Merchants of Peace: Twenty Years of Business Diplomacy Through the International Chamber of Commerce 1919–1938 9780231886482

Table of contents :
Foreword
Preface
Contents
Illustrations
Introduction
Part I. Prewar - A Business Men's International 1905 - 1914
I. The International Congress of Chambers of Commerce and Commercial and Industrial Associations 1905-1914
Part II. Postwar - A Business Men's League of Nations and The Reconstruction Movement
II. A Business Peace Conference
III. Origins of the Reconstruction Movement
IV. The Founding of the International Chamber of Commerce
V. Finance, Labor, and Industry at the Conference of Spa
VI. The Organization of International Reconstruction
VII. A Business Settlement of Reparations—The First Effort
VIII. The Return to Politics
IX. The First Congress of the International Chamber of Commerce
X. Toward the Dawes Plan and European Reconstruction
XI. Danubian Reconstruction
XII. The United States Sponsors a Business Settlement of Reparations
XIII. The Rome Business Congress
XIV. The Rome Congress and World Opinion
XV. The Business Settlement of Reparations
Part III. Economic Disarmament
XVI. The Evolution of International Tariff Policy
XVII. A World Customs Conference in Preparation
XVIII. Business and Officialdom at the League Customs Conference
XIX. Proposal for a World Economic Conference in 1927
XX. The International Chamber at the 1927 Conference
XXI. "The Year of Commercial Treaties"
Part IV. The Diplomacy of Technics
XXII. The Business of the International Chamber of Commerce
XXIII. Industrial Property
XXIV. Double Taxation
XXV. Communications and Transit
XXVI. The Hague Rules: Bills of Lading
XXVII. A World Court of Business
Part V. World Business Statesmanship and Catastrophe
XXVIII. Seeds of Catastrophe
XXIX. The Statesmanship of Nationalism
XXX. The Statesmanship of World Business
XXXI. The Sabotage of Parliament
XXXII. The Breakdown: A Proposal for Economic Peace and Its Rejection
XXXIII. World Business Opinion and the New Statesmanship of Reform
Appendices
A. Recommendations of the Joint Committee of the Carnegie Endowment for International Peace and the International Chamber of Commerce
B. The International Chamber of Commerce in 1938
Index

Citation preview

MERCHANTS OF PEACE

THOMAS J. WATSON PRESIDENT OF THE INTERNATIONAL CHAMBER, 1937—

Merchants of Peace TWENTY YEARS OF BUSINESS DIPLOMACY THROUGH THE INTERNATIONAL CHAMBER OF COMMERCE 1919-1938 By GEORGE L. RIDGEWAY Associate Professor of History Wells College

NEW Y O R K : MORNINGSIDE

HEIGHTS

Columbia University Press 1938

COPYRIGHT T H E CARNEGIE ENDOWMENT

1938

FOR I N T E R N A T I O N A L

PUBLISHED BT COLUMBIA UNIVERSITY

Foreign agenti:

OXFORD

UNIVERSITY

PRESS,

PEACE

PRESS, N E W

Humphrey

YORK

Mil ford, Amen

House, London, E.C., 4, England AND B. I. Building, Nicol

Road,

Bombay, India;

Road,

KWANG

Shanghai, China;

HSUEH

PUBLISHING

HOUSE,

MAKUZEN COMPANY, LTD.,

140 Peking

6 Nihonbaihi,

Tori-Nichome, Tokyo, Japan

Manufactured in the United States of America

To FLORENCE and JIM ROBIN

What we see\ is the reign of law, based upon the consent of the governed and sustained by the organized opinion of mankind. —Woodrow Wilson Mount Vernon July 4, 1918

Foreword

N

O MORE honorable title could be borne by any profession than the title which the author of this book has given to that company of industrial and commercial leaders who make up the officership and the membership of the International Chamber of Commerce. It is a challenging title, one which will probably come with a certain note of surprise to those who have not followed the history of the varied and earnest efforts which this international commercial community has made to further international peace. But those who have borne the brunt of the day in the tireless effort to lessen the barriers to international trade will not find in this volume an overstatement of the contribution which they have made to the cause of international understanding. The International Chamber of Commerce is a symbol of the business world in its broadest aspects. Therefore it has had to deal with the never-ending problems of routine in international business intercourse, and this fact has perhaps obscured the part that it has played in the formulation of the larger issues in international relations. But the record set forth in the pages which follow shows how it has built upon the solid groundwork of day-to-day experience the foundations of an international community and how, still further, it has sketched the architectural blueprints of the edifice of international peace. Because it has been held to the intensely realistic task of working out the problem of welfare for the common man, it has been able to make progress under the most adverse circumstances in economic statesmanship. If ever history had a lesson to teach, it is that which the thoughtful reader will draw from this history of international cooperation, for it shows how necessary is peace to a world that is based upon credit. Credit is not merely a term in business; it is a condition of human relationships. It binds the future to the present by the confidence which we have in the integrity of those with whom we deal. Since war is the denial of this confidence and the refusal of trust in our neighbors, it is

viii

Foreword

the chief enemy of the business community, and it follows that the business community should be the strongest force for peace in the world. The International Chamber of Commerce, therefore, does not step out of its role as an organization for furthering international trade when its interest extends to the furtherance of the condition under which alone it can prosper. International peace, as all the world now clearly sees, is not merely an ideal for governments and statesmen to pursue through politics and diplomacy; it is a factor in the day-to-day relations of every citizen in every country and, more especially, of those great formations of capital and industry which meet together on even terms from all the nations of the world in the International Chamber. In times as troublous as the present, it is well that we should be reminded of these facts, and in this pioneer volume which describes the part played by the International Chamber of Commerce in the successive crises of the postwar period, we have a contribution to our knowledge of the forces making for peace which remain alert to the fundamentals of international cooperation, no matter what the political constellation may be anywhere in the world. The circumstances under which the Chamber began its career and carried through its program were often fully as difficult as those which confront the world today. The "Merchants of Peace" therefore should be regarded not as a closing chapter of a tale that is told but as the prelude to new and greater achievements in the future. JAMES T . SHOTWELL

Columbia University May 5, 1938

Preface

I

NTERNATIONAL economic relations have assumed a new and puzzling complexity in the postwar period. Any attempt to describe them or even any part of them calls for an examination of a maze of influences, all of which have affected the formation of policy. With this in mind, in telling the story of the efforts of the International Chamber of Commerce to remove the barriers to international trade and lessen the impediments to national understanding, I have sought to describe organized business opinion as a part of a larger whole. The story touches themes of varied national interests in which politics is bound to enter, and deals with technical problems of experimentation in ways and means to the desired end. And yet, in the description of world reconstruction and technical cooperation, I have of necessity focused attention upon the discussions of business men and upon the evolution of the conception of international economic cooperation in business minds. I regret that the limitations of space have made it necessary to neglect many of the technical activities of the International Chamber of Commerce. In the section on the "Diplomacy of Technics" I have, however, endeavored to present a cross section of the great volume of technical work carried on through the International Chamber of Commerce.

The source material, in addition to League of Nations documents and publications of the International Chamber of Commerce, consists in large part of unpublished documents and private papers made available through the courtesy of those who have had them at first hand. I have also had access to minutes of the Economic Committee of the League of Nations and to certain material at the Bank for International Settlements which has proved a useful commentary on the main theme of research. Among the general works on postwar political and economic history which I consulted I wish especially to mention the Survey of International Affairs (Royal Institute of International Affairs) and that most useful and comprehensive volume on postwar inter-

X

Preface

national economic relations, World Prosperity, by Dr. Wallace McClure. It has been possible for me to confer personally with many who have been active in the work of international economic and financial cooperation in Geneva, at the International Chamber of Commerce in Paris, and at the Bank for International Settlements in Basle. I gratefully acknowledge my indebtedness, for their untiring assistance and kindness in providing the facilities for my research in Paris, to M. Édouard Dolléans, Secretary-General of the International Chamber of Commerce 1920-1933, to his successor, M. Pierre Vasseur, and to the members of the Secretariat, especially Thomas Pearson, Owen Jones, Harold King, Willard Hill, Virgilio Del Rio, René Arnaud, Richard Barton, Reginald P. Van Biene, and Miss Gamier. I am grateful also to Mr. John P. Gregg and his successor, Mr. Chauncey D. Snow, of the Washington office of the American Section of the International Chamber of Commerce. I particularly thank Mr. Arthur E. Felkin and Mr. Benjamin Gerig of the League Secretariat in Geneva. I shall always be grateful for the generous measure of time and information given me in Basle by M. Pierre Quesnay and his colleagues, Mr. Leon Fraser and Mr. Per Jacobsson, of the Bank for International Settlements. My book owes much to the kindness of friends. I wish to thank Mr. Thomas Pearson, formerly American administrative commissioner at the International Chamber of Commerce, and Mr. H. V. Alward of the Bank of California for helpful criticism on several sections of the text. Sir Alfred Zimmern gave most valuable assistance and criticism in the preparation of Parts I and II. The entire volume owes much to Professor James T. Shotwell who by providing information and papers of a private character and by most generous editorial assistance has been endlessly helpful. I am grateful also to Dr. Michael T. Florinsky for his criticism. The woodcut on the jacket was designed by my friend and colleague, Professor J. J. Lankes. Miss Mildred Prinzing gave generous care in preparing the text for publication and the Index was compiled by Miss Eugenia Wallace. My warmest appreciation is due to my wife for continuous collaboration at all stages of the preparation of this volume. G. L. R. The Grange Aurora-on-Cayuga, N. Y. April, 1938

Contents Foreword by James T. Shotwell

vii

Preface Introduction

ix 3 PART I

PREWAR—A

BUSINESS MEN'S INTERNATIONAL

1905-1914

I. The International Congress of Chambers of Commerce and Commercial and Industrial Associations 1905-1914

13

PART II POSTWAR—A BUSINESS MEN'S LEAGUE OF NATIONS AND THE RECONSTRUCTION MOVEMENT

II. A Business Peace Conference III. Origins of the Reconstruction Movement IV. The Founding of the International Chamber of Commerce V . Finance, Labor, and Industry at the Conference of Spa VI. The Organization of International Reconstruction . VII. A Business Settlement of Reparations—The First Effort VIII. The Return to Politics IX. The First Congress of the International Chamber of Commerce X . Toward the Dawes Plan and European Reconstruction XI. Danubian Reconstruction XII. The United States Sponsors a Business Settlement of Reparations XIII. The Rome Business Congress X I V . The Rome Congress and World Opinion X V . The Business Settlement of Reparations

21 39 59 78 92 103 114 122 144 156 163 168 178 182

xii

Contents PART III ECONOMIC

DISARMAMENT

X V I . The Evolution of International Tariff Policy . . . . 195 X V I I . A World Customs Conference in Preparation . 201 XVIII. Business and Officialdom at the League Customs Conference 209 X I X . Proposal for a World Economic Conference in 1927 . 217 X X . The International Chamber at the 1927 Conference . 227 X X I . "The Year of Commercial Treaties" 250 PART IV THE DIPLOMACY

OF

TECHNICS

X X I I . The Business of the International Chamber of ComXXIII. XXIV. XXV. XXVI. XXVII.

merce Industrial Property Double Taxation Communications and Transit The Hague Rules: Bills of Lading A World Court of Business

263 273 279 284 309 317

PART V WORLD BUSINESS STATESMANSHIP

AND

CATASTROPHE

XXVIII. XXIX. XXX. XXXI. XXXII.

Seeds of Catastrophe The Statesmanship of Nationalism The Statesmanship of World Business The Sabotage of Parliament The Breakdown: A Proposal for Economic Peace and Its Rejection X X X I I I . World Business Opinion and the New Statesmanship of Reform

335 346 350 355 364 374

APPENDICES A . Recommendations of the Joint Committee of the Carnegie Endowment for International Peace and the International Chamber of Commerce B. The International Chamber of Commerce in 1938 . .

395 399

Index

405

Illustrations Presidents of the International Chamber of Commerce Thomas J. Watson

Frontispiece

¿tienne Clementel

22

Willis H. Booth

68

Dr. Walter Leaf

126

Sir Alan Anderson

150

Dr. Alberto Pirelli

186

Georges Theunis

200

Dr. Franz von Mendelssohn

224

Dr. Abraham Frowein

254

Dr. F. H. Fentener Van Vlissingen

286

Chairmen of the American Section of the International Chamber Former Chairmen: A. C. Bedford; Owen D. Young; Thomas W. Lamont; Silas H. Strawn 320 Present Chairman: Eliot Wadsworth

352

INTRODUCTION

Introduction

T

H E idea of an international regime of law based upon popular consent and sustained and developed by organized opinior throughout the world was implicit in the prewar democratic conception of a world parliament which gave birth to the League ol Nations. Against the arbitrary acts of autocrats President Wilson marshaled "the organized opinion of mankind." A world-wide democratic regime of law according to the Wilsonian thesis could not be achieved or sustained by power politics. Change in an evolving world commonwealth of democracies must spring from the same dynamic forces which motivated the democratic movements in the centuries of parliamentary growth. The extension of the reign of parliament to the international sphere meant the spread of "this liberation to the great stage of the world itself." To the democratic slogan "Liberty, Equality, and Fraternity" President Wilson added the watchword of prewai parliamentary reformers—public opinion. The rule of international law was in the last analysis to be the rule of world opinion.

Prewar internationalism embraced ambitious attempts to give precise institutional form to the conception of public opinion as an instrument of international action. The Socialist International was perhaps the most dynamic of these efforts. All these organizations had as theix objective some form of cooperative action running from religious propaganda to technical research. Among them the International Congress of Chambers of Commerce was notable as an institution devoted both to the organization of opinion and to cooperative efforts at technical research. As an international movement it drew inspiration from the philosophy of humane liberalism of the leaders of the Manchester Chamber of Commerce. Its creed, like Cobden's, coupled international trade with international peace. The postwar years of European reconstruction saw this business international reborn into the new world parliamentary regime centered at Geneva. The story of the organization of the International

4

Introduction

Chamber of Commerce, or the I.C.C. as it is known to its members, is, in fact, meaningless apart from the history of the early days of postwar reconstruction. The discussions of the two organization conferences held at Atlantic City and at Paris throw a revealing light upon the economic forces which motivate international relations centering in the crucial meetings of the Allied Supreme Council, the Council of the League of Nations, the first Allied-German conference of Spa, the International Financial Conference of Brussels, and the Brussels Reparations Conference of Experts. The story of the tragic failure of the reconstruction movement to attain a Dawes settlement during the important early stage of the first treaty year is a reflection of the failure of Allied and American business leaders to formulate a business policy for European reconstruction based not upon reparations and military sanctions but upon international economic cooperation. The following year, with the inauguration of broad international cooperation among business men at the first congress of the I.C.C. held in London, and in the collaboration on the I.C.C. council and committees, a new influence was brought to bear upon European reconstruction and reparations, an influence running sharply counter to the ideology of the old wartime Allied industrial front. The newly founded I.C.C. became the center of a movement by liberal business men which had as its objective the overthrow of the surviving wartime domination by governments of international economic relations. This group of business liberals included such important leaders as Clémentel, Pirelli, Leaf, Sir Felix Schuster, Willis H. Booth, Owen D. Young, Roland W. Boyden, Filene, Nelson Dean Jay, Henry Robinson, William Thys, Edstrôm, H. R. du Mosch, François Hlavacek, and K . A. Wallenberg. The history of the I.C.C. is the story of international cooperation by representative business men. Like the League of Nations and the International Labor Office, the International Chamber of Commerce is both a technical bureau—an organization designed to facilitate technical cooperation—and a world movement with the dynamics of a party commanding loyalty and demanding action. Unlike the I.L.O. and the League of Nations, the I.C.C., however, is largely free from political control. The nonpolitical character of the I.C.C. is one of the cherished features of its organization. It has been maintained despite the fact that outside the English-speaking countries the na-

Introduction

5

tional chambers of commerce represented in the I.C.C. are for the most part conducted under some form of government auspices. Freedom of the I.C.C. from political control has allowed the development of a unique relationship between business and government in the international sphere. This relationship has not only permitted the I.C.C. to exert a powerful nonpolitical influence upon the international aspects of the vast and complex systems of technical and business lawmaking and administration centered at Geneva, but it has also made it possible for the I.C.C. to formulate a business policy and to intervene in the three major politico-economic international questions of the postwar era: reparations, war debts, and trade barriers. In 1919 the victorious powers threw a dead line about the ruins of the shattered structure of international finance. Politicians were here determined to attempt a hazardous engineering project in high finance based on those twin political currencies of the war—reparations and war debts. The League of Nations was not permitted by the powers to take any direct part in this major operation of the postwar period. The rehabilitation of the blood money was placed solely in the hands of the Allied and associated governments. Those millions of peace-time earnings absorbed by the war machine in four boom years of grimly efficient operation had been replaced by the war bonds which, when the armistice was signed, awaited conversion into real wealth for the reconstruction of world credit. A settlement of war costs such as would give a peacetime value to the reparations and war debts items on national budgets was the fundamental problem of European and world reconstruction which faced national statesmen in the postwar era. There never was a problem in the history of organized society which so urgently demanded an objective solution by trained experts. And yet national statesmen were restrained by their own business men from risking supposed national economic interests in a settlement by experts. All the wealth of technical competence available in Geneva for the reconstruction of international finance was barred by sovereign states from the reparations and war debts scene. League technicians were permitted to enter only when actual collapse had either taken place or was imminent, as in the case of Austrian and Hungarian reconstruction. The business men of the I.C.C., however, were not subject to government control. Experts from its mem-

6

Introduction

bership were on the spot from the very beginning in the ranks of the Allied governments, and business leaders from the I.C.C. participated in League reconstruction in Central Europe. The I.C.C., moreover, afforded an opportunity for carrying out, with the full participation of American business, that policy of nonpolitical cooperation which has been a feature of the United States' foreign policy since the war. Consequently the I.C.C. became a clearinghouse for important lines of influence and interest. The Allied interest, the League reconstruction interest (reflecting more nearly an international point of view), the American interest, and finally the German interest were all ably represented within the I.C.C. in the formulation of an objective business policy on the crucial postwar problem of a settlement of war costs. The final acceptance by governments of the settlement of reparations by two committees of business men, drawn largely from the council of the I.C.C., was not a historical accident. The Rome plan for world restoration drawn up by the second congress of the I.C.C. preceded the Dawes plan. Nor were the dates of the Washington I.C.C. congress and the Hoover moratorium wholly a matter of happy coincidence. The story of the evolution of international policy from reparations through European reconstruction to world restoration parallels in large part the history of business thought and action within the organization of the I.C.C. The evolution of postwar economic policy dealing with the problem of world restoration raised the question of trade barriers and tariffs. Here again the I.C.C. served as a clearinghouse for the powerful business interests which control the formation of international commercial policy. T h e clashing interests represented by the advocates of cartels and tariff reform, of creditor nations and debtor nations, and of important industrial groups such as the transport industries as opposed to tariff-sheltered manufacturing industries all participated in the formation of I.C.C. commercial policy. Its active participation in the World Economic Conference of 1927 and its subsequent activities, offer substantial evidence of the validity of the I.C.C. both as an efficient technical bureau and as a dynamic world business movement. T h e disasters which have followed the failure of the 1927 movement for economic disarmament mark the bitter ending of successive national policies conceived in the supposed interest of national economies

Introduction

7

assumed to be isolated by national frontiers from outside influences. Although the I.C.C. was unable to rally certain powerful business forces (notably in the United States and France to the cause of tariff reform in time to avert present calamities), its continued advocacy of world economic disarmament has contributed to a second world movement for tariff reform, led this time by the United States. Into this new movement for economic disarmament the I.C.C. has thrown all its influence. In 1935 under the leadership of Fentener Van Vlissingen the I.C.C. joined the Carnegie Endowment for International Peace in setting up a committee of economists and business men, after the manner of the Dawes committee, with instructions to conduct an exhaustive survey and study of the principal aspects of international economic relations. This committee of experts issued a series of documents and list of recommendations based upon the fundamental principle "that world peace and a return to prosperity through the revival of world trade are one and indivisible." The work of the committee of experts has been made the platform of a world-wide effort by the I.C.C., directed by the recently elected American president of the International Chamber, Thomas J. Watson. The new president is well known as an ardent supporter of enlightened trade policies. The strength and driving force of the I.C.C. are the result of the combination of technical ability and economic power which distinguishes this world association of business men. The I.C.C. is a technical bureau of a unique character. It is a bureau set up on popular representative lines. The working members of the bureau are representative business men organized in national committees throughout the world. The International Headquarters of the I.C.C. maintained in Paris is not, stricdy speaking, the bureau, but the secretariat of the bureau. The bureau itself is composed of experts who are at the same time representatives of powerful economic interests. The interests represented, however, are not only national, but functional as well, since national representation is on the basis of those industrial groups which make up the national economy. A member of the international bureau, therefore, is an expert with the authority of a delegate. The strength of the I.C.C. lies in its ability to coópt, in the person of business executives, capital itself for the service of world economic peace.

