, 221

— prices, 431 ff, 435

— religions, 223

— Socialism, 222, 224, 566

— tariffs, 539, 540

— tourists, 221

— unemployment, 509

— wages, 553, 554
Syndicalism, 120, 331 ff., 631,

688 f.

TARIFF TRUCE, PROPOSED, 537
Tariffs, post-war, 14, 423 f.,

435 f-, 467 ff, 52 if- 530 ff,
536 ff., 778, 784, 810
agricultural, 410, 545

— pre-wai , 1 05 ff.
Tartars, 51 f.

Taxation, effects of, 479 ff., 519

— growth of, 812 f.

Textile production, 511, 512 See

separate countries and industries
Thomas, Albert, 806
Three-Power Pact, 1927, 723,

733 ff

Timber trade, 155
Tin, 417

Tobacco, 447, 474
Trade, post-war, 402 ff., 427 ff,

457 ff., 516 ff.
Trade Unions after war, 399,

561 ff, 817

— during war, 686 ff.

— under Capitalism, 659 f. See
separate countries

Transylvania, I79f., 213
Trianon, Treaty of, 1920, 124,

212 f.

Triple Entente, 117, 361
Turkey, and Balkan States, i88ff.

— armaments, 706 ff.

— economic position, 457

— history, 51 ff, 68, 92 f., 98 f,
103 f., 114, ii7f., 125, 126

— imports and exports, 429

— Kemal, Mustapha. 126, 131,
1 86

INDEX

Turkey, L. of N. and, 773

— Mehemet, AH, 98 f.

— monetary conditions, 469

— Peace Treaties, 1 24, 1 25

— political conditions, 129, 131,
132, 566

— population, 137 f.

— revival, post-war, 286

— tobacco trade, 474

— U.S.S.R., relations with, 147,

736, 753
Turks, Ottoman, 52 ff.

— Seljuk, 36, 51

U.S.S.R. See Russia.
Unemployment, Convention, 800

— cost of, 481

— during slump, 14, 498 ff.,
692 f.

— insurance, 307, 500 ff., 561
Union of Democratic Control, 717
United States, agriculture, 107,

409 ff., 412, 420 f.

— armaments, 699, 701 ff., 706 ff.

— balance of trade, 424

— boom and slump, /pstf-s-p,

419 ^

— - capital exports, 421 ff.

— chemical industry, 527

— disarmament, 723, 733, 736 f.

— economic conditions during
war, 395 f.

-- outlook, 807 f.

— European debts to, 424

— gold reserves, 424

— immigration, 238

— imports and exports, 428 ff.,
5.i 7> 520, 523

— industrial production, 407, 409,

[on, 426
425

— I.L.O. and, 794

— investments in Germany, 466

— L. of N. and, 725, 730, 750 f.,

754, 783

— monetary conditions, 4193.,

433*487,491 B

— political conditions, 586 f.

— population, 1 36
-- occupations, 142

— prices, 41 5,431 ff.

— Roosevelt, 808

United Stat<

— tariffs, i

— transport

— unempl
—-wages,

— wheat
Uruguay
Utrecht, Ti

76

VENICE, 28, 32!

1 02

Vickers- Armstrong, 715!
Vikings. See Norsemen

WAGES, DURING AND AFTER WAR,

396, 4i9> 55i ff-

— and prices, 558 ff.

— real, 551 ff.

— reductions, 485 ff., 500, 555 ff.
War, danger of, 820 ff.

— economic effects, 395 ff.
Washington Hours Convention,

*9*9> 797 ff-» 803, 805

— Naval Treaty, 1922, 701 ff.,

723> 733

Wells, H.G., 823 f.
Westphalia, Treaty of, 56, 59, 67,

68, 133
Wheat problem, 437 ff., 779

— production and trade, 437 ff.

— stocks, 417

White Slave Traffic, 758

Wilson, President, 123, 149, 233,

248, 250, 750, 783
Wine trade, 447, 450 f.
Wool, raw, 447
Woollen industry, 530
World Economic Conference, 19*7,

536^,541,752,758,784
~ *933> 445» 549, 752, 758, 808

YOUNG PLAN, 276 f.
Yugoslavia, 186, 193 ff.

— agriculture, 139, 195, 446, 451,

453

— Alexander, King, 1 97

— armaments, 706 ff.

— balance of trade, 459 f.

— capital imports, 422

— Communism, igoT.

864

INDEX

Yugoslavia, debts, 457 ff.

— economic position^ 457 ff.

— foreign relations, 728. See
Little Entente

— history, 104, id!, 127, 193 f.,

195 £

— imports and exports, 429, 451,

453» 454» 459 ff-

— industries, 195

— I.L.O. and, 797

— minorities, 1 94 ff

— monetary conditions, 433, 462,
469,471

— nationalities, 148

Yugoslavia, Pasic, 197

— Peace Pacts, 725

— political conditions, 1 29, 1 95 ff.,
566

— population, I36f., 194

— prices, 431 ff.

— public finance, 459

— Radic, 1 96 f.

— religions, 194

— tariffs, 541

— transport, 151

— wheat, 439, 44 1

ZIMMERWALD CONFERENCE , 682

/ IB