8

Introduction

Successful business management is, of necessity, primarily conccrned with immediate profits for special interests. These interests—a company, a class, a nation—which are essentially fractions of the whole are frequently confused with the larger interest of the whole. Such confusion in thinking is at the bottom of the confusion in ethics which war seeks to simplify. Against the destructive tribal emotionalism of war, however, international organizations of mere technicians offer scant protection. The technician is intellectually equipped to shed light upon particular problems. But unless these particular problems are viewed as segments of a larger pattern, the resulting confusion will obscure or invalidate partial solutions. Technics is not enough. Organized international cooperation, if it is to result in the creation and maintenance of the reign of law, must offer an opportunity to pay more than lip service to technical deities. Events are today resistlessly shaping an answer to the question as to whether a competitive bourgeois society can evolve a social ideal which will inspire loyalty rather than mortal strife. The ideal of a world commonwealth based upon a community of economic interest is at the back of all international economic cooperation. The I.C.C., in the form of its organization, has attempted to embody this ideal in a growing, living institution. It provides organs common to community life: a world community center known as International Headquarters, a president, a council and executive committee, resident national administrative commissioners, an international secretariat, a system of continuous international collaboration by wire, post, and deputation, a general assembly, an extensive system of committees, special conferences, a court of commercial arbitration, and an official journal, World Trade, published monthly in three languages, in addition to a mass of technical reports published from time to time. Unlike an embassy, the International Headquarters of this extensive regime of world cooperation enjoys no extraterritorial rights, no special immunities, no status suggestive of sovereignty, nor even limited police power. It is an international regime based entirely upon voluntary obedience and a frank recognition of its limited competence. It has never sought to impose its interests as an employers' organization upon other economic groups. Rather, it has sought to cooperate with

Introduction

9

all classes and groups in the peaceful solution of common business problems of international interest. The World Economic Conference of 1927, for example, saw the representatives of the I.C.C. and of the International Labor Organization standing shoulder to shoulder for the cause of economic disarmament against powerful national industrial interests. These cordial relations between the I.C.C. and the I.L.O. are indicative of the common interests of business management and labor in great international economic enterprises, the primary objectives of which, when considered as a part of the larger interests of a world commonwealth, are a higher standard of living and a more abundant life. The breakdown of the parliamentary conception of the reign of law within national states and at Geneva points to the failure to organize a public which is competent to direct cooperative state action in the economic and social fields. In the present world crisis, society is seeking in particular the establishment of a workable partnership between business and government, in the public interest. The influence of organized business opinion through the I.C.C. upon international affairs since 1920 indicates the general lines of such a partnership. Economic nationalism, whether the prostitution of the state by business or the prostitution of business by the state, threatens the extinction of both business and the state. National and international welfare can be achieved through the application of broad principles of business cooperation by business men in collaboration with other economic and social groups. The goal and the method of such economic cooperation are to be found in the record of business leadership by those merchants of peace who have loyally collaborated through the I.C.C. to apply scientific knowledge to the crucial problems of an industrial age.

Part I PREWAR—A BUSINESS MEN'S INTERNATIONAL 1905-1914

CHAPTER

I

T h e International C o n g r e s s of Chambers of C o m m e r c e and C o m m e r c i a l and Industrial Associations

S

1905-1914

I N C E the war world business through the organization of the International Chamber of Commerce has been slowly reaching out toward the establishment of some sort of a system of controls for the protection of its own common interests. From the anarchic impulses of mere profits business has been forced to the consideration of the more remote effects upon distant markets of contemplated immediate earnings. Any intelligent formulation of policy on the part of the vast body of small partners in the world's business must of necessity be slow, but it has been surprisingly rapid among the leaders and the means for its dissemination have been rapidly increased. H i e origin of postwar collaboration in the field of economic policy is to be found in the prewar world capitalist system. International cooperation had developed to an extraordinary degree when we consider the instability of the international political foundations upon which it was built. The capital of the world economic community before the war was London. Under the shelter of the liberal imperial authority at Whitehall, but never overshadowed by it, the City of London exercised the major control over the world's capital markets and through these markets over the great process of the production and distribution of wealth. The City's control was not despotic. It was based upon a very large and complex system of business cooperation which had gradually been established to meet the needs of sound and profitable investment all over the world. Its development was connected with the expansion of the British colonies, but it far transcended in influence and authority the limits of the empire. The

14

The International Congress

concentration of resources for such a vast free-trade area in one center automatically created a controlling influence in world finance. Any study of the history of international loans before the war would lead us straight to the square mile which comprises the City of London. The financial control centered in London before the war was supplemented by the growth of an international consciousness throughout the economic world. The international business movement, although in its infancy, gave evidence of some recognition of common business interests. The International Congress of Chambers of Commerce and Commercial and Industrial Associations had steadily grown since its first meeting at Liège in 19051 until, two months before the outbreak of the war, its assembly in Paris, including influential business men representing every phase of economic life from all the leading countries of the world, adopted a new constitution designed to provide the machinery for continuous cooperation in the formation of broad policies and for common action in the protection and expansion of business interests. Its provision for the creation of an active and continuously functioning executive council and secretariat to carry the policies of the biennial congresses into action, in view of subsequent international political organization which was only realized after the war, indicates the prescience of this prewar economic community. The Paris congress which closed on June 10, 1914, with a brilliant state banquet attended by President Poincaré2 had successfully mapped out a program of international action in a series of resolutions on the following subjects: the unification of legislation relating to commercial arbitration,3 unification of laws governing checks,4 postal checks and international postal transfers,® unification of laws concerning warrants,6 the utility of international action in respect of unfair competition, in the direction of existing legislation,7 the possibility of the use of gold reserves with a view to averting financial panics,8 and the adoption of a customs stamp for parcels sent by post.9 Recognizing the futility of the occasional formulation of policy 1 M. Canon-Legrand, in International Congress of Chambers of Commerce and Commercial and Industrial Associations, Sixième congrès (Paris, 1 9 1 4 ) , p. 141

p. 16.

® I b i d . , p. 2 2 1 .

'Ibid.,

pp. 2 2 2 , 2 2 3 .

'Ibid.,

Ibid.,

pp. 2 1 8 , 2 1 9 .

'Ibid.,

pp. 2 2 1 , 222.

'Ibid.,

p. 2 2 3 .

1

p. 220.

7

p. 2 2 2 .

Ibid.,

Ibid.,

The International Congress

15

in biennial congresses without provision for continuous organized cooperation, the Paris congress laid down a new set of regulations. These provided for the organization of the International Congress of Chambers of Commerce and Commercial and Industrial Associations, the declared object being to facilitate the commercial intercourse of nations, to secure harmony of action on all international questions affecting commerce and industry, and to promote peace, progress and cordial relations between the countries and their citizens by the co-operation of business men and their associations devoted to the development of commerce and industry. 10

It was stipulated that the congress should meet at intervals of not less than two years and that a permanent committee11 should be formed for the purpose of making arrangements for the next congress and for the preparation of the agenda. The headquarters of the committee should be at Brussels and each country should be represented on the committee by three delegates. The permanent committee was to elect from among its members a president, a vice president, and a general secretary. The permanent committee was empowered to appoint subcommittees. Provision was made for the appointment of a paid staff. 12 The provisions of this prewar international constitution for world business provide the origins of the present International Chamber of Commerce. Thus, on the eve of Sarajevo, a business men's League of Nations became a reality. This growing prewar business international did not fail to realize the need for more adequate political organization in international affairs. Speaking at the great congress of the Chamber held in Boston in 1912, Harry A. Wheeler, president of the United States Chamber of Commerce, said: The business interests of the United States are deeply sensible of the importance of this great gathering. It signifies to us a recognition of a world inter-dependence, an acknowledgment that the happiness, the welfare and the prosperity of all the people are so interlaced that harm permitted to be done to the least of the nations must necessarily find its adverse effect upon the greatest. 13 a "Ibid., p. 2 3 7 . "Ibid., p. 240. Ibid., p. 242. 1S International Congress of Chambers of Commerce and Commercial and Industrial ciations, Cinquième congrès (Boston, 1 9 1 2 ) , p. 26.

Asso-

16

The International Congress

And later, speaking for the multitude of industrial financial and trading interests represented by the United States Chamber of Commerce at Boston, Wheeler foresaw the need for such international organization as would insure "international arbitration of individual and national disputes" and "with commerce create and maintain world peace." 14 T h e final resolution was introduced by the president of the congress and the representative of the Belgian Chamber of Commerce, Canon-Legrand, over the secret protests of the German representatives "that it was not the time or place for such a matter." 15 The resolution read: T h e Congress affirms the desire to see convened as soon as possible a number of official international congresses assuring between nations the existence of arbitral jurisdiction in the widest sense of the term and such as may assure an equitable solution of all international controversies, either between the governments (or individuals) ; and agrees to the principle of a combination of nations, where possible, to endeavour to prevent the atrocities of war. 1 6

The German delegation, of which Gustav Stresemann was a member, finally voted for the resolution with the rest of the congress despite the early opposition to which Canon-Legrand testifies. T h e German opposition to the attempt of the congress to exert pressure upon international politics is interesting. T h e philosophy of "power" and "liberalism" of the young Stresemann and his fellow German National Liberals looked to the national state as the proper instrument of international action. This philosophy, however strongly entrenched it may have been in Germany, was by no means peculiar to Germany. Like Stresemann, the vast majority of economic liberals all over the world looked to their own governments and their fellow countrymen for the furtherance of commercial enterprises. T h e idea for which Stresemann labored constantly during this period of his public life was the creation of a German Society of World Commerce through which he hoped to enlist the more active cooperation of the German government in foreign commerce. 17 T h e "new imperialism" which finally culminated in the World War was to find " ibid., p. 26. ' 5 Canon-Legrand, in International Trade Conference (Atlantic City, 1 9 1 9 ) , pp. 125, 126. w International Congress of Chambers of Commerce and Commercial and Industrial Associations, Cinquième congrès (Boston, 1 9 1 2 ) , p. 364. " G u s t a v Stresemann, Vermächtnis, I, 8-12.

The International Congress

17

reincarnation in that postwar economic nationalism with which Stresemann himself was one day to grapple. Between the National Liberal of 1914 and the statesman of Locarno and Geneva there was a great gulf. It was the broad gulf between the philosophy of power embodied in the ideal of the modern state and the philosophy of welfare embodied in the ideal of the broadest national cooperation. It is the gulf between the Roosevelt of "the big stick," "walking softly" in Panama, and Roosevelt, the Progressive, batding "at Armageddon" for the gospel of "the square deal." Against this background Roosevelt's famous speech at Stockholm in 1910 with its prophetic proposal, "Finally it would be a master stroke if those great powers honestly bent on peace would form a league of peace, not only to keep the peace among themselves, but to prevent by force if necessary, its being broken by others,"18 stands as one of those fleeting glimpses beyond the contemporary national scene which mark the beginnings of this great enterprise. The occasion was the Nobel Peace Prize award by a foundation which, with the Carnegie Endowment for International Peace, was a testimonial of the birth of the new spirit of international cooperation embodied in practical continuously functioning organizations. National Liberals and Progressives in the decade which preceded the division of 1914 needed the platform and the occasions which only organized international cooperation could furnish. Given a Progressive on the platform of the Nobel Peace Foundation and we have the origin of the League to Enforce Peace. Roosevelt's League, however, embodied an authoritative rather than a cooperative conception of world government, fully as authoritative as that provided by the Covenant which his countrymen were to reject in 1920. It is primafacie evidence of the small progress that political liberalism had in reality made in the international sphere. Placed beside the statement of Roosevelt, the words of the president of the American Chamber of Commerce at Boston and the international attitudes of the slowly forming political and economic world communities of 1914 stand in vivid contrast. The idea of a world community had already come to signify to forward-looking business leaders "a recognition of a world interdependence, an acknowledgment that the happiness, the welfare 18

World Peace Foundation, League of Nations, I, 29.

18

The International Congress

and the prosperity of all the people are so interlaced that harm permitted to be done to the least of the nations must necessarily find its adverse effect upon the greatest." The implications of the philosophy of world economic interdependence current among business leaders in 1914 were hardly even foreshadowed in the sphere of international politics. Stresemann, the National Liberal, carried back with him to his own office on the Wilhelmstrasse a large photograph of the delegates to the great world economic gathering of 1912 assembled at the Boston Congress of the International Chamber. It was hanging opposite his desk when the telephone rang one August day in 1923, and the head and founder of the Deutsch-Amerikanischer Wirtschaftsbund went out to face Poincaré in the closing days of the grim economic Battle of the Ruhr.

P a r t II POSTWAR—A BUSINESS MEN'S LEAGUE OF NATIONS AND THE RECONSTRUCTION MOVEMENT

CHAPTER

II

A Business Peace Conference

H

A D the work of the International Congress of Chambers of Commerce in Paris in June, 1914, not been extinguished two months later by the tragic political blunders of August the

experiment of a continuously functioning business men's league of nations designed "to secure harmony of action on all international questions affecting commerce and industry and to promote peace" might have been launched in a world less bitter, and clean, at any rate, of the economic debris of the great war. It was to meet the immediate needs of European reconstruction by closer cooperation between American and European private business interests that the preliminary organization conference of business interests from the five Allied countries of Great Britain, France, Italy, Belgium, and the United States was called. T h e originators of this

cooperative movement among Allied business interests had the larger permanent world organization of the International Chamber in mind as an eventual and not far distant outcome of this collaboration. It figured as an important item on the agenda of both the International Trade Conference of 1919 at Atlantic City and the Organization Conference which followed in Paris in the spring of 1920. The decision, however, to build the International Chamber upon Allied foundations was an inevitable consequence of the militarization of industry during the war. T h e natural bitterness following a war in which industrialists participated so fully made universality such as was achieved by the admission of Germany into the International Labor Organization in 1920 impossible of attainment in the International Chamber of Commerce, until the period of reconciliation following the Dawes plan. This reconciliation of German and Allied industry within the organization of the International Chamber of Commerce was to come

22

A Business Peace Conference

only as the final phase in an evolution of business opinion commencing with the reconstruction movement The Atlantic City International Trade Conference which met October 20-24, I 9 I 9» w a s called with a view to supplying an initiative for the restarting of the privately operated peace-time machinery of world industry and commerce. The conference hoped to continue by means of voluntary collaboration between private business men the cooperative movement of war days centralized around the intergovernmental committees of control. The purpose of the Atlantic City conference was to lay the plans for the organization of the business peace. Allied business interests had cooperated to win the war. Private business interests assembled at Atlantic City to formulate a business peace program. The first objective of the conference was reconstruction, the second the planning of a permanent international organization of private business. The plans for launching collective action by Allied business interests in European reconstruction were germinated in a meeting of the Permanent Organization Committee of the prewar International Congress of Chambers of Commerce held in Paris in the spring of 1919. A group of American business men including E. A. Filene, E. G. Miner, T . W. Lamont, A. C. Bedford, and E. H. Goodwin laid the plan before leaders and organizations in Belgium, France, Great Britain, and Italy. It was accordingly determined that the United States Chamber of Commerce should invite representatives from each of these countries to come to the United States to discuss these problems with American business men. The negotiations were carried on in Paris by Filene, Lamont, and Bedford with Georges Pascalis, the president of the Chamber of Commerce of Paris and the chairman of the Board of Presidents of French Chambers of Commerce, with Clementel, the French minister of commerce, and with the General Confederation of Production.1 The definite purpose of this first organization conference of the International Chamber as thus outlined was to ascertain " ( 1 ) the material and economic needs of the four principal Allied nations—Belgium, France, Great Britain, Italy—both immediate 1 Address by Clementel, in Organization Meeting of the International Chamber of Commerce (Paris, 1920), p. 163; address by Pascalis, ibid., p. 1 7 1 .

ETIENNE CLÉMENTEL PRESIDENT OF THE INTERNATIONAL CHAMBER, 1920-1923

A Business Peace Conference

23

and continuing, and (2) to what extent the United States could and should supply those needs and how." 2 The practical organization of the Atlantic City International Trade Conference into ten committees: credit and finance, chemicals, coal, foodstuffs, metals, petroleum, reconstruction supplies, shipping, textiles, and permanent organization, and the quasi-official nature of the Continental missions themselves are self-explanatory of both the character and the importance of this movement in its formative stage. The Belgian commission was headed by Florimond Hankar, a director of the National Bank of Belgium, and included Albert E. Janssen, another director of the National Bank of Belgium; Paul Van Den Ven, formerly delegate of the Belgian Minister of Finance at the Paris Peace Conference; and Canon-Legrand, the permanent president of the prewar organization of the International Congress of Chambers of Commerce. The French delegation was led by Eugene Schneider, head of the Creusot Steel Works, and included Tirman, French councilor of state and representative of the French Ministry of Commerce; Varaigne, the head of the French mission that was associated with the American Services in Paris; Godet, delegate of the Confederation Generale de Production; Fran^ois-Poncet, delegate of the Steel Committee in France; Parmentier, delegate to the Ministers of Commerce and Public Works; and, as general secretary of the mission, Mazot, the general secretary of the French High Commission. The Italian representatives included Luigi Luiggi, a member of the State Council of Public Works, and Domenico Gidoni, delegate of the Italian Treasury. And the British delegation was headed by a member of Parliament prominent in English business circles, Sir Arthur Shirley Benn. Although the United States Chamber of Commerce delegates were of an entirely unofficial character, the secretary of the treasury was represented by Norman H. Davis, who gave an address upon international finance and trade recovery. The secretary of commerce, William C. Redfield, and the governor of the Federal Reserve Board, William P. G. Harding, also spoke before the conference. The International Trade Conference was, therefore, in personnel a very representative international economic parliament from the countries ~ Chamber of Commerce of the United States, The p. 1 1 .

International

Trade

Conference,

igig,

24

A Business Peace Conference

immediately concerned with European reconstruction and with that dangerous phase of reconstruction policy, the collection of reparations. Its importance was recognized by business leaders. A . C. Bedford, chairman of the board of the Executive Committee of the Conference, wrote at its conclusion: The Conference, in conception, in execution, and in probable results, was the most important international trade meeting in history. It serves as a corollary to the Peace Conference and was a natural and inevitable outcome of the situation in which the world was left by the devastating war which rocked human institutions to their foundations.3 T h e representatives of the Allied powers at Paris had attempted to liquidate the question of war costs in the f o r m of reparation for damages under the armistice terms of the Fourteen Points. T h e reparations clauses of the treaties were the result. T h e Atlantic City conference was faced, as the Peace Conference of Paris was not, with the immediate problem of building a practical program of cooperation for the actual work of reconstruction. In the sense that its task was the restarting of the normal process of production and trade, it acted as the economic executor of the Conference of Paris. T h e governments had mobilized private industry and credits for the prosecution of the war, but, although the political act of Versailles had ended the war, the demobilization of industry by the various governments had left factories either idle or producing unevenly. T h e effect of the Conference of Paris upon the economy of the world was therefore largely negative. Mere industrial demobilization induced private industrial collapse all along the line. T h e Conference of Paris drew up the w a r settlements upon the assumption that the economic processes upon which peace depends would reestablish their normal function under the new treaty regime. T h e conference of Allied business men at Atlantic City was, therefore, in a very real sense "the corollary to the Peace Conference." H o w did the Atlantic City conference propose to execute the reparations clauses of the Treaty of Versailles? What place did reparations occupy in the Atlantic City program of world reconstruction ? T w o of the three obvious methods by which transfers of wealth may be accomplished, cash, kind, and services, are represented in the * Ibid., p. 10.

A Business Peace Conference

25

reparations clauses of the Treaty of Versailles. It was expressly stipulated that Germany should make certain deliveries of raw materials essential to Allied industry, particularly coal and timber. In the minds of the framers of the reparations clauses, the main payments, however, were to be made in the form of annuities over the exchanges. No mention is made in the Treaty of Versailles of payment in services. According to the Treaty program, therefore, the German economy was to stand to the Allied economy mainly in the relation of an unwilling banker to industry. Comprehension of the absurdity of this proposition was apparently vouchsafed to a very limited number at Paris, notably to the Cambridge economist, J. M. Keynes, and to the American treasury adviser to President Wilson, Norman Davis. The obvious way to eliminate this absurdity would have been to accept payment in services and kind. This would have called for active Allied and German cooperation in industry as well as in finance. But the war psychology was to a large extent dominant at Paris; men were thinking in terms of sanctions rather than in terms of cooperation. The cooperative implications of the financial relationship with Germany, set up by the reparations payments, were commonly confused with the possibilities of coercion and arbitrary enforcement. The war had in fact produced an amazing reversion to eighteenth-century economic thinking wholly out of keeping with the working of the prewar machinery of international trade as it was for the most part operated on the continent of Europe, despite European adoption of the techniques of the new imperialism for use abroad. The Treaty of Versailles, in fact, opened up the sinister possibility of the introduction into the heart of Europe of the techniques of colonial exploitation commonly practiced in Africa, Asia, and South America. The nature and causes of this reaction in business psychology appear in the words of business men in the Atlantic City conference. Speaking before the main session of the conference, Albert E. Janssen expounded the recent financial history of Belgium as follows: When the war began we believed private property would be protected by the H a g u e Convention. W e believed that international treaties were more than "scraps of paper," as they were termed by Bethmann Hollweg. On August 12, 1914, we were startled by the news that the reserve of 2,000,000 francs had been seized by the Germans by armed force in the little

26

A Business Peace Conference

town of Hesselt on the frontier The reserve of private banks in Liège also was taken and the Germans forged signatures on bills that had not yet been signed. Then, in rapid succession the branches of the National Bank at Huy, Charleroi, Dinant, Nivelle, Athus, Mons and Ghent reported that German officers with squads of soldiers with rifles and bayonets had compelled them to throw open their vaults. But we lost no time. By telephone and telegram we had issued orders to burn all notes So as the Germans advanced, our banks sent their reserves to the fortress of Antwerp and from there to the solid vaults of the Bank of England. When on Friday, August 21, at 10 o'clock in the morning, I received German officers in the Bank in Brussels, I had the personal satisfaction of opening to their inspection vaults empty except $100,000 worth of copper coins that had been too heavy to carry away. May I recall for you a personal experience, an incident which occurred on the 25th of August, 1914, in the Grande Place of Brussels. The German general who was governor of Brussels, called us together and told us that if we did not at once pay a $100,000,000 "war contribution" imposed upon Brussels he would seize the valuable paintings and treasures of our Museum. H e added that we could easily find rich Americans who would buy these priceless possessions of ours and that in this way the levy would certainly be collected.4 Janssen then proceeded to describe in some detail the recent banking system of Belgium. Of approximately $200,000,000 in bills discounted by the National Bank of Belgium in circulation at the beginning of the War, about four-fifths or $160,000,000 were paid back into the bank in marks which the bank was compelled to receive at the rate of one franc twenty-five. The Germans threatened us with deportation to Germany if we did not accept the marks in payment.5 T h e above statement has been cited at some length because, coming f r o m the lips of a director of the National Bank of Belgium, it provides an accurate description of the psychology of the Belgian bankers and of its cause. Janssen, as director of the National Bank of Belgium, was an influential member of that large group of Allied interests w h o were designated, by the Conference of Paris as Germany's creditors on the reparations bill. Moreover the occasion for this speech was the need of Belgium for American credit. " T h e Peace Treaty provides, as you ' Albert E. Janssen, in The International Trade Conference, 1919, pp. 2 : 1 , 2 1 2 . 5 Ibid., pp. 212, 2 1 3 .

A Business Peace Conference

27

know, that Germany shall reimburse Belgium in the form of gold bonds for loans made by the Allies before the Armistice " Thus in Janssen's appeal for long-term credit the interest of Belgian bankers and industrialists in reparations is made very clear. The reparations item appears in the very forefront of the list of collateral assets which Belgian financiers in effect were offering American bankers as security. This was the main item in the Belgian reconstruction budget and it was of necessity, as Janssen admitted, intangible. "We, no doubt, shall receive the indemnities from Germany imposed by the Peace Treaty, but how many years we shall have to wait is a matter of doubt."6 Janssen's financial exposé was followed by a similar account of French finance by Baron du Marais, director of the Crédit Lyonnais. The Treaty of Peace holds Germany responsible for war losses. In anticipation of reparations returns the French government would be obliged to advance sums which, it was admitted with equanimity, would reach "a very elevated figure." This expensive program was "of supreme importance" because France would be "entirely absorbed in the work of reconstruction until it is completed. Consequently in view of her depleted equipment," she would not be able "to regain her place in the world markets save slowly and to a very limited degree." And it was "precisely at this point that France might require the cooperation of the United States to secure through credits, the means of paying for merchandise, raw materials and manufactured articles, which she could obtain in return for her exports under normal circumstances." As to guarantees for these advances, Baron du Marais frankly asked American investors to share the risk of German default, an eventuality which, presumably by a process of political reasoning, he considered to be "improbable."7 The nature of this ambitious reconstruction program and its significance in the evolution of reparations policy in business minds is clearly expounded in the discussions of the Allied industrialists who were its initiators at Atlantic City. The attitude of Allied industrialists toward actual German industrial cooperation in carrying out reconstruction and the explanation of this attitude appear on every hand. 'Ibid., p. 217. : Baron du Marais, in The International Trade Conference, lgig,

p. 226.

28

A Business Peace Conference

Canon-Legrand, the venerable President of the International Congress of Chambers of Commerce, introduced his appeal for Allied support of Belgian reconstruction as follows: W e have the names of the five big German firms which comprised this organization of vandals. They and the government of Germany profited by the sale of our stolen machinery . . . . But when Germany visioned defeat she set about destroying all of Belgium's industries which before the war had competed with her in the world market. Machinery in factories which was not shipped into Germany was wrecked Under the direction of the Minister of Economic affairs, Belgium has been bringing stolen machinery out of Germany at the rate of 3,000 tons a week. T h e last report I saw set the total amount recovered at 39,000 tons. This work began in April and is still going on. 8

In the meeting of the French and American committees on reconstruction supplies in which the French commission was represented by Major Varaigne, Pesson-Didion, Tirman, and Parmentier, Major Varaigne, reporting for the commission on the "Reconstruction Needs of France," described the recent relations of French and German industry as follows: Then, the Germans decided to transfer into Germany, all our machinery. For this purpose an official organization called B.D.K. was created, under the supervision of the Minister of War. The first task accomplished by this organization was to make an inventory. T h e German industrials, acting upon this information, and often after a personal inquiry on the spot, bought any material that happened to be convenient to them, giving for this a percentage benefit to the said organization, which made enormous profits out of this trade.9

Such was the Franco-German industrial background of reparations as it appeared in the reconstruction program discussions. The role which German industry was expected to play in this reconstruction program was, apparently, based entirely upon a survival of these wartime conceptions of industrial relations. The attitude of Allied business men toward the debtor nation, upon whose wealth they admittedly proposed to build this vast new structure of international credit, is eloquent of the distorted vision of war times. The extent to which the • C a n o n - L c g r a n d , in The ' V a r a i g n e , ibid.,

p. 3 9 5 .

International

Trade

Conference,

igig,

p p . 1 2 3 , 124, 126, 127.

A Business Peace Conference

29

Allied business mind was at this time closed to German cooperation is indicated by the dark picture of future Anglo-German trade which appeared in Sir Arthur Shirley Benn's expose of the British situation: "Germany, with whom we had a large trade before the war, I do not think will be likely to buy very much." 10 And again speaking of reconstructed Allied countries: "They will be our customers, they will be people who will sell to us, people to whom we will sell, who will trade with us in the future, and the sooner they are reconstructed the better it will be for commerce the world over." 11 Bernardo Attolico, undersecretary designate of the League of Nations and a member of the Italian delegation, in presenting a survey of Italian economic conditions, made the following allusions to German-Italian trade: As you are aware no other country, perhaps, was so dependent on the German and Austro-Hungarian markets for the selling of its goods as Italy. This trade was wiped out altogether by the War without any possibility of finding adequate compensation in Allied or neutral markets. 12

The future of the German entrepot trade was forecast as follows: Geography is there to show that once Bremen, Hamburg and other German ports, are no longer protected by the artificial preferential tariffs which Germany was allowed to enjoy before the War, Italy is bound to become the greatest transit country in Europe for people going from east to west. The same may be said for goods traffic in both directions. Italy, if only freedom is guaranteed, will become the great entrepot of eastern Europe. 13

And of future German and Austrian commerce in the Levant, Attolico spoke as follows: "Our own export trade will certainly take a proper share—if not a predominant share—of ex-German and Austrian commerce in the Levant. This is bound to happen."14 As regards German trade in Italy, Attolico's survey noted that the Italian chemical manufacturing industry was then able, "generally speaking, to supply the entire needs of Italy" and predicted that with the necessary financial assistance, it would "perhaps affirm itself on other market.»."15 And it was added: "Numerous small industries have " S i r Arthur Shirley Benn, ibid., p. 140. Ibid., p. 1 4 1 . "Bernardo Attolico, ibid., p. 144.

11

a

/ W . , p. 148. Ibid., p. 149. "Ibid., p. 149.

14

30

A Business Peace Conference

been born during the War which emancipate our country from similar industries in Germany." 14 The only supplies which Italy contemplated obtaining from Germany and Austria, according to Attolico's survey, were coal and timber and these only apparently to a very limited extent. The resumption of trade with Germany and Austria was held out as a calamity which American credit could alone prevent. Said Domenico Gidoni, financial representative of the Italian government in England during the war, and at this time financial representative of the Italian government in the United States: If provision is not made to facilitate the payment of imports from the United States, a tendency already manifested here and there in Europe will be accentuated, for, in spite of a natural reluctance to resume business with Germany and Austria, the merchant will be forced to make his purchases in these countries where his own money is at a premium, and where the price is consequently lower than elsewhere. 17

The same fear and determination were expressed by Canon-Legrand on behalf of Belgian business: It will be necessary for us to react against economic infiltration from Germany, and for that it would be well if our Allies would lend us every possible aid so that we should not be obliged to return to our pre-war trade with Germany. Already they are seeking in Germany to sell us machinery and tools which we seek over here, offering all kinds of inducements. It would be deplorable if we were compelled to have recourse to them. 1 8

The possibilities of American business interests displacing German interests in Italy, particularly the chemical interests, were developed in the committee on chemicals as follows, in the presence of Quartieri, head of the Italian Chemical Industry, and a prominent group of American chemical executives under the chairmanship of Charles H . MacDowell, the president of the Armour Fertilizer Works: T h e meeting then discussed the question of investing American capital in Italian chemical enterprises. It was pointed out that the position of the Italian chemical industry was such that it must have assistance from outside, that this help can best be obtained from two countries, United States and Germany, and that the Italians wished to get help from the United States. 19 Ibid., p. 150. "Domenico Gidoni, ibid., p. 256. "Canon-Legrand, ibid., p. 1 3 1 . "Summary of the Proceedings of the Meeting of American and Italian Committees on Chemicals," ibid., p. 314. w

a

A Business Peace Conference

31

As regards German steel in Italian markets Luiggi, in explaining the requirements of Italy for reconstruction, made the following bid for American cooperation in ousting the German interests. "Prior to the war Italy consumed about 2,000,000 tons of iron and steel, about 500,000 tons came from England, Germany and Austria. The rest was made in Italy. Now they would like the 500,000 tons to come from American markets to meet their needs."20 In the meeting of the French and American committees on reconstruction supplies, American business interests were supplied the following significant information: "The lists of imports from Germany into France in 1912 and 1913 published by the Institut Français aux Etats-Unis, 599 Fifth Avenue, New York, affords information which will enhance the value of this report if a copy can be had and included." 21 The future of German shipping was placed under the same cloud of war penalties in the discussion of the distinguished group of executives on British and American committees. In the presence of representatives of the United States Shipping Board, the State Department, the Department of Commerce, and the civil attache of the British embassy, the following course of action was apparently accepted without question: It was plainly shown both by the British and A m e r i c a n speakers that the place in the world's merchant marine formerly held by G e r m a n y

should

now be held by the United States, and that working in the closest harmony with England, as brother Anglo-Saxons, the commerce of the world should be carried on with every vessel working at 100 per cent efficiency. . . . 2 2

But the British and American interests were by no means conceded an exclusive monopoly of ex-German trade on the seas. French ambitions in this direction were fully aired by Schneider as follows: W e intend to raise our shipping to at least six million tons gross. Y o u can give us considerable assistance in this line either by the construction of n e w vessels or by giving us your support in having an appreciable quantity of tonnage awarded to us from G e r m a n sources. 23 " "Summary of Proceedings of the Meeting of American and Italian Committee on Metals,"

ibid., p. 351.

11 "Summary of Proceedings of the Meeting of French and American Committees on Reconstruction Supplies," ibid., p. 394. 23 "Summary of the Proceedings of the Meeting of the American and British Committees on Shipping," ibid., pp. 4 3 1 , 4 3 2 . " A d d r e s s by Schneider, ibid., p. 1 7 3 .

32

A Business Peace Conference

A n d as to the ex-German entrepot trade, Schneider made the following French claim: " W e look forward to a considerable increase of passenger traffic as well as of freight diverted from German ports." 24 A s regards the program of the French steel industry Schneider, as head of the Creusot Works and president of the French Iron and Steel Institute, was entitled to speak with the highest authority. He said: Victory gives us back the whole of the Lorraine iron ore districts, including that which had been held since 1870 under German domination. France, after the war, will take second place in the list of the world's steel countries following immediately behind the United States. Her engineering industry will follow the lead of the steel industry and will get ready for export business. Plans have already been laid and steps are already being taken for capturing the markets which were formerly in the hands of her enemies. France does not want to compete with her Allies in the foreign markets, but she wants to supersede Germany in the countries where German industry had the lead before the war. 28 In this ambitious steel project the Germans were cast for their only industrial role of vital importance in the whole Allied reconstruction program. Upon the subject of German coal deliveries Allied industrialists spoke in no uncertain terms: Under the stipulation of the Treaty of Peace [said Schneider] Germany is obliged to send 20 million tons every year to France to replace the production of the mines she destroyed; moreover, she must deliver to us an extra 7 million tons, which was the average amount she sold to us yearly before the war. Up to the present we have not even received one-half of the quantities promised to us from Germany, and England has very greatly reduced her coal exports. So we find ourselves faced by an actual shortage of about 20 million tons.26 German lumber is also mentioned as a possible item in the French building trades survey: "If there is any deficit to meet, Sweden, Norway and even Bohemia can send us the surplus, without counting Germany who can very well pay a part of its indemnity by shipments of lumber." 27 From Allied industrial plans it would therefore seem evident that **lbid., p. 1 7 4 . "Ibid., p. 166. "¡bid., p. 164. " "Summary of Proceedings of French and American Committees on Reconstruction Supplies," ibid., pp. 404, 405.

A Business Peace Conference

33

European reconstruction was primarily conceived as a great Allied market which it was to French, Belgian, Italian, British, and American industrial interest jealously to guard, together with all other possible ex-enemy markets, against what Canon-Legrand had well described in current war phraseology as "economic infiltration from Germany." 28 T h e reconstruction market, for the exploitation of which by Allied interests the above program was designed, was, of course, actually in the control of the appropriate government departments of the reconstruction countries. The industrial bids by French, Belgian, and Italian interests which marked the execution of this program were thus destined to find their way through the channels of departmental estimates into the discussion of French, Belgian, and Italian cabinets and eventually to come to rest in grand budget totals upon the desks of the prime ministers, beside the bids of rival German financiers and industrialists in the form of the various reparations offers of reconstruction aid in kind and services made from time to time by the German government. It is evident that in this rather complicated transaction the governmental bureaus concerned were merely acting as financial collecting and distributing agents for the general public in German and reconstruction countries and for that part of the British and American public and of the general world public which should elect by investment to become entangled in the affairs of these national communities. N o political decision could in any way affect the self-evident fundamental truth of governmental impotence in meeting these and consequent financial obligations apart from recourse to the total financial wealth represented by the above national incomes, or such parts of these incomes as were presumed to be at governmental disposal. The momentous character of these political decisions, therefore, lay in the fact that such decisions must inevitably determine the future tax burdens to be shouldered by the general public in these countries. This, as events were to reveal, was a responsibility fraught with all the international consequences involved in national bankruptcy. The exploitation of the reconstruction market by Allied business interests was motivated by the illusory conception revealed in the Atlantic City discussions of German financial capacity to meet these huge tax burdens " A d d r e s s by Canon-Legrand, ibid., p. 131.

34

A Business Peace Conference

on the reparations account. In well-organized political communities the irate taxpayer is empowered with the necessary checks on those forms of governmental expenditure, which might prove an ultimate distortion of the general welfare in the supposed interest of a section of the community. In this instance, however, the taxpayers most vitally concerned were in no position to exert any influence at all proportionate to the importance of their function in the general scheme. Had the ordinary processes of representative government been allowed to work, had the German taxpayer been allowed such a hearing on the Reparation Commission as Allied taxpayers were being granted in Paris, Brussels, Rome, and London, the wholesome check, which history has since shown that this program deserved, would have unquestionably been administered. That tendency alluded to by Allied industrialists in Atlantic City as "already manifested here and there in Europe" would have been, as it was feared, "accentuated, for, in spite of a natural reluctance to resume business with Germany and Austria" economic laws would have dictated "purchases in . . . countries where . . . money" was "at a premium, and where the price" was "consequently lower than elsewhere." This was the unwelcome economic law to which Allied industrialists confessed themselves obedient outside the governmental balance sheet. They asked for American credit to accomplish its evasion wherever possible. Failing such help from American capital, they acknowledged the necessary obedience to the obvious laws of economic necessity. But whimsical government reparations budgets reduced private business resolves to a sinister paradox. The superficiality of early American conceptions of the reconstruction problem is shown in the utter disregard of the reparations factor. The discussions on the floor of the general conference and in the committees quoted above were organized about four general subjects which American business opinion considered relevant to European demands for American cooperation, particularly in the capacity of creditor. The four subjects which, as possible dangers to industrial stability, were conceived to be of primary interest to American creditors, as stated by A . C. Bedford for the guidance of European business men,

A Business Peace Conference

35

included: Bolshevism or Socialism; freedom of business from governmental interference, particularly as it might affect American business abroad; foreign reactions to American investors abroad; and the European attitude toward technological development in industry, or rationalization.29 Among "the infinite questions," in anticipation of which the American chairman begged European patience, there is no record of a single American business man suggesting that he considered the possibility that the attempted enforcement of reparations as well as Bolshevism might, by involving the danger somewhere of the confiscation of private property, of the nonrecognition of the rights of ownership and business management, or of the annulment of law, affect "the success and permanency of business." Likewise, there is no expression of fear that reparations might afford occasion for European failure to recognize that "commerce is the greatest of all interests" and might result in materially compromising "such a statesmanlike conception"; or of fear that a decision by American investors to put their treasures in European enterprises and take "pot luck" might reasonably be conditioned upon further light on how the important item on reparations reconstruction budgets was to be realized; or of trepidation as to the possible effect of the intensive campaign for markets by cut-throat competition, implicit in American demands for European rationalization, upon the capacity of Germany to produce the expected reparations total.30 There is no reason to suppose from the published minutes of the Atlantic City conference that business men possessed any intuition of these dangers beyond that evinced by statesmen in Paris four months previously in framing the reparations clauses of the Treaty of Versailles. The vast credit resources of the United States made the American banker the liaison officer between needy European financiers and industrialists and that great body of eager small American investors scattered over the American continent from the Atlantic to the Pacific and from the Rio Grande to the Canadian border. Of all the parties affected by the reparations question, of all the parties called upon to pass judgment upon this item in the European reconstruction program, which subsequent events were to prove so vital, the American financier might have been expected to deliver a resounding banker's " A . C. Bedford, ibid., pp. 40, 4 1 .

30

Ibid., pp. 40, 41.

36

A Business Peace Conference

warning in the face of this contemplated admittedly expensive program, optimistically elaborated by American and European business men at Atlantic City. The overwhelming character of the revolution in American financial thinking finds startling illustration in the address of the governor of the Federal Reserve Board. As Governor Harding stated, the number of American investors had jumped within less than two years from three hundred thousand to thirty millions. These thirty million Americans, men, women, and children, had actually within the space of months subscribed twenty-five billions of government securities under the stress of "patriotic unselfishness." Ten billions of this "magnificent response" had been put through a series of quick entries by Allied bookkeepers in New York and Washington and immediately placed to the credit of Allied governments at the scale of the current war price level on the books of American industry. Here they had served as a form of stupendous export subsidy in support of the various features of the American standard of living including high wages, plant upkeep and rationalization improvements, and that general industrial expansion which had characterized the war era of efficiency and increased production. The billions of dollars of capital and labor which had been sucked into the maw of diis industrial system now constituted a vested interest of unprecedented power. The plan of the American banker as frankly outlined by Harding proposed to place the influence of the Federal Reserve system and the War Finance Corporation behind a continuance of the war investment campaign transformed to meet the requirements of private plans for the exploitation of the reconstruction market. The Atlantic City conference was a clearinghouse for Allied and American business plans. It was a natural outgrowth of the remarkable international cooperation achieved during the war. The conference, with its discussion of international market sharing and better industrial understanding and cooperation between Allied nations, was a step toward the eventual world economic community symbolized by the organization of the International Chamber of Commerce. On the other hand, in so far as the conference, limited by war horizons, marked the re-forming of something like the old Allied industrial

A Business Peace Conference

37

war front under private command for the purpose of continuing the economic conflict, its program must be considered as an ominous economic implementation of the Treaty of Versailles. This program was particularly ominous, since it called for an Allied monopoly of the most important of postwar markets—the reconstruction market. The entire German economic system stood mortgaged to maintain this market through the provisions of the reparations clauses of the Treaty of Versailles. The sinister character of the relationship thereby established between the Allied reconstruction program and the tragic reparations drama, about to open, passed unrealized at Atlantic City but not without one significant warning. Norman H. Davis, fresh from the arduous reparations struggle at the Conference of Paris, in a cautiously worded review of the world economic situation deprecating what he termed "gross over-estimates of European requirements," spoke as follows, upon the problem of reconstruction market financing: I am sure, that when peace is consummated, and certain political risks, especially in respect to the newly constituted countries, are measurably removed; when it is known just what definite policy is to be followed in collecting reparations from Germany; American exporters and European importers will lay the basis of commercial credit in normal transactions; and I am confident that American bankers, in co-operation with our exporters, will not fail to devise means for financing the needs of the situation, nor American investors to respond to Europe's demand for capital, on a sound investment basis.31

Davis continued with the following analysis of the reparations item in the European reconstruction budget—the only such analysis on the minutes of the International Trade Conference: It must not be overlooked that the German reparations may also serve as a basis for the financial rehabilitation of Europe, provided there is an early constructive policy defined and announced, which has due regard, not only to Germany's capacity to pay, but to what her creditors can afford to have her pay.32

The Atlantic City International Trade Conference of Allied business leaders passed this significant principle in haste to re-cement the old war partnership and share postwar markets. The International Chamn

Address by Norman Davis, ibid.,

"Loc.

at.

p. 206.

38

A Business Peace Conference

bcr of Commerce, however, was to have occasion to recur repeatedly to this principle, ignored at Atlantic City and at Paris. Davis concluded: It is folly to try to succeed by any principle except that of efficiency and service, and I look upon this Conference as the beginning of international co-operation between the industrial and commercial interests of the world, which will lead to closer international affiliation, to a more commercial use of the world's resources and service, and consequently to a new era of peace and prosperity in the world. 33

Common recognition of these principles in business minds as applied to reparations awaited the tedious and tragic course of events. "Ibid., p. 209.

CHAPTER

III

O r i g i n s of the Reconstruction

Movement

T

H E postwar international movement for world financial reconstruction crystallized early in 1920. Its effect upon the formulation of Allied reparations policy, preparatory to Spa, is shown in the decisions of the Allied Supreme Council. The financial and exchange crisis, which it was sought to meet at Atlantic City by Allied cooperation among private business interests, grew more acute during the closing months of 1919 and the beginning of January. It was perceived that Allied cooperation was inadequate to meet the situation. Nothing short of a world financial conference could deal with all the factors involved, particularly the chaotic conditions of Central and Western Europe.

In January, leaders in finance, business, and the professions in the United States, Great Britain, and a number of European neutral countries initiated a movement for an international financial conference. This movement took the form of a memorial which was simultaneously presented to the various governments. On the fifteenth of January, the memorial, signed by an imposing list of distinguished Americans, was presented to the United States government, the Reparation Commission, and the Chamber of Commerce of the United States. Among the signatories were such prominent men as Charles W. Eliot, J. P. Morgan, Elihu Root, F. A. Vanderlip, Paul M. Warburg, George M. Reynolds, Arthur T . Hadley, Herbert Hoover, and A. Barton Hepburn.1 Although it was asserted that the movement was the result of "spontaneous combustion," it is understood that the initiative came from European neutrals, particularly Holland. 2 l T h e British signers included C. S. Addis, H. H. Asquith, R. H. Brand, Lord Bryce, Lord Robert Cecil, J. R. Clynes, F. C. Goodenough, Lord Inchcape, R. M. Kindersley, Walter Leaf, R. McKenna, Donald Maclean, J. H. Thomas, R. V. Vassar Smith. Among the Dutch signers were the following names: G. Vissering, C. E. ter Meulen, S. P. van Eighen, E. P. de Mouchy, C. J. K . van Aalst, and E. Heldring. Sweden contributed, among others, the following names: K . A. Wallenberg, M. Wallenberg, and J. H. Branteug. "The London Times, Jan. 16, 1920.

40

The Reconstruction Movement

The memorial, submitted to the United States Chamber of Commerce, called upon the Chamber to appoint representatives of commerce and finance for immediate conference with representatives of the Allies and Germany, Austria, the neutral European countries, and the chief exporting countries of South America for the purpose of examining the world situation and recommending action to revive international trade. The same memorial, submitted to the governments, put forward the proposal that the Governments of the countries chiefly concerned which should include the United States, the United Kingdom and the British Dominions, France, Belgium, Italy, Japan, Germany, Austria, the neutral countries of Europe and the chief exporting countries of South America should be invited forthwith (the matter being of the greatest urgency) to convene a meeting of financial representatives for the purpose of examining the situation, briefly set forth below, and to recommend, in the event of their deciding that co-operative assistance is necessary and advisable, to whom and by whom assistance should be given and on what general conditions. 8

With this introduction, the memorial proceeded with a striking statement of the international significance of postwar economic conditions and the principles necessarily underlying remedial measures. From the opening sentence of the terse summation of the main factors in the world situation to the concluding appeal for immediate action this statement was an impartial nonpolitical setting-forth of the case for placing government once more upon a sound financial basis. "Conquerors and conquered alike" were faced with "the problem of finding means effectively to arrest and counteract the growth in the volume of outstanding money and of Government obligations, and its concomitant, the constant increase of prices." National politicians were reminded that unless the generally accepted remedies involving "a decrease of excessive consumption and an increase of production and taxation" were promptly applied the continuance of the depreciation of money would inevitably result in the wiping out of the savings of the past and "a gradual but persistent spreading of bankruptcy and anarchy in Europe." 4 The memorial continued with a definition of a "solvent debtor." No country, it was asserted, was "deserving of credit" whose "current ex'ibid.

4

ibid.

The Reconstruction Movement

41

penditure" failed to come "within the compass of its receipts from taxation and other regular incomes." It was imperative that "the peoples of all countries" be aroused "from a dream of false hopes and illusions to the recognition of hard facts." Upon this sound principle of public finance, the memorial proceeded to deal in no uncertain terms with the question of reparations: "It is evident, continued the statement, that Germany and Austria will have to bear a heavier load than their conquerors, and that in conformity with the Treaty of Peace, they must bear the largest possible burden that they may safely assume."5 Acceptance of these political facts, however, the petitioners hastened to point out, was no excuse for the abandonment of wellestablished principles of public finance. The memorial continued, B u t care will have to be taken that this burden does not exceed the measure of the highest practicable taxation, and that it does not destroy the power of production, which forms the very source of effective taxation. F o r the sake of their creditors and for the sake of the world, whose future social and economic development is involved, G e r m a n y and Austria must not be rendered bankrupt. 8

The memorial did not stop, however, with this generalization. These principles, in the judgment of the signers, applied to reparations as follows: I f , for instance, upon close examination, the Commission des Reparations finds that, even with the most drastic plan of taxation of property, income, trade and consumption, the sums that these countries will be able to contribute immediately towards the current expenses of their creditors will not reach the obligations n o w stipulated, then the Commission might be expected to take the view that the scope of the annual contribution must be brought within the limits within which solvency can be preserved, even though it might be necessary for that purpose to extend the period of instalments. T h e load of the burden, and the period during which it is to be borne, must not, however, exceed certain bounds, it must not bring about so drastic a lowering of the standard of living that a willingness to pay a just debt is converted into a spirit of despair and revolt. 7

Nor did the memorialists shrink from the task of a similar application of the same principle to the question of inter-Allied debts. The condition of "some of the victorious powers" was "grave." "The posi• ibid.

•ibid.

7

ibid.

42

The Reconstruction Movement

tion of these countries too should be examined from the same point of view of keeping taxation within the power of endurance and within a scope that will not be conducive to financial and social unrest."8 The entire problem of governmental indebtedness and its demoralizing effect upon private life was clearly stated for the general world public as follows: T h e world's balance of indebtedness has been upset and has become topheavy and one sided. Is it not necessary to free the world's balance-sheet from some of these fictitious items which now inflate it, and lead to fear or despair on the part of some and recklessness on the part of others? Would not a deflation of the world's balance sheet be the first step towards a cure? 9

It was proposed that such a thorough financial reorganization as the circumstances demanded should be made "a first condition" for the granting of "further assistance." The reorganization meant, first, the balancing of domestic budgets and, second, the adjustment of intergovernmental debts to the limits of national taxation. Political submission to these financial principles would make possible and necessitate, the memorial continued, a consideration of the problem as to how these countries were "to be furnished with the working capital necessary for them to purchase the imports required for restarting the circles of exchange, to restore their productivity, and to reorganize their currencies." Ordinary banking channels, it was urged, were inadequate to furnish quickly the large amounts of capital required. The problem was so unprecedented as to demand an altogether "more comprehensive scheme" of relief than that afforded by national banking systems. "It is not," continued the statement, "a question of affording aid only to a single country, or even a single group of countries which were allied in the War. The interests of the whole of Europe and indeed of the whole world are at stake."10 Neither national nor Allied remedies could in the nature of things effect a cure of postwar ills. Nothing short of international cooperation of the broadest character could adequately deal with a situation which was essentially beyond the control of any single national authority. The general principles upon which such international cooperation in the granting of credits should be based were laid down as follows [quotations are from the London Times, Jan. 16, 1920]: • Ibid.

'Ibid.

10

Ibid.

The Reconstruction Movement

43

1. "The greater part of the funds" must necessarily be supplied by those countries having a favorable trade and exchange balance. 2. "Long-term foreign credit is only desirable in so far as it is absolutely necessary to restore productive processes." It should not be a substitute for national effort. "It is only by the real economic conditions pressing severely, as they must, on the individual that equilibrium can be restored." 3. For this reason American domestic credit demands "should be reduced to the minimum absolutely necessary." 4. "Assistance should as far as possible be given in a form which leaves national and international trade free from the restrictive control of Governments. 5. "Any scheme should encourage to the greatest extent possible the supply of credit and the development of trade through normal channels." 6. "In so far as it proves possible to issue loans to the public in the lending countries, these loans must be in such terms as will attract the real savings of the individuals, otherwise inflation would be increased." 7. The "best obtainable security" should be supplied by borrowing countries under the following conditions: (a) "Such loans should rank in front of all other indebtedness, whether internal debt, reparations payments or inter-Allied government debts. (b) "Special security should be set aside as a guarantee" for interest payments and amortization, "the character of such security varying perhaps from country to country, but including in the case of Germany and the new States the assignment of import and export duties payable on a gold basis, and in the case of States entitled to receipts from Germany, a first charge on such receipts." All of these principles were to receive continual reiteration by financial and business authorities during the decade to follow. They were essentially but the sound principles of public business administration which had been established by trial and experiment in the prewar capitalist world. The new conception of national monetary policy as a part of an international policy was necessitated by the passing of the complete domination of the City of London over the markets of the world. Changed conditions involved the substitution of an interna-

44

The Reconstruction Movement

tional authority for the authority of the C i t y . In the prewar capitalist w o r l d such principles as those laid d o w n in the memorial of 1920 w e r e quietly applied through the cooperation of the great b a n k i n g houses and their international ramifications centralized in the City of L o n d o n . T h e w a r had forced the w i d e n i n g of this overshadowing w o r l d financial combine through the sale of securities and currency inflation until it included a large section of the general public over a great geographical area. T h e very foundation of the p r e w a r system of

financial

control w a s a sound w o r l d monetary standard anchored to sterling. W o r l d - w i d e depreciation had resulted in the u n d e r m i n i n g of this basis and threatened the collapse of the entire system. T o save this foundation, built of "the savings of the past," the memorial asked the peoples of the w o r l d to cooperate. T h e sweeping character of the revolution w h i c h the w a r had accomplished within the inner financial citadel of the capitalist system finds no more striking illustration than the popular terminology of the memorial of 1920. T h e City was n o longer the controlling partner in the world's business. T h e partnership had been w i d e n e d and the essential terms of the partnership altered. G o v e r n m e n t s and the general public h a d become the controlling interest in w o r l d finance and in the capitalist system. T h e magnitude of the problem of

financial

leader-

ship, created by the overthrow of the p r e w a r system of control, this memorial courageously faced. G o v e r n m e n t s were invited to convene a meeting of financial representatives for the purpose of examining the activation, briefly set forth below, and to recommend in the event of their deciding that co-operative assistance is necessary and advisable, to whom and by whom assistance should be given and on what general conditions. 11 T h e proposal m i g h t have served as the introduction to the terms of reference for the m a n y experts' conferences w h i c h were destined to follow the Brussels conference and w h i c h w e r e to provide the pivotal feature of the n e w quasi-governmental system of control still in process of evolution in the field of international relations. T h e dangers involved in this n e w partnership between government and business were clearly foreshadowed in the statement of

financial

principles and in their application to the terms of the proposed partu

ibid.

The Reconstruction Movement

45

ncrship. Governments had put the general public into business in the war emergency. The memorial looked to public and governmental acceptance of sound business terms of partnership as covering present and future policy. This meant, first, the liquidation of "fictitious items" on "the world's balance-sheet" and, second, the acceptance of business rules in that further extension of the partnership to the investing public which world conditions made inevitable. By reestablishing government credit through a liquidation of the war liabilities, namely reparations and inter-Allied debts, and the stopping of further unproductive expenditure it was proposed to rebuild the weakened credit foundations with "the real savings" of the investing public. The permanence of this proposed world financial reconstruction was dependent upon the elimination of bad credit. The danger of rebuilding with inflated securities rather than "real savings" was clearly forecast in Point six of the memorial's prospectus for a new credit structure. The main principles governing public finance laid down by the memorial were to receive a large measure of acceptance by governments in the course of the following decade, particularly in the field of reparations. In 1920 the number and character of the authorities through whom policy must be conceived and action taken might well have seemed an insuperable obstacle to the achievement of any degree of control and direction. The closing paragraphs of the statement of 1920 indicate the difficulties of this task: In conclusion the signatories desire to reiterate their conviction as to the very grave urgency of these questions, in point of time. Every month which passes will aggravate the problem and render its eventual solution increasingly difficult. A l l the information at their disposal convinces them that very critical days for Europe are now imminent and that no time must be lost if catastrophes are to be averted. 1 2

On the thirtieth of January, Carter Glass, Secretary of the Treasury of the United States, in reply to a letter from Homer Ferguson, president of the United States Chamber of Commerce, requesting an expression of Treasury opinion on the recent memorial on the international financial situation, opened the debate for the American position on the proposals of the memorial as follows: 12

¡bid.

46

The Reconstruction Movement

Concerning the need of increased world production and deflation of currency and credit, the Treasury is in hearty accord with the memorial The Treasury is opposed to further Government aid beyond that already outlined in the Secretary's recent annual report and his recommendations to the House Ways and Means Committee, concerning the funding of the interest of Allied debts and supplying relief to certain portions of Europe. 13 T h e existing world-wide inflation of currency and credit, Glass continued, was a consequence of the fact that for a period of five years the people of the earth had been consuming and destroying more than they had produced and saved. Against the wealth so destroyed the warring nations had issued currency. T h e evidence of their indebtedness, wrote Glass, in consequence of the world's greatest war was "profound and unescapable." 14 T h e remedy to this situation, he pointed out, depended to a great extent upon public encouragement to the afflicted individual "to repair his own fortunes with the assistance of his business connexions in other countries." 15 Individuals must be encouraged to return to a normal life of industry and economy. T h e United States Treasury policy, f r o m the moment hostilities ceased, he asserted, had looked "towards the restoration as promptly as possible of normal conditions, the removal of Government control and interference and the restoration of individual international free competition in business." 16 In the view of Secretary Glass the rectification of the exchanges, now adverse to Europe, lay "primarily in the hands of European Governments." T h e normal method of meeting such an adverse balance, he wrote, was to ship gold. T h e refusal to ship gold prevented the rectification of an adverse exchange. T h e need of gold embargoes lay in the expanded European currency and credit structure. Relief, he contended, was to be found "in disarmament, the resumption of industrial life and activity, the imposition of adequate taxation and the issue of adequate domestic loans." H e continued with the significant warning which was to become so familiar to European debtors of the United States: The American people should not be, in my opinion, called upon to finance, and would not, in my opinion, respond to the demand that they should 13

The London Times, Jan. 3 1 , 1920. " Ibid.

15

Ibid. "Ibid.

The Reconstruction Movement

47

finance the requirements of Europe in so far as they result from failure to take these necessary steps for the rehabilitation of credit. 1 7

International bond issues, international guarantees, and international measures for the stabilization of exchange, the Secretary characterized as "utterly impracticable" in the face of existing inequalities in national policies of domestic taxation and finance. "When those inequalities," he asserted, "no longer exist, such devices will be unnecessary." T h e dangers of a continuation of "the manufacture of bank credit in the United States for the movement of exports," a process which Glass declared had already proceeded too far, were to be avoided in the movement of goods, of investment securities, and of gold into the United States from Europe. The American people in order to absorb such securities "must consume less and save." T h e United States government could not "undertake to finance the requirements of Europe" because it was unable "to shape the fiscal policies of the Governments of Europe." The limits of American governmental assistance to Europeon and American business reconstruction interests were set down by Secretary Glass as follows: T h e Government of the United States cannot tax the American people to meet the deficiencies arising from the failure of the Governments of Europe to balance their Budgets, nor can the Government of the United States tax the American people to subsidize the business of our exporters. It cannot do so by direct measures of taxation, nor can it look with composure on the manufacture of bank credits to finance exports when the requirements of Europe are for working capital rather than for bank credits. 18

In the view of the United States Treasury, "the demand for a resort to such impracticable methods as Government loans and bank credits would cease" when European peoples and governments returned to the principles of sound finance and decided "to live within their incomes, increase production as much as possible and limit their imports to actual necessities"; for foreign credits sufficient to cover adverse balances would most probably be forthcoming under such circumstances from private investors. Having turned European governments over to private investors, the Secretary closed with the classic American advice on reparations security: Ibid.

"Ibid.

48

The Reconstruction Movement

There is no more logical or practical step towards solving their own reconstruction problems than for the Allies to give a value to their indemnity claims against Germany by reducing those claims to a determinate amount which Germany may be reasonably expected to pay, and then for Germany to issue obligations for such an amount and be set free to work it out. This increase of Germany's capacity to pay, concluded Secretary Glass, will restore confidence and improve the trade and commerce of the world. The maintenance of claims which cannot be paid causes apprehension and serves no useful purpose.19 This statement of Treasury policy by Secretary Glass is important as indicating the views of the Wilson administration on the methods of world financial reconstruction. T h e American government had consistendy maintained that economic principles, to the exclusion of all political considerations, should dictate the reparations setdement. T h e retirement of the United States government from the League of N a tions, however, and the rejection of the Wilson program of political cooperation served to give to the policy of the State Department a negative emphasis not in accord with President Wilson's record of world statesmanship. Secretary Glass's denunciation of governmental aid for the European reconstruction program, it should be noted, was applied in the same unsparing terms to American export subsidies of every description. T h e Secretary's policy called for a relaxation of government control in the United States as well as abroad. T h e success of this policy was plainly dependent, as the Secretary asserted, upon the «establishment of the freedom of the exchanges both in goods and in gold. In short, the policy of the United States government in 1920 was directed toward taking government everywhere out of business and basing reconstruction upon business cooperation. T h i s policy, it should be noted, was in sharp disagreement with the demands for the use of political control in economic affairs evident in the business planning at the International Trade Conference at Atlantic City. American business interests were destined eventually to oppose successfully the application of this philosophy in the matter of European reparations. T h e principle of political control of domestic markets, however, was to find wide application under American leadership in the general race in tariff armaments which has characterized postwar economic history. Events now moved rapidly toward an answer by the governments "ibid.

The Reconstruction Movement

49

to the memorial in the form of the summoning of an International Financial Conference. The British Chancellor of the Exchequer on February 11, 1920, expressed the willingness of the British government to participate in such a conference.20 The international machinery of the newly formed League of Nations seemed a fitting instrument for this purpose. Accordingly on February 13 in the Second Session of the Council, Balfour, the president, moved the calling of such a conference in the following words, indicating the exceptional and popular character of the source of the proposal: That would conclude our principal business but for one item which does not appear upon our programme, an item, however, of considerable importance

Most people . . . .

are only too painfully aware of the position

in which Europe finds itself at present o w i n g to the financial difficulties in which so many of its constituent nations are involved

21

The resolution which Balfour then moved provided for the summoning of "an international conference on the subject of the worldwide financial and exchange crisis" to be convened "at the earliest possible date." A committee was appointed by the president of the Council to make the necessary preliminary arrangements with the governments and to draw up an agenda.22 During the early months of 1920 the Allied Supreme Council was making efforts to reach an agreement upon the subject of reparations. At ths Peace Conference in Paris the German delegation had not been permitted to enter into actual negotiation on the floor of the conference but had been compelled to make written reply to the peace terms dr?wn up by the AUied powers. In this written rep'y the German delegation had vigorously protested both the assumption of German war guilt and the reparations clauses of the Treaty. The Allied powers had denied the German contention that the reparations clauses would in effect necessitate the interference of the Allies in German internal affairs in perpetuo and therefore involve the permanent surrender of German independence. To make this denial more reasonable the Allied powers had made an offer to consider a lump sum proposal by Germany in lieu of the reparations commission assessment " T h e London Times, Feb. 12, 1920. "Leafue of Nations, "Minutes of the Second Session of the Council" (March, 1920), Official ¡ournal, p. 58. " Ibid

50

The Reconstruction Movement

provided by the Treaty. 23 This alternative procedure was thereupon embodied in a protocol and signed as a supplementary document with the Treaty of Versailles. 24 T h e period of the first Treaty year was occupied with an attempt to reach an agreement on a lump sum basis under the general procedure provided by this protocol. Europe and the world in 1920 were dominated by the necessities of the economic collapse which followed the armistice. American and British credit sources were inadequate for the pressing needs of relief. Central and Eastern Europe were rapidly progressing toward social disintegration and anarchy. France, Italy, Belgium, Great Britain, and the United States were all passing through a period of great labor difficulty involving strikes, lockouts, and so forth. T h e world was in a state of feverish excitement and the situation in many countries seemed to be growing worse. Under these conditions the question of reconstruction and relief loomed above all other considerations. T h e immediate need was therefore to set the normal process of production and trade going again. This involved first a restarting of the credit system on which international trade depended. Governments had mobilized all available credits for the prosecution of the war. The first task, therefore, was to demobilize the world's credits and allow them to move freely to the demands of trade. Private industry had been demobilized in the months following the armistice and now production was limited and irregular. T h e markets required recourse to the ordinary credits of peace time. Thus the freeing of the credit system from the burden of governmental debt became the pressing necessity which confronted statesmen. This required a political act. The power to issue the order for the demobilization of the private credits, which had been placed behind the armies of the Allied and associated powers, lay of necessity with the governments of those powers. This act, however, to be effective must be taken in unison. Credits were not like the separate national armies which could be marched back into local barracks and demobilized at will by separate governments. The credit system represented a truly international aggregate of the world's wealth and resources. The interest of the Allied and associated powers in reparations had forced them into a position somewhat similar to that of a giant holding a

Treaty of Versailles Protocol.

u

Ibid.

The Reconstruction Movement

51

corporation, which dominated the world's economic life. Private enterprise must wait the decisions of this overshadowing international combine before it could act with any certainty of the future. The withdrawal of the United States, who had become the largest shareholder in this combine, complicated the problem beyond measure, for it placed the major part of the company's assets under the shadow of a huge and indefinite mortgage. Nevertheless, the course of events was ominous. The minority shareholders in the huge financial undertaking of the war were therefore forced to attempt to draw up a settlement. This settlement involved first of all a settlement of that part of the common enterprise which was in the province of their control—reparations. Accordingly during the first treaty year Allied statesmen sought informally to come to an amicable agreement upon the percentage of the total reparations claim to which each government was entitled and upon the total amount to be collected from Germany. In quest of the requisite composure for an agreement upon these problems the prime ministers of Great Britain, France, Belgium, and Italy led their entourage of experts from place to place about the European littoral, from the Mediterranean to the Kentish coast; San Remo, Hythe, Boulogne, Spa, and two meetings of the experts at Brussels make up the list of the conferences of this first period of negotiation. The movement toward world reconstruction, which had been initiated in the action of the peace machinery set in operation by the Covenant, affected the formulation of Allied policy. On the eighth of March the Supreme Council of the Allied powers responded to the load given by the League Council in a declaration on the economic situation, including a comprehensive survey of affairs and a series of eight draft recommendations for the consideration of the proposed League conference; of these eight, the following dealt directly with the relation of the reparations question to reconstruction. T h e Powers represented at the Conference have taken under consideration Article 235 and cognate articles of the Treaty of Versailles and the passages in the letter addressed on the 16th June, 1919, by the Supreme Council to the German Peace delegates which contemplate that Germany shall make proposals for fixing the total of the payments to be made by her by way of Reparation, and that facilities may be given her to obtain necessary foodstuffs and raw materials in advance of payments being made by way of

52

The Reconstruction Movement

Reparations. T h e Powers are agreed that it is desirable in the interest alike of G e r m a n y and of her creditors that the total to be paid by her for Reparation should be fixed at an early date. T h e y observe that under the Protocol to the Treaty a period of four months f r o m the signature of the T r e a t y was provided during which G e r m a n y should have the right to make proposals of the kind referred to, and they are agreed that in the circumstances as they exist today such period should be extended. 2 5

Thus the Allied governments took the first step in the reconsideration of Article 235 and the cognate articles of the Treaty of Versailles, in the interests of general reconstruction and world peace, on the motion of the Council of the League of Nations, which in turn was acting in response to the memorial. The Supreme Council in the eighth draft recommendation, quoted above, emphasized the earlier grant of the priority of pressing reconstruction relief over reparations, a grant contained in the Protocol of the Treaty in the phrase "and that facilities may be given her to obtain necessary food-stuffs and raw materials in advance of payments being made by way of Reparations." The International Financial Conference originally planned for the spring was accordingly put off from month to month in anticipation of an agreement by the powers. Throughout 1920, international activities centering about these two proposals affected each other—the promotion of a world conference for reconstruction and the negotiation of an immediate Allied-German agreement on the lump sum reparations total. The effect of these two interests, reconstruction and reparations, upon international negotiations and the peace machinery in general, and the reparations commissions and conferences in particular, during the entire period of negotiation preceding the Dawes settlement was like that of an alternating current whose positive and negative forces magnetized the economic field of the peace machinery. In the short space of three years between Versailles and the French advance into the Ruhr, conferences were continuously sitting upon one phase or another of this vexed question. Twenty-four apparently distinct international conferences of ministers of state discussed reparations per se. And the Reparation Commission itself never slept. The field of international relations had become a continuously functioning world parlia* League of Nations, International Financial Conference (Brussels, 1920), Paper No. II.

The Reconstruction Movement

53

ment which never seemed to progress further than that confused moment in the Chamber of Deputies or the Reichstag immediately after the fall of the government when the members stand awaiting the announcement of a dissolution or another attempt to form a ministry with a workable majority. It was this workable majority which the liberal advocates of settlement by negotiations found so elusive. Fortunately the reactionary advocates of a dictated peace found a dissolution and an appeal to passion and force almost as difficult of attainment. It was generally recognized from the beginning of 1920 that the paramount need was credit and that credit awaited the settlement of reparations. These two projects, world financial reconstruction and a reparations agreement, reacted upon each other. The League conference was put off from month to month in anticipation of a reparations agreement. The Brussels financial conference awaited the successful termination of the Allied conference of Spa. The bankers' memorial discussed above awaited the course of international politics. The Allied powers, therefore, exerted themselves to the full to secure an offer from the German government. The Allied note of the twenty-sixth of April which summarized the reparations activities of the statesmen at San Remo informed the German government that she has taken no steps, as was provided for under the protocol of the Treaty, towards ascertaining her liabilities under the head of reparation or towards making proposals for fixing the total amount she should thus pay. Urgent as is a settlement of this nature in the interests of all concerned, she does not appear even to be considering how she is to meet her obligations as and when they mature. 26

After a brief statement relating to the inviolability of the Treaty of Versailles, the note concluded with the decision to invite the heads of the German Government to confer directly with the heads of the Allied Governments, and they ask that when they meet the German Government will present to them precise explanations and proposals on all matters mentioned above. 27

At the conference of Hythe, May 15-17, the economic situation in France was voiced in Millerand's request for French priority over other claimants for reparations. The proposal met the opposition of the ala

* Allied note to Germany on April 26, 1920. Text in the London Times, April 27, 1920. "Ibid.

54

The Reconstruction Movement

most equally hard-pressed economic interests of Great Britain that was expressed in the rejection by Lloyd George. At the same time, in the official communiqué for the second day of the conference (May 16), the reparations question emerged as an integral part of the broader reconstruction problem embracing inter-Allied debts and "the whole body of international liabilities." The language of the communiqué shows the rapid development of opinion. It read: T h e British and F r e n c h Governments recognize that on the one hand, it is to the general interest that reparation for the damages caused by the w a r should be secured as soon as possible, and that with this object in v i e w the necessary resources should be made effectively available without delay, and, on the other hand, that it is desirable that G e r m a n y should be put in a position to regain her financial autonomy by a speedy fulfilment of her obligations. T h e t w o Governments are further of opinion that, in order to provide a solution for the economic difficulties w h i c h are gravely w e i g h i n g upon the general situation of the world, and in order to mark a definite beginning of the era of peace, it is important to arrive at a settlement w h i c h will embrace the whole body of the international liabilities which have been left as a legacy of the war, and which will at the same time ensure a parallel liquidation of the inter-Allied

war

debts and of the reparation

debts of

the

Central

Empires.28

Accordingly, the powers proceeded to arrange for the introduction of experts. The communiqué continued with a statement of the scope of the expert investigation. The terms of reference, limiting and defining the work of the experts, were as follows: 29 first, the adjustment of the twin principles of the projected settlement, the creditors' minimum total and the debtors' capacity to pay; second, the working out of the methods of payment and of capitalization to meet the general program of world reconstruction, elaborated in the preamble which commenced by coupling the immediate needs of the Allies for available resources for reconstruction with the desirability of opening the way for Germany "to regain her financial autonomy by a speedy fulfilment of her obligations"; and third, the drawing up of the general principles for an all-round settlement of inter-Allied debts "in order," as the second paragraph of the preamble states, "to mark a definite beginning of the era of peace" by ensuring "a parallel liquidation of the inter-Allied "Official communiqué, May i6, 1920. Text in the London Times, May 17, 1920. "Ibid.

The Reconstruction Movement

55

war debts and of the reparation debts of the Central Empire." The general principles of the policy of "the clean slate" which finally came to the front again at the close of the decade were present in the Hythe communiqué which summed up the position of the Supreme Council at the end of the fourth month in the first treaty year. Events were to force a reëmphasis of all these principles. The program of Hythe was not, however, the original product of its author, the Allied Supreme Council. The Supreme Council was acting in response to the overwhelming sentiment and demand of the general economic situation expressed in the program of reconstruction set in motion by the memorial and by the Council of the League of Nations in the meeting of February. The impetus for reconstruction was much more general than the Allied interests represented at Hythe. Moreover, its solution was quite beyond the powers of the Allied governments there represented. America was not only a decisive factor in the intergovernmental debt situation but her cooperation and the cooperation of the remainder of the neutral world were essential to the remedying of an immediate and very dangerous state of affairs, not only in Central and Eastern Europe but in France and Italy, and, to a lesser extent, in Great Britain. The general community interests, in view of the exhausted condition of the belligerents, were, for the moment, paramount. May and June were crucial months of preparation for the proposed conference with Germany which it was hoped would produce the reparations settlement. The reconstruction movement, however, did not halt, but continued the exploration of various possible plans of economic cooperation. These activities were highly stimulating to the Allied conferees. The world pressed for a solution. The Advisory Committee of the League worked ceaselessly in the preparation of the agenda for the coming world financial conference. This involved the continuous correspondence and activity of the expert and liaison machinery which operates between such a preparatory committee and the governments of invited powers in the delicate task of drawing up an acceptable agenda. In this instance the agenda was of great concern to the powers since a free discussion of reparations might cause the matter to be placed in the hands of a League commission for settlement. The activity of the League itself was but indicative of the great

56

The Reconstruction Movement

movement for reconstruction which was going on outside the limits of official government channels. This movement centered about the activities of business men in Europe and America. It found collective expression, as has been pointed out above, in the scheme to organize the International Chamber of Commerce. American liberal business opinion, which was confused by the political campaign then being fought with unparalleled bitterness in the United States, to a large extent found a united purpose in the project of a nonpolitical world organization of business men. The general paralysis which affected the foreign policy of the United States throughout this period did not affect the movement of American business men toward this great project. The American Chamber of Commerce had taken the lead in proposing the organization of the International Chamber of Commerce by summoning the International Trade Conference early in 1919. T h e preparations for the organization meeting of the International Chamber of Commerce planned for the spring in Paris were carried actively forward throughout the intervening months. The agenda necessarily embraced the major aspects of the entire situation. T h e correspondence and personal conferences necessary to its preparation, beginning with the conferences of Thomas W . Lamont, A . C. Bedford, and Edward Filene with the president of the Paris Chamber of Commerce, Georges Pascalis, the French minister of commerce, ¿tienne Clementel, and the representatives of the General Confederation of Production in the early part of 1919, were carried on, not among governments, but among bankers, traders, and manufacturers themselves. The movement toward reconstruction was, in fact, only visible in its narrowest political aspects in the governmental conferences of Allied statesmen. The conference of San Remo was principally concerned with the Turkish treaty and the Eastern situation, the second conference of Hythe with the military offensive of Turkish Nationalists who imperiled the Allied forces that were holding the Asiatic shore of the Black Sea straits. Turkish and Russian affairs were again before the conference at Boulogne. And even at Spa the Allied statesmen were diverted by the Turkish question and the Russo-Polish war which seemed likely to end at that moment with the collapse of the Polish armies and the fall of Warsaw. The council of the Allied premiers was

The Reconstruction Movement

57

overwhelmed with the multitude of tasks which pressed for decision in the months immediately following the conclusion of the Peace of Versailles while the new political situation was settling down. The scope of action was so vast that it was impossible to centralize international relations in either the Supreme Council or the Conference of Ambassadors. The movement for reconstruction, therefore, swept along for the most part entirely outside the Supreme Council whose attention it occasionally commanded. Had the Supreme Council, therefore, not exerted itself toward a settlement there were numberless possibilities that outside initiative might at least make Allied aims more difficult to attain. The Russian and German situations were regarded with grave apprehension. France's militant Polish ally on her enemy's eastern front was nonexistent. Events were altering the face of Europe. It was recognized that the reparations negotiations had reached a critical moment demanding a major effort at agreement within the Supreme Council. Under these circumstances the two conferences of Hythe and of Boulogne finally produced a preliminary draft scheme known as the "Boulogne Agreement." During this preparatory period of negotiation, terminated at Spa and Brussels, the program of reconstruction was going through a process of continual evolution in the minds of business men. The significance of reparations in the program of reconstruction was becoming more and more apparent as private business interests strove to work out for the credit problem a solution necessitated by the Allied reconstruction program. This evolution in private business minds found a channel of expression, running parallel to the government channels terminating at Spa and Brussels, in the preparatory negotiations leading up to the second organization conference of the proposed international Chamber of Commerce to be held at Paris in June. The necessities of the general reconstruction program tended to transform the war conceptions of industrial relations so prominent at Atlantic City. This evolution is clearly shown in the discussions in which prominent American business men, including George W. Hodges of the American Bankers Association, Myron T. Herrick, Willis H. Booth, Charles H. MacDowell, and Owen D. Young, participated at the Washington meeting of the American Committee of the International Chamber, held immediately before the committee's departure for Paris in

58

The Reconstruction Movement

May. Discussions had progressed since Adantic City from Allied market exploitation to the possibilities of extending the system of international barter (which had sprung up here and there with so-called "border countries" to meet the exigencies of the financial collapse), to practical means of developing a debenture system for those countries which still had a financial system capable of sustaining investment, and to the subjects of tariffs and of unfair commercial practices. Thomas Walker Page, chairman of the Tariff Commission, and William B. Colver, member of the Federal Trade Commission, were present for the purpose of elaborating "most favored nation" philosophy and the American doctrine of "unfair competition" as embodied in the Webb-Pomerene Act. American business men were turning their thoughts toward general considerations of world trade. The war horizons which had limited Atlantic City planning were beginning to lift. Myron T. Herrick, wartime American ambassador to France, in the only reference to Germany, on the minutes of the meeting remarked: There is no question about it, I think we will all agree on that point, and I find some Frenchmen, I find some Englishmen high in office are beginning to feel the same way,—that some sort of a recognition of the economic condition of Germany has got to be taken now and taken rather quickly. If, for instance, Germany goes down into bolshevism there are other nations that are going to follow, and the 3,000 miles of cool sea water is not a great distance for that sort of a fever to cross, in order to infect our people. W e already know that. So it is to the interest of the great business interests of America to get together quickly—this is one of the means,—and see if they cannot hold up this economic structure upon which civilization really rests. 30 " M y r o n T . Herrick, in International Chamber of Commerce, Eighth Chamber of Commerce of the United States, p. 5.

Annual

Meeting

of the

CHAPTER

IV

The F o u n d i n g of the International

Chamber

of Commerce

T

H E Organization Conference of the International Chamber of Commerce revealed the reconstruction movement in transition from an Allied to an international organization. This transition in organization was paralleled in the sphere of policy. The discussions of the conference show the beginnings of a return from the coercive conceptions of the war to the normal cooperative business concepts of peace. The conference divided on these lines, some advocating a return to normal laissez-faire business procedure and others a continuation of some form of special governmental or quasi-governmental aid involving the use of political authority. This division was accentuated in the discussion on financing the reconstruction of the devastated region. The influence of the American investment market upon this question was apparent in the proposals to utilize reparations bonds as a basis for reconstruction financing. The possibility of the need for cooperation as well as coercion in the reparations end of this transaction was foreshadowed. The conference's reconstruction program as finally adopted deserves comparison with the decision finally taken at Spa and at Brujsels.

T i e conference was preceded by a series of meetings of a Joint Committee on Permanent Organization held during May and June. Although this conference was organized, as at Atlantic City, around the central purpose of Allied reconstruction, the wide variety of subjects covered in the resolutions and the adoption of the permanent constitution of the International Chamber indicated a trend of opinion among private business men in Allied countries toward some form of broader cooperative action such as that being considered by those preparing the international financial conference to be held at Brussels. It would be difficult to find a more illuminating expose of the economic forces

60

Founding of International Chamber

motivating international relations than that presented by the representatives of these forces themselves in the frank, unofficial exchange of views which took place at the Paris business conference. Representation of French industry and the large delegation of a hundred and forty prominent American business men served the immediate purpose of bringing American business to grips with the problem of the Allied reconstruction market. T h e pressing necessity, as at Atlantic City, was for some means of providing long-term credits. T h e Finance Committee of the conference, which was responsible for the formulation of resolutions dealing with indemnities, reconstruction, and exchange, was composed of leading Allied bankers among whom were William Thys, Baron Janssen, W . Leaf, E. G . Barclay, Hugo Baring, Sir Arthur Shirley Benn, A . J. Hobson, Mario Alberti, Roland W . Boyden, Willis H . Booth, Fred I. Kent, and H . C. Robinson. This group and the conference, as is shown by the agenda, were made to face the world financial problem and all its factors. Thus, while the conference of Spa was to confine its attentions in the economic field to reparations, and the conference of Brussels was necessarily to be restrained from dealing at all with reparations, the business conference of Paris was at liberty to consider reparations as a part of the world problem of reconstruction. The Atlantic City conference, as we have seen, had been dominated by special Allied considerations. T h e first item, however, on the agenda of the conference of Paris was not Allied reconstruction but the adoption of a constitution for a permanent international organization of a universal character. Although delegations from other nations did not take their places in the conference and join in the formation of policy, Allied business men at Paris could not fail to be conscious of the larger group of world interests. The problem of reconstruction was considered by Allied business interests, who were aware of the need of wider cooperation and who were impelled by the necessity of formulating a policy acceptable to the other ex-neutral interests, whom it had become their chief purpose to join under the constitution of the Permanent Organization of the International Chamber of Commerce adopted in the opening sessions. T h e conference of Paris was in this sense the first economic conference of an international character to deal with the entire reconstruction problem, not excluding reparations, in its broader world significance. The resolutions finally

Founding of International Chamber

61

adopted by the conference are therefore the first reflection which we possess of international economic opinion in the face of all these factors of the world problem. The first resolution to be adopted by the conference dealt with the devastated regions. It was introduced by the chairman of the Finance Committee and head of the British delegation, A. J. Hobson, and was supported by the chairman of the Committee on Permanent Organization and head of the American delegation, John H. Fahey. The chairman of the session was the French premier, Millerand. The resolution was intended, as Clementel remarked, to make the first action of the International Chamber of Commerce a declaration that economic equilibrium and world restoration would not be possible or durable until the material and economic restoration of the devastated regions had become an accomplished fact.1 The resolution, first, assumed the immediate importance and urgency of the reconstruction of devastated regions over all other considerations and, second, noted German failure to carry out the terms of the Versailles Treaty, not only on reparations and deliveries of coal and other supplies but also on military matters, and concluded "that the Germans have not as yet given any evidence of an honest desire to honour their signature to the Treaty of Peace." Upon these assumptions the resolution urged that the governments of the Allied nations clearly and definitely inform the German government that further postponement will not be permitted in carrying out the obligations Germany has undertaken regarding the restoration of the devastated areas and in fully complying with the terms contained in the Treaty of Peace. 2

On the other hand, the relation of reparations to the question of credits was clearly elaborated in the resolution on indemnities, which affirmed that a restoration of international credit depended upon the fixing of the amount and the condition of payment of intergovernmental debts including debts of both "allies and enemies" and urged that "the Allied states agree as soon as possible to fix definitely the amount and conditions of payment in accordance with the stipulations 1 Address by fetienne Clementel, in International Chamber Organization Meeting, p. 53. 'Ibid., Appendix B, p. 1 8 1 .

Chamber of

Commerce,

International

62

Founding of International Chamber

of the Treaty of Peace."8 A s regards the exchange situation the conference shunned all palliatives, recognized the primary dependence of exchange rates upon international confidence, and called for a study of actual economic and financial conditions in the interested countries with a view to clarifying the situation. And the detailed resolution on the reconstruction program, after recognizing that the abnormal situation created by reconstruction demands had turned the current of trade, declared that "The only effective means of correcting the depreciation and wide fluctuations in exchange lies in removing the cause for such a condition; that is by the return to a normal relationship between imports and exports."4 Upon this premise the resolution called for the adoption of an extensive program designed to assist in the correcting of adverse balances of trade, including restrictions of imports to essentials and an increase in exports through a careful detailed study of export possibilities; the elimination of all possible export obstacles; the negotiation of temporary credits for coal and raw materials necessary to production, to be paid for from the exportation of manufactured goods; and generally increased efficiency in transport and in labor. T h e resolution cautioned against purchases, through foreign loans, of high-priced unessential commodities by countries with depreciated currencies, advised the removal of all obstacles to the tourist trade, and counseled readiness "to take advantage of foreign money markets when available and desirable," particularly with respect to long-term loans for the reconstruction of devastated districts. The resolution concluded with a reassertion of the urgency of the reconstruction of the devastated regions "as rapidly as financing and physical conditions make possible" and asked "that the furnishing of raw material for this purpose and of credits to cover their cost and transportation . . . . be considered a first call upon the money markets of the world." The larger program of world restoration of which Allied reconstruction and reparations policy formed a part included those subjects of universal international interest upon which the International Chamber was to represent world business up to the present day. T h e second resolution to be passed by the conference dealt with the subject of double taxation5 in terms which were to become familiar through years 'Ibid., p. 188.

4 Ibid.,

p. 189.

'Ibid., p. 181.

Founding of International Chamber

63

of agitation. The practical principle of tax exemption in the home state up to the amount of the foreign tax, which has since found such wide advocacy, was here laid down. The third resolution8 advocated a program of government economy by extensive administrative and personnel cuts. The conference explained in considerable detail a plan of advice and cooperation between local chambers of commerce and national and local government officials in order to assist in such a "business-like reduction." T h e Chamber's advocacy of "non-partisan counsel" through "non-partisan committees" of business men gave early currency to an idea of business collaboration in the economic affairs of governments which was to lead far in both the national and international sphere. Resolution No. 4* of the Paris business program urged the creation by the Chamber of a Foreign Credit Interchange Bureau; Resolution No. 68 advocated equality of treatment for foreign banks; Resolution No. 7® called for "the creation of an appropriate body attached to each national bureau, and to be under the direction of an organization of a similar nature attached to the general headquarters" of the International Chamber for the purpose of studying "from a legal point of view, all questions, relating to unfair competition, industrial property, trade marks, names of origin and misleading indications" and of preparing reports to be submitted to the general meetings. From this initial resolution the extensive work of the International Chamber upon these subjects has been since largely developed. The two resolutions passed by the conference upon customs, tariffs, and embargoes (resolutions No. 810 and No. 9 1 1 ) dealt with subjects of future League of Nations conferences. Resolution No. 8, which advocated the simplification of customs nomenclature on the basis of such a nomenclature as that adopted for the customs statistics of each country at Brussels before the war, advocated "the establishment of a technical intergovernmental commission for the purpose of devising ways and means to be advocated for the unification of the customs legislation and regulations of the Allied nations." Resolution No. 9 asked for the gradual relaxation of embargoes "as soon as the internal conditions of each country will permit" and demanded "that in any and every case 'Ibid., p. 182. 7 ¡bid., p. 7.

'Ibid. 'Ibid.,

Ibid., p. 183. " Ibid., p. 184.

10

p. 8.

64

Founding of International Chamber

such embargoes should not apply to goods

shipped or for-

warded prior to the date" of the embargo and asked further that special licenses be granted for goods under lawful contract for shipment prior to the date of embargo. The resolution asked that the above procedure should be also followed in the mandated territories. These resolutions began that tedious campaign into the tangle of government trade restrictions so resolutely prosecuted ever since by the I.C.C. In the realms of statistics the conference recommended that the Board of Directors (as the council of the International Chamber was then called) give serious consideration to the advisability of establishing a central bureau of international statistics "for the purpose of collecting, collating, analysing and interpreting statistical information for the business interests of the world, in order to centralize and harmonize the data which should form the basis of all sound commercial policy" and urged that the various statistical agencies in the world take immediate steps to secure a greater degree of international uniformity. 1 2 T h e extensive work of the International Chamber in the field of transport and communications was commenced at Paris by the conference's adoption of resolutions on port facilities, trade terms, passports, and maritime laws. The resolution on port facilities, 13 dealing with current port congestion, recommended the appointment of a permanent committee to study measures to facilitate operations in the ports and particularly the transportation to and from the interior and to centralize and distribute information to shippers, consigners, and ship owners. Upon the subject of trade terms 14 the conference provided for the carrying out of the useful work of defining and codifying a highly confusing shipping terminology such as F.O.B., C.I.F., and similar expressions, for its publication by the International Chamber of Commerce in the form of an "International Dictionary of Shipping and Quotation Terms." Resolution No. 16 1 5 advocated the resumption of "the work of the International Maritime Committee for the unification of laws governing maritime commerce, interrupted by the European war." The resolution on passports also initiated a task which was to necessitate years of continuous international cooperation, terminat°lbid., "Ibid.,

Resolution No. 10, p. 184. Resolution No. 12, p. 186.

"Ibid., Resolution No. 13, p. 187. Ibid., Resolution No. 16, p. 188.

16

Founding of International Chamber

65

ing in an international conference under the League of Nations and a convention providing for simplification and uniformity. It is apparent from this constructive program that the thought of liberal business leaders in Allied countries was returning to the philosophy of cooperation held by the group of business leaders which in 1914 at the earlier Paris congress visioned a business men's League of Nations. If internationally minded business men were still somewhat confused by the philosophy of national economic power that had been fanned to flame by the war and that continued to smolder in the military sanctions of the reparations clauses of the Treaty of Versailles, enough sanity had returned to permit the launching of a constructive program of international significance. A reorientation in economic thinking, which was to eventuate in the restoration of Central Europe and of Germany, was given tangible form in the constructive international business planning of the Paris Organization Conference of the International Chamber of Commerce. T h e beginning of this reorientation is most evident in the discussions of the conference on reconstruction credits and reparations. Basic issues were here clearly defined. Allied industry, led by French industrialists, was as determined as it had been at Atlantic City to develop to the full the various national reconstruction markets in behalf of respective national industries. This Allied industrial program, however, was brought up against the realities of the world financial situation. In such a discussion a new alignment was inevitable. This new alignment cut across war frontiers. As William Thys of the Bank of Brussels, speaking on behalf of the Belgian delegation in the general session on finance,16 pointed out, the Belgian franc was not unaffected in the world market by the fluctuation of the German mark. "There is certainly," he remarked, "nothing to surprise us in the fact that Belgium, the creditor country, should be affected by the ups and downs of her debtor, Germany." This brought him to a consideration of reparations from another angle. "But," he continued, "it is precisely the involuntary community of interests that may well be a matter of concern to us when we come to consider the present financial administration of Germany." This was the very angle of the problem from which the "Address by Thys, in International Chamber Organization Meeting, p. 126. Following quotations arc from same source.

66

Founding of International Chamber

Dawes committee were finally to launch the successful business solution of the controversy. Thys continued with an exposition of the problem of German inflation which he was content to ascribe to the "nerveless attitude of Germany" possibly in pursuance of a considered plan calling for exportation of marks, a declaration of bankruptcy, and a demand for freedom from Treaty obligations. He was not sure whether threatened German bankruptcy was really to be expected or whether it was mere "blackmail." Nevertheless the dangers in the situation, he was assured, were real and threatened all, and called for international rather than Allied action. "It is to be desired," he asserted, "that the members of the International Chamber of Commerce shall, with the assistance of the neutral countries, consider the measures to be adopted." His mind was turning to nothing less than international control of German finances. "Recourse to some sort of sanitary barrier may be held advisable; perhaps in the prohibition of not only the issuance of marks but of all and every speculation in German currency that is not based at least on some commercial operation." Germany would thus be given an opportunity to show willingness "to cooperate genuinely with the rest of the nations" in honest financial policy. This was an entirely new conception of Allied-German relations. Thys felt constrained to "apologize for speaking at such length of Germany." "But how," he concluded, "would it have been possible to consider the problem of the Belgian exchange without taking into account a factor of such paramount importance in our economic life?" Allied financiers were beginning to appreciate their interest in German solvency and to consider the means of recreating normal financial relationships with their ex-enemies. This was too large a problem for even victorious nations. It required international action, including not only ex-neutral but ex-enemy cooperation. The use of the word cooperation in connection with Germany and reparations is worthy of note. Thys's proposed plan of international action was in answer to German claims that reparations deliveries of raw materials and finished products, by necessitating payments out of the Reich budget to German industry, had made inflation unavoidable. It was evidently apparent to Thys that this situation was beyond the control of the Allied Supreme Council. It could not be settled by political ultimatums. It required

Founding of International Chamber

67

nothing less than the broadest international cooperation among business forces, including Germany. This idea called once more into play the normal business vocabulary set aside so suddenly six years previously. The idea that Germany was "to follow" was seen to imply some form of international cooperation and leadership. The same change in point of view was manifest in the remarks of other speakers. Walter Leaf of the British Bankers Association, who followed Thys in the general discussion on finance, after ascribing the fundamental cause of the instability of the exchanges to defective distribution, advocated "the re-establishment of the machinery of commerce, the actual barter of commodities," which would find its expression in the natural as opposed to an artificial stability of the exchanges. This problem again involved a normal business approach to ex-enemy countries. It is tragic to think that at the present moment, while large areas in Central Europe are starving, there should be in the warehouses of England, Holland and the United States a glut of certain classes of foodstuffs of general value. The consequent fall in the price of these goods has contributed not a little to the general tension of the situation.17

This was the broader problem of international credit for European as opposed to Allied reconstruction. Leaf proceeded directly to deal with the matter of German rehabilitation, citing a specific instance. The British government holds a large stock of certain manufactured goods which they are anxious to sell abroad. It is plain that if these goods were suddenly placed on the home market they would create a most serious dislocation in the trade concerned. On the other hand the German government is anxious to buy; but they can offer only a small payment in cash, and for the rest they ask a credit reaching by instalments up to three years. It is certain that such bills dependent solely on the credit of the German government could not at present be negotiated through the ordinary channels of a London market to anything like the amount required. Yet the goods, finished articles, are needed by Germany for the immediate bodily necessities of their people, and could not be used for any competition in world trade.

This transaction Leaf believed to be desirable from the most selfish point of view. It was to the creation of machinery by which such exchanges might be accomplished, not only with Germany but with " T h i s quotation and following quotations are from the address of Leaf in the Chamber Organization Meeting, pp. 138, 139.

International

68

Founding of International Chamber

every country in Central Europe, that the bankers' memorial of February had looked. " T h e outcome of this memorial," said Leaf, had been the calling of the Brussels conference. T h e magnitude of the problem was "outside the power of individuals to deal with." The discussions at Brussels "must necessarily all centre upon the establishment of some sort of international machinery" fitted to deal with a problem whose vastness overshadowed "the whole commerce and industry of the world." Trade with Central Europe was primarily in the interests of "all the Allied nations" in order that markets for surplus goods might be found. There were, however, larger interests than those at stake. Starvation conditions in Central Europe endangered not only the political stability of Europe but the actual health of the entire world. The conditions of starvation in Central Europe are setting up a focus of disease, of tuberculosis and typhus, which may easily spread beyond control, a cancer eating into the very heart of our world system. The danger is a real and urgent one; it is our duty to meet it with liberal and long-sighted views of what is our ultimate interest. W e cannot afford to let Central Europe starve; to do so would be the suicide of civilization.

Upon the question of intergovernmental debts Leaf stated clearly the historic British position. May I add that we are conscious of the load which our Allies on the Continent have to bear in respect of monies borrowed by them from Great Britain and the United States. W e feel that this is in itself a serious obstacle to the re-establishment of international exchanges and commerce. May we assure the Conference that any method by which this load could be postponed or lightened would receive sympathetic consideration among many thinking men on our side of the Channel, even if it should entail some sacrifice on our part.

The American situation was reviewed at considerable length by Willis H. Booth, vice president of the Guaranty Trust Company of New York, and by Fred I. Kent of the Bankers Trust Company of New York, both representing the American Bankers Association. Booth, speaking on the economic situation at the general meeting presided over by Premier Millerand, fully explained the American side of the financial crisis. American money markets had been affected by increased industrial money requirements and by the shipments of gold to South America and Japan. High money rates on the stock exchange

WILLIS H. BOOTH PRESIDENT OF THE INTERNATIONAL CHAMBER, 1923-1925

Founding of International Chamber

69

had terminated in the crash of 1919. Poor crops (wheat 20 percent below normal, cotton 48 percent below normal), the scarcity of farm labor, a housing shortage estimated at one million homes all contributed to the heavy drain on American money markets.18 The United States government had itself just borrowed $400,000,000 in treasury certificates at 5% percent and 6 percent. The Pennsylvania and the New York Central railroads had made large borrowings on short-time notes at approximately 7% percent. There were uncontrollable circumstances which had made it impossible to extend free credit abroad except at competitive rates. Despite all obstacles, however, much help had been extended to Europe and conditions were improving. Large merchandise stocks were steadily being liquidated and a longtime revolving credit had been established for copper shipments to Europe, particularly to France. 19 The assistance to European reconstruction offered by the United States government was reviewed in some detail before the general session of the conference on finance in a statement by Fred I. Kent. It was pointed out that the United States government had in the form of Treasury advances, sale of supplies on credit, and advances through the United States Grain Corporation, the American Red Cross, and other agencies, advanced a sum approximately equal to the amount of the Victory Loan of 1919. "In other words," said Kent, "after the pressure of war was over, the people of the United States paid into their government over $5,000,000,000 of which $4,500,000,000 was required because of money advanced for the benefit of Europe."20 He then alluded to the current American dissatisfaction with the way in which this money had been utilized by European countries, mentioning the fact that production and trade had actually met with greater interruption since the Armistice than at any time during the war, due to the loss of millions of hours of labor in strikes and sabotage. Both speakers brought European bankers and industrialists to grips with the American financial situation. Normal credit operations awaited some form of economic stabilization and the return of confidence. It should be the task of world business "through an international organization working under fundamental economic" laws to aid "in rational 18

Address by Willis H. Booth, in International Chamber Organization Meeting, pp. 75, 76. " Ibid., pp. 76, 77. " A d d r e s s by Fred I. Kent, in International Chamber Organization Meeting, pp. 1 4 1 , 1 4 2 .

70

Founding of International Chamber

stabilization." Upon such a system, operating entirely independent of governmental financial support "under sound business laws with due regard to domestic need," political order might be more rapidly built. American business men hoped to play a real part in this task. It was to be hoped "that this participation would be helpful and profitable" to Europeans, "safe and remunerative" to Americans, and "a very definite factor in the world's steady progress."21 "It is of the greatest importance," Kent pointedly told the conference, "that the proceeds of loans made to foreign countries by the people of the United States should be used to the best advantage for the benefit of both the borrowing and the lending countries and that they be not subject to political emergencies." The difficulties which lay in the path of an immediate return to sound business policies appeared throughout the statements of French and Belgian speakers. Picot, representing the French union of bankers, explained with like clarity the special circumstances in which the devastated countries found themselves. If the Allies considered reparations as incumbent on the responsible perpetrator of the war ruins, they could only make such a judgment effective "by compelling Germany to pay." French opinion considered that it would be unfair for the devastated countries to be compelled alone to advance the necessary funds. Inasmuch as they had been deprived of a considerable part of their means of production they should in justice be called upon to contribute last of all. Picot stated the case very candidly: We consider, therefore, and in saying this I think I am also speaking for our Belgian and Italian friends, that the Americans and the British will discharge their obligations toward the devastated countries only when they have compelled Germany to make reparation for all the ruin she wrought and when they have assumed their proportionate share of the advances, taking into account the impaired resources of the countries laid waste.22

As to the question of American credits, Picot passed quickly over the difficulties imposed by the American money markets so carefully explained by American bankers. "Our reply," said Picot, "is that we fully understand the difficulties surrounding the task We refuse, however, to believe that the task is beyond the strength of our friends, the ** Address by Willis H. Booth, in International Chamber Organization Meeting, pp. 77, 78. "Address by Picot, in International Chamber Organization Meeting, p. 42.

Founding of International Chamber

71

American bankers." In America where banks were numbered in the twenties of thousands "but a very trifling individual effort," Picot contended, "would be needed to obtain immense results." The same American indifference to Europe had preceded American entrance into.the war. Picot believed that present American apathy to European securities might be changed if American bankers should "express the opinion" that "America's real interest" lay "in helping Europe, by accepting her securities to re-establish the economic balance."23 The fullest exposé of the French stand on European reconstruction, however, was made by the great French steel master, Eugène Schneider, chairman of the French delegation. It was the longest speech of the conference,24 and was delivered at the general session under the presidency of Premier Millerand. Schneider addressed himself in militant fashion to the task of re-forming the Allied industrial front. After explaining at some length French disappointment at American refusal to ratify the Treaty of Versailles, Schneider dealt with the menace of a German military revival and ascribed alleged German efforts to evade Treaty obligations to the influence of "eminent writers" in Allied countries—"superior persons" who had made it "an ordinance of intellectual elegance" to emphasize the imperfections of the Treaty of Versailles and who had pleaded "the cause of the aggressor in preference to that of his victims." "Encouraged by this campaign," asserted Schneider, "Germany has not fulfilled her obligations." All proposals for a sound business settlement of reparations based upon German capacity to pay were caustically dismissed as malicious attempts to make science a pretext and weigh the claims of the innocent and those of the guilty in the same balance . . . . putting forward the so-called economic necessities, to predict failure and final chaos, as if economic facts stood all by themselves and moved along invariable curves and were not often themselves in close relation with political and moral facts. 25

As opposed to the policy of cooperation, Schneider advocated the policy of "keeping a firm hand on Germany." This policy, he affirmed, contravened neither generosity nor the principles of "international stability and order" which he strongly upheld. "Germany," he asserted, "can not escape from obedience to a law," but he believed that German " Ibid., p. 44. " Address by Schneider, in International "Ibid., p. 83.

Chamber

Organization

Meeting,

pp. 78-98.

72

Founding of International Chamber

"leaning to democracy" and "experience of liberty" was "not enough to enable her to discover this law in herself." " L e f t to herself," said Schneider, "she will go back to her masters who have already led her astray. This law, therefore, must come from elsewhere, from outside. A new order will not be established in Germany unless the Allies help Germany to conceive it." In the face of economic law Schneider raised the standard of political and moral law. Political and moral law must first be imposed upon Germany "from outside." What Schneider in a philosophical disquisition into Fichte was pleased to call "the new German 'ego'" could be given "enduring form only in proportion to the resistive and cohesive force of the Allied 'non ego' with which it should find itself face to face." 28 Schneider did not leave his American and British friends in any doubt as to the economic implications of this political and philosophical disquisition. The French industrial program was being held up by German failure to deliver coal and money. French industry needed fuel and raw materials. France looked to Germany to supply the coal and to British and American bankers to furnish the credit for the raw materials until the Germans could be made to pay the bill. French industry was at the moment waging an unfair battle against the exenemy. " N o w do you know," said Schneider, "that while at this moment the German iron and steel industry is producing 65% of total output, the French for want of coal can produce only 2 5 % . " That Germany should thus profit from the destruction of northern French mines in defiance of the Treaty of Versailles appeared to the French mind like a "monstrous conspiracy," "a veritable refusal of justice," "a glaring abuse" that could not be prolonged. "That is why," said Schneider, "it seems to me that it is as impossible to deny us coal as to refuse water to a wounded man." 2T As to the world financial crisis which American and British bankers saw as evidence of the pressing necessity of a return to the normal practices of general international trade and exchange, Schneider saw rather the need of the recrudescence of Allied unity. The relaxation of war control had meant in his view the beginning of indiscriminate economic war between all nations. " T h e great international agreements" which were to put an end to the money-market crisis had not mate"ibid., p. 86.

"Ibid., pp. 93, 94.

Founding of International Chamber

73

rialized. It had not been possible to organize credits. The American Edge Bill had not given the promised relief. Schneider challenged the fairness of American and British proposals to return to sound business principles. It ought not to be possible for any man who chooses to hoard the riches he has inherited from nature to either keep for himself the raw materials that he happens to possess in abundance or to employ them as a valuable medium of exchange in dealings with others to draw from them all possible profit, without thought of the toil and suffering it cost his friends to acquire them.

In the face of the exposé of the American financial situation to which he had just listened Schneider frankly suggested that "in view of the enormous inequality of conditions in which peace has left the Allies, it might perhaps have been more profitable to continue the practice of allotment, distribution and reciprocal aid in force during the War." 28 The extent to which French reconstruction was dependent upon German payments of cash reparations was freely admitted. So far France has not received any financial reparation from Germany. W h a t is the result of this? A part of her budget remains undecided. W h e n will the sums be paid ? Will they ever be paid ? Meanwhile, France must pay pensions to her mutilated soldiers and support her army of occupation.

France, whom the war had cost "as much in money as in blood," France, who had been "victorious," was compelled to go on "heaping up debts on account of the vanquished." "Under such circumstances," Schneider asked the conference, "what country could restore her finances?" Although the normal budget had been balanced, this "serious disturbing element," consisting of the "special account" for the reconstruction of the ten devastated departments, "in its greater part . . . . charged to Germany by the Treaty of Versailles, awaited enforcement by Allied action." Meanwhile, "a breach" had been opened in French finances through which resources were "oozing out" and exhausting the nation "because of the considerable sums expended" and the uncertainty as to "when and how the gap will be closed."29 The reconstruction debate revealed the conference sharply divided. American bankers said in effect that it was impossible to get investors to back a continuance of the war program either through direct inter" Ibid., pp. 85-86.

" ibid., p. 89.

74

Founding of International Chamber

governmental loans which would have involved taxation or through an appeal to the sentiment of the general public to support Allied securities. The American public was not satisfied with the manner in which the Victory Loan, most of which had been turned over to Allied governments, had been spent. It was impossible to secure further funds by other than normal business procedure. To this bankers' warning the industrialists replied that they must have support in order to compete with reviving German industry in the new markets. The market which they were most determined to support and to which sentiment seemed to give them a peculiar right was the reconstruction market. This market was charged to Germany on the reparations bill. The clamorous interest of the industrialists, therefore, lay in re-forming the Allied front in order to force the German banks to the limit and in any event to secure a general Allied guarantee of this market against a possible reparations default. These two positions were irreconcilable. One meant a continuance of the war in the form of a titanic struggle for markets by national industries financed by huge public investment and eventually by taxation. For the market immediately under consideration, the reconstruction market, the German people must be forcibly taxed by a process of international coercion. This was the industrial position. The other view demanded a return to the normal processes of the prewar world capitalist system founded primarily not upon ulterior interests, supposedly nationally beneficent, but upon the motives of individual profit which ordinarily operate within states. In this sense the entire reparations controversy became merged in the great postwar struggle in the economic field between the industrialists and the international bankers. The one demanded economic nationalism, tariffs, and so forth, the other international cooperation and the maintenance of the gold standard. The one represented powerful interlocking groups within states, the other more nearly represented an international interest. In the reparations controversy itself it is apparent that French and Belgian industry in particular represented a powerful vested interest in the continuation of the extraordinary system of government subsidies in operation during the war. Circumstances so well described by Schneider had inevitably shaped this interest into an industrial phalanx directed at the financial integrity of the Reich. Nothing could satisfy

Founding of International Chamber

75

this industrial demand short of cash payments from German banks across the international exchanges. Cash and coal were the irreducible reparations minima which Allied governments were commanded by industry to accept from the German ministers at the forthcoming conference of Spa. Allied industry was not ready to return to normal. Overexpanded by war demands and still permeated by the bitterness of the recent death grapple with German industry in the invaded districts, French and Belgian industry saw no relief save in a reunited Allied industrial front. The war concepts of coercion still dominated the FrancoGerman industrial horizon. That industrial reconciliation and cooperation in a sharing of the reconstruction market by German and Allied industry, which would immediately have eased the demands of reconstruction budgets upon reparations, facilitated speedy reconstruction, and made a reality the international financial cooperation urged by leading bankers, was in 1920 deemed altogether unworthy of consideration.80 The business world was still divided into two distrustful groups. While Allied business interests were forming the International Chamber in Paris, uninvited German business interests were vainly attempting to form a similar international business organization at Frankforton-Main under the name of an International Economic Union. The International Economic Union met in May, 1920, for the purpose of forming a permanent organization which should contribute to the reorganization of the world's economy, and the inauguration of an era of lasting peace by providing facility for discussion, in cordial cooperation, of international economic problems. The Milan Chamber of Commerce, which was invited to attend this meeting, replied in a friendly refusal calling attention to the organization of the International Chamber and pointing out that the Chamber was not limited to those countries which were then members and that its aims appeared to be identical with the aims of the proposed International Economic Union. This incident was later reported to the Council of the International Chamber of Commerce at its October meeting by the secretary of the Italian committee, who had attended the Frankfort meeting unoffi*°The Confédération général du travail early in 1921 urged the acceptance of German offers to rebuild the devastated areas with German labor and German industry, thus throwing into striking contrast the attitudes of French labor and industry. The proposal was blocked by the building trades. Sec Sir Arthur Salter, Recovery, p. 1 6 1 .

76

Founding of International Chamber 81

daily. Had it been possible to bring together these two rival economic groups in Paris in the organization meeting of the International Chamber of Commerce, the reparations negotiations might have proceeded against a background of industrial as well as financial and labor international cooperation. Complete world cooperation was reestablished in both the financial and labor spheres in 1920 through the Brussels conference and the meeting of the International Labor Bureau at Genoa. The early failure of the International Chamber of Commerce to bridge the gap between these two groups was a tragedy, the bitter consequences of which were to be written at Spa, at Paris, and in London. But this was the tragedy of the war itself, an industrialised war which had left its coercive concepts to bedevil for more than a decade the economic thinking of its survivors. Subsequent events give some indication of the importance of the business conference at Paris as a factor in immediate international developments and as a commentary upon the springs of governmental policy. Millerand carried with him a week later to the conference of Spa a clearer comprehension of the industrial demands of the reconstruction program for German cash and coal. Charles Laurent, president of the French Union of Mining, Iron and Steel Industries, whose paper on "Reconstruction of the Devastated Regions," demanding enforcement of Treaty rights, was before the conference, left immediately for Berlin to take direct charge of negotiations as French ambassador to Germany. Roland Boyden was to sit as the unofficial American representative on the Reparation Commission and as the American delegate at the Brussels Financial Conference. Senator Ricci, the president of the Italian delegation at Paris, was to represent the Italian government at the Brussels conference. Ferdinando Quartieri was to act as Italian deputy delegate, and Giannini, Rossi, and Guglielmo Ventimiglia were to attend the Brussels conference, with the Italian delegation, in either an advisory or a secretarial capacity, ¿tienne Grosclaude, who represented the French mining, mineral, and fuel industries group at Paris, was also to attend the Brussels conference as one of the three advisers to the French delegation. The organization of the International Chamber of Commerce was itself to be represented at Brussels " I.C.C., Minutes of the Council of the International Chamber of Commerce for October 1 2 , 1920.

Founding of International Chamber

77

by a nonvoting delegate, Jean Proix. And the delegates of the Brussels Financial Conference were to be referred to the reports of the Paris conference by the president of the conference, Ador, in his opening address, as documents containing "much useful information" supplementary to the bankers' memorandum and the economic declaration of the Supreme Council of March 8, 1920.32 "International Financial Conference (Brussels), Proceedings, Vol. II, Verbatim Record of the Debates, p. 2.

CHAPTER

V

Finance, Labor, and Industry at the Conference of Spa

F

I N A N C E , labor, and industry each appear to have exerted a distinctive influence upon the course of the reparations negotiations at Spa. Although finance and labor interests failed to smother Franco-German industrial strife, the necessities of the Allied industrial program, outlined at the Paris Business Conference, forced industrial cooperation in the provision of a coal protocol, some of the terms of which marked a return to normal business methods. The deliberations of the Paris Business Conference and the preparation of the International Financial Conference to be held at Brussels proclaimed that a large section of the business community was desirous of returning to the normal routine of peace. Normal peace conceptions were emerging to confront the surviving coercive conceptions of the war. The series of intergovernmental conferences, which sat during the year following the Organization Conference of the International Chamber of Commerce at Paris, provided a clearinghouse for all the international and national influences which had suddenly been given a stake in international politics. The new vested interests formed a gigantic lobby beyond the doors of the International Conference room. This lobby fell sharply into two classifications: the reparations lobby and the reconstruction lobby. The division was apparent in the two types of conference which functioned in 1920: on the one hand, the Allied-German conferences, which dealt exclusively with those matters included in the Treaty of Versailles; and on the other hand, the Brussels Financial Conference, which dealt exclusively with those problems which were termed international. Between these two types of conference the Reparations Conference of Experts held at Brussels in December might be said to occupy middle ground. The Allied conferences on economic affairs

The Conference of Spa

79

attempted to adjust nationally divergent interests which converged upon the reparations clauses. The Brussels Financial Conference considered national problems as a part of a broader international problem. The Brussels Reparations Conference of Experts attempted on behalf of broader world interests to apply the international technique of adjustment to the reparations question. A t this series of conferences the attempt was made to break down the war alignment and to bring the Allies and their ex-enemies into a sphere of general international cooperation. It was an attempt to bring the reparations controversy into the sphere of a general world settlement. As has been pointed out, any settlement of the reparations controversy necessarily involved some form of agreement to cooperate in the field of industry and finance. Measured by these requirements, the intergovernmental conferences terminating with the London schedule of payments of May 5, 1921, were, generally speaking, a failure in as much as no voluntary financial settlement was reached. However, international influences plainly made some impression upon the course of the controversy. The economic situation, under the pressure of these influences, did actually force Allied-German cooperation on the question of raw materials, namely coal, and upon the question of labor conditions. The conference of Spa met in an atmosphere of hostility and distrust. Although the German representatives had come prepared immediately to discuss the question of reparations payment, the Allied representatives insisted that the conference first consider the questions of disarmament and war criminals. 1 T h e conference was therefore adjourned in order that the German military authorities might be summoned from Berlin. For four days the conference was on the point of dissolution over the military and war criminal clauses of the Peace Treaty. With this introduction completed by German signatures under duress to protocols covering these questions,2 the conference proceeded to attempt to negotiate a reparations agreement. In the early stages of the conference an attempt had been made The Times, July 5, 1920. The provisions of the disarmament protocol were considered too lenient by a section of the French public. The precarious position of Poland, it was asserted, made dangerous the six months' delay granted Germany in which to reduce her army to 100,000. Poincaré characterized this decision taken despite the advice of military experts as unreasonable and inexplicable. See Poincaré in "Lettres libres,'' Le Temps, July 11, 1920. 1

2

8o

The Conference of Spa 8

in an exchange between Sforza, the Italian representative, and Millerand and to introduce an international atmosphere into the reparations dispute. Sforza was so bold as to suggest that the Supreme Council cease to exist as an Allied body, or at least that it be merged into a general international conference in which the Germans should participate on an equal footing. Millerand opposed this view and was supported by Lloyd George. The debate revolved about the question of setting up some form of Allied control for supplies of coal due to the Allies under the Treaty provisions. Lloyd George opposed Millerand's suggestion to this effect and proposed as a substitute indefinite penal measures which he failed to elaborate. Millerand countered by frankly accusing the British prime minister of lack of sympathy for French industrial needs. Great Britain, Millerand pointed out, could afford to be indifferent to German evasion of coal deliveries.4 The German delegate, Fehrenbach, in an interview with the Press, attempted to explain German economic limitations and to show German desire to cooperate in an international solution. "We regard," said Fehrenbach, "the Spa negotiations from the point of view not only of Germany but also from that of international interest."5 General public sentiment, however, was still running strongly against any form of international cooperation which involved accepting Germany as a colleague on a footing of equality. In this respect British and American opinion was not far different from French opinion.6 Lloyd George, in an interview reported in the Times of July 10 with the American correspondent of the Sun and the New York Herald, was informed that the American people would think that the Allies were "giving way considerably before the Germans." Lloyd George replied: Perhaps they will think that way in America, but I want you to tell your people this for me. If the Americans were with us things might be entirely different. But they have left us. They are out of it. T h e y are not giving us any help at all now to solve the problems. 7

On July 9 the German delegates were asked to explain the unsatisfactory coal deliveries. After Bergmann had explained in some detail 1 • The Times, July 5, 1920. Ibid. ' B e r g m a n n , The History of Reparations, 7 The Times, July i o , 1920.

'Ibid. p. 3 7 ; The Times, July 10, 1920.

The Conference of Spa

81

the German difficulties which had led to the failure to deliver the required amounts, Millerand replied in an impassioned speech, describing French industrial needs and citing the claim made by Schneider at Paris8 that while "only between 30 and 40 percent of French blast furnaces were working" 65 percent of German furnaces were in operation.9 The following day the conference was almost disrupted by the exhibition of arrogant German industrialism provided by Stinnes, the representative of the German coal operators. " I have arisen," commenced Stinnes, "in order to look all my adversaries in the eye." Millerand, he continued, had said yesterday that the Germans were to be granted the right to speak as a matter of courtesy. "I claim to speak," he asserted, "as a matter of right and whoever is not afflicted with the disease of victory " The president of the conference, Delacroix, at this point called Stinnes to order with the remark that "the object of this conference is to seek a peaceful solution" and the admonition not to be provocative. Stinnes then continued with a rebuttal of the French industrial allegations made by Millerand. It was untrue, he said, that 65 percent of the German blast furnaces were working. 10 The effect of the Stinnes incident upon the conference's chances of agreeing on a reparations total was disastrous. It revealed to Allied minds, as the Special Correspondent of the Times at Spa reported, the spirit of the Schlotjunker or industrial barons who since the downfall of the agrarian military and bureaucratic nobility, known as the Brotjunker, have become more than ever a powerful faction in German life. 11

The psychology of the Allied public is well illustrated by the Times's caption for the special despatch of July 10, which read: The Germans are behaving with even more effrontery than usual at Spa. On Saturday Herr Stinnes 12 treated the Allies to a truculent harangue that astonished the delegates, and yesterday when at last after a lot of equivocation the Germans produced their reparations "plan" it resembled in the ' Address by Schneider, in International Chamber Organization Meeting, p. 86. * The Times, July 10, 1920, and Bergmann, The History 0/ Reparations, p. 40. 10 The Times, July 1 2 , 1920. u Ibid. " G e r m a n y ' s militant industrial spokesman of 1920 is further described as "Herr Stinnes . . . whose name and appearance seem to indicate a Jewish origin." The Times, July 12, 1920.

82

The Conference of Spa

words of our Special Correspondent "an attempt on the part of a practical joker to befool the Allies."13 The Stinnes harangue, of which the "calculated insolence" seemed to serve as a useful reminder of the Germany which made the war and carried out the premeditated destruction of Allied economic resources, conclusively demonstrated to Allied minds the fact that the old Imperial Germany was not only not dead but was very much alive. It was recalled, moreover, that Erzberger, speaking before the German national assembly, had accused Stinnes of drafting a plan for the deliberate devastation of the French coal-mining districts in the northeast department and also of having framed the scheme for the systematic destruction and removal of French and Belgian industrial machinery in order that French and Belgian industry might be crippled for future competition with German industry.14 The speech of Stinnes served to bring to a white heat the smoldering embers of Allied-German industrial hate. The conference and the world thought that they had heard "the true voice of industrial Germany and did not like the sound." 15 Hue, the German workmen's delegate, who was called upon to explain the position of German labor, strove to "mend matters" and in a "manner not displeasing" to the Allied delegates played for the appointment of an expert commission to investigate the whole situation. The plight of the French, Hue continued, was bad but the figures given yesterday were too favorable to the Allied cause. The coal problem, he urged, was in reality an international problem. This plea by German labor, fresh from the cooperative atmosphere of the first conference of the International Labor Bureau, held in May and June at Genoa, materially lightened the atmosphere of industrial strife introduced into the conference by the representative of German industry and was doubtless largely instrumental in drawing forth the moderate reply of the Allied spokesman, Millerand. 16 Allied experts, Millerand explained, should examine regularly the details of the German coal output in conjunction with German experts. The reparations commission should then assure a fair contribuu

ibid. " ibid. "Ibid. See also Jacques Seydoux in Revue d'economic politique, 1 9 2 1 , pp. 694, 695. " The Times, July 12, 1920.

The Conference of Spa

83

tion to the Allies. The Allies, in effect, proposed that the Germans make a plan in which Allied wants should receive proportionate shares. The Allies did not mean, Millerand explained, that the Allied needs should be first supplied and that German needs should receive the balance. The Allies intended to treat Germany "loyally and liberally." There was no thought of "chastising" Germany. Germany was regarded as a "necessary and useful member of the European family." The Allies were determined to aid German recovery provided Germany was equally determined to execute her Treaty obligations.17 After this exchange between the rival industrial camps the conference attempted to settle down to the task of drawing up a coal treaty which should meet opposing industrial claims. The character of the struggle from the point of view of the Allied industrial front was well described in the Times of July 13 under the headings "More Spa Delays," "Germans Haggle over Coal," "Fresh Committees Appointed," "Dangerous Forces at Work," and "Our Special Correspondent Describes the Dangerous Financial and Other Forces Working against the Allies." Allied interests considered themselves embattled against world financial pressure. The issue as stated by the Times was Whether the reparations clauses of the Peace Treaty . . . . should result in the establishment of economic equilibrium in Europe or whether on the pretext of putting Germany in a position to pay full reparations later the pre-War economic supremacy of Germany shall be restored. 18

"All those German and international interests," wrote the Times correspondent, "that were associated with the old supremacy of Germany are working for the latter solution." Millerand was described as asserting the leadership of a saner policy, set down as implicit in the Treaty of Versailles, while Lloyd George and Sforza were understood to have taken up a noncommittal position. The international forces which were pressing for an agreed solution were further described as follows: The attitude of the Germans and of all the international financial and international industrial forces that play between Berlin and the German Jewish banking houses at New York, not forgetting the branch establish17

Ibid.

"Ibid.,

July 13, 1920.

84

The Conference of Spa

ment in the Bolshevist camp is naturally favourable, as it was during the war, to the economic pan-German thesis.19 The German schedule of the thirteenth for future deliveries of coal met the cry of "not enough" by French industrial experts. T h e great Allied reconstruction program awaited German coal, awaited the surrender of Stinnes. T h e conference was suspended. Marshal Foch, Sir Henry Wilson, and General DeGoutte were summoned to Spa to discuss immediate measures of military coercion.20 Lloyd George, in a private conversation with Simons, made clear the Allied industrial position which would unquestionably, in the case of German refusal, lead to the occupation of the Ruhr. 2 1 The German delegation was accordingly faced with an internal crisis in which the German industrialists under Stinnes demanded that the delegation pursue a policy of no compromise and bring the issue to a head at once in the inevitable contest foreseen in the Ruhr. German industrialists professed to see a complete failure for the Allied cause in such a policy of coercion. It was argued that the Allies would withdraw again in a few months at the utmost without having obtained results. German national sentiment, however, prevailed over this industrial view with the argument that occupation of the Ruhr would mean the exposure of the whole of Germany in the coming winter to a food and coal famine, and the possibilities of political disintegration. It was pointed out that the Ruhr district itself with a sufficient supply of food and coal might not provide the expected resistance to Allied Rule. 22 On the other hand, Allied industrial necessities described above at the Paris conference served to moderate Allied determination to provoke an immediate issue. Allied industrial needs appeared to argue strongly for an agreed settlement which would enable the reconstruction program to be carried out. 23 The debate developed around an "ibid. Ibid., July 14, 1920. a Bergmann, The History of Reparations, p. 4 1 . a Ibid. 23 French economic interest in a peaceful solution appears in the views advanced in French official circles throughout the period. French economic interest in a reparations settlement was clearly identified with the general interest of the neutrals who were the creditors and clients of Germany. (See leading article in Le Temps, April 25, 1920.) The "frank informal talks" between Millerand and Lloyd George at San Remo are reported to have resulted in the strong assertion by Millerand of the "French need for peace." French statesmen were reported to be well aware that "their indefinite mortgage upon Germany" was x

The Conference of Spa

85

interesting question of concern to all industrialists. The German coal owners asserted that they would be unable to make the deliveries demanded by the Allied industrial program unless they were able to provide better food for the German miners. This would involve foreign credit. The force of this argument could not have failed to penetrate the minds of Allied industrial experts. The Allied industrial program called for coal as an absolute essential. The practical necessity of paying labor needed no illustration in 1920 in Allied countries. The memory of the German general strike, which had proved so effective a weapon of the Republican government only three months before, and of the ensuing Communist outbreaks in the Ruhr, was still fresh. Under these circumstances Allied governments, on behalf of Allied industry, consented to cooperate with German industry to meet necessary ends. It was accordingly agreed that in addition to crediting the German deliveries to the reparations account according to the Versailles Treaty, Part VIII, Annex V , § 6, a further premium of five gold marks per ton, to be earmarked for the purchase of foodstuffs for the German miners, should be paid in cash by the party taking delivery.24 Furthermore, two international commissions subject to the approval of the Reparation Commission were provided for, upon which Germans were to sit with Allied representatives. One was to have charge of the allocation of the coal output in Upper Silesia (Article 4); the other, with headquarters at Essen, was to investigate means of raising the standard of living of the German miners (Article 5). In addition Articles 235 and 251 of the Treaty of Versailles were seized upon at the insistence of Lloyd George 25 as a means of providing an advance cash payment to Germany, during the six months of the agreement, to equalize the difference between the German internal price and the export price.20 The legal interpretation of Article 235 of the Treaty of Versailles, to which the resourceful legal minds of the Allied experts had re"too shaky a foundation for big internal or international credits." French "crippled industries were involved in a financial situation." The Times, April 26, 1920. French interest in a peaceful solution was further described by the Paris correspondent of the Times under the heading "What France Wants—A Definite Negotiable Credit." The Times, May 1 5 , 1920. 24 Sforza is credited with having made this proposal. The Times, July 1 7 , 1920. * See the Times, July 1 3 , 16, and 1 7 , 1920. M T e x t of the British official version in the Times, July 17, 1920.

86

The Conference of Spa

course in order to bring the Lloyd George proposal within the four corners of the Treaty, is of interest. Article 235 provided that in respect of the first installment of twenty million gold marks, payable by Germany before May 1, 1921: Such supplies of food and raw materials as may be judged by the Governments of the Principle Allied and Asserted Powers to be essential to enable Germany to meet her obligations for reparations, may also with the approval of the said Governments, be paid for out of the above sum. 27

These hypothetical first twenty million gold marks mentioned in the special protocol were thus held out to German industry by the representatives of Allied factory owners whose wheels would not turn, as a necessary offering for rapid coal production. The Allied plan stipulated that this loan should be returned in cash by May 1, 1921. Against any proposition involving cash payments the German delegates remained obdurate, Bergmann asserting that repayment in cash by May 1, 1921, was out of the question, and that he would rather forego the advances entirely should such payment be required.28 Accordingly, it was finally agreed by the Reparation Commission and the German War Burdens Commission on December 28, 1920, that the advances made were to be set off against the deliveries in kind up to May 1, 1921.29 This agreement forms an interesting contrast to the other documents signed at Spa and to the general tenor of Allied-German negotiations to date. The actual protocol contained all the elements of a sound business arrangement. Both parties got what they wanted. Allied industry got German coal to the amount of two million tons a month. German mine owners received 360 million gold marks in cash. And in addition a special labor and a special distribution situation were recognised and provided for by the contract itself. Allied cash was supplied to feed German miners, and an international commission including both parties was set up to study how to raise the miners' standard of living. 30 Upper Silesian coal was to be rationed out to the " Treaty of Versailles, Article 235. " Bergmann, op. at.. p. 45. " Ibid. " W h e n this proposal was first intimated the Times in a scathing editorial remarked: "The suggestion that a European Treaty should be revised in agreement with a particular class of working men in a country which has signed it, is a novelty in the annals of diplomacy. Our Special Correspondent suggests that its explanation may be discovered in the German intention to exploit to the utmost the forthcoming International Congress of Miners at Genoa." The Times, July 14, 1920, leading editorial.

The Conference of Spa

87

market by another international commission, again including both parties. If reparations could be turned into a series of international trade agreements, within the legal limits of the Treaty of Versailles, why speak of revision ? The coal protocol, even with the objectionable sanctions, concerning which the Germans made reservations, was a distinctly hopeful result of a very discouraging conference. The question of general financial reparations and the proposed lump sum agreement were hardly even discussed. The German proposals, which never proceeded farther than a subcommittee, are indicative, however, of the progress which had been made between expert opinion on both sides towards an agreed settlement. The Reparation Commission itself had afforded the opportunity for the advance negotiations which had preceded the drawing-up of Simons's Spa proposals. These confidential discussions, which were carried on on June 9, 1920, between Carl Melchior and Bergmann and several members of the Reparation Commission, had resulted in a full explanation of the necessities of the Allied situation which a German offer must eventually meet at Spa. The Germans were told that a failure to make a definite financial offer at Spa, on the ground that German political and economic conditions made such an offer at the time impossible, would serve to strengthen extreme nationalist elements especially in France and England. At the same time it was agreed that the German offer must be kept within the limits of Germany's prospective capacity to pay. This involved a great difficulty, the difficulty of bridging the gap between the figures of such a German offer and the amounts popularly demanded in France and England. Failure to bridge this gap would inevitably result in summary rejection and a possible crisis.31 It was thereupon conceived that Germany might make a minimum offer which should fall within her present capacity to pay, and a further offer of additional payments conditioned on German economic improvement. This marked the origin of the idea of the "Besserungsschein."32 The method to be employed for determining an accurate " Bergmann, op. at., p. 36. ** Bergmann, op. cit., p. 36. The idea had been current in official circles for some time but had not previously been made the subject of official negotiation. The idea of an annual minimum payment and a fixed sliding scale for additional payments synchronized with German recovery was advanced in the leading article of Le Temps, April 20, 1920, cited above.

88

The Conference of Spa

index of German economic conditions was then discussed from all angles. It was agreed that the most expedient method would be a special index of some sort based on specific data of German economic statistics, e.g., the yield of the income tax, the surplus revenues of the government railroads, the excess of exports over imports, or exports in relation to the prevailing rate of exchange of the market. 33 T h e German proposals, which were made at Spa, were accordingly based upon this informal conference between the experts of June 9, 1920. 34 They expressed the German desire to cooperate in the actual reconstruction of the devastated regions and put forth two proposals to facilitate such cooperation: first, it was proposed that the actual reconstruction should be undertaken through an international syndicate of private capitalists on a business basis; and second, there should be set up a central organization to handle German deliveries in kind, thus displacing the rather clumsy reparations organization. As to the Allied demands for financial reparations, the German offer consisted of a financial memorandum, in which it was first of all claimed (to Allied amazement) that Germany had already exceeded the twenty million gold marks due on May 1 a year hence. The memorandum, after this unfortunate introduction, proceeded with a bankers' warning to the effect that German capacity to pay was in danger of swift annihilation by the increasing floating debt and currency inflation and asked immediate Allied consideration for their debtors' actual financial

and economic conditions. The following specific proposals

were then offered: first, that the indemnity should be fixed in the form of annuities; second, that a minimum total should be determined; third, that the annuity should not run for longer than the thirty years contemplated in the Versailles Treaty; fourth, that the minimum annuities should include both deliveries in kind and payments for the cost of occupation; fifth, that any supplementary annual payments should be proportionate to a sliding scale; sixth, that a maximum total should be fixed, after the payment of which Germany should be freed from all further reparations liabilities. In conclusion the German proposal called for a joint conference of Allied and German experts to discuss the technical aspects of this program. 35 M ™ Bergmann, op. cit., pp. 36, 37. Ibid. * The Times, July 12, 1920; Bergmann, op. cit., pp. 42, 43; Seydoux, op. cit.

The Conference of Spa

89

The German proposal thus showed much common ground between the experts of both camps. Informed opinion had evidendy made considerable headway on both sides of the border toward a common rendezvous for negotiations. The general program, which Allied experts had supposedly succeeded in introducing into the tentative Boulogne plan, was in no way precluded from the realm of negotiations by the German proposals. French statesmen, however, had not dared to make a clean breast of the Boulogne agreement in the Chamber of Deputies. It was the first of those many tentative agreements which embodied the hopes rather than the decision of the negotiators. Allied opinion, in fact, would not at this time have been satisfied with anything less than an offer of a substantial annual financial indemnity by Germany. With the unfortunate introduction provided by the Stinnes incident the Simons reparations proposal at Spa passed hardly noticed in the atmosphere of intense industrial strife which permeated the conference. Despite the failure of the conference of Spa to give a fair consideration to the reparations question, Lloyd George continued his efforts to force a political decision upon the lines of a lump sum agreement. In the adjournment at Spa he had secured an agreement for a further conference upon reparations to be held at Geneva.36 Writing to President Wilson on August 5, Lloyd George described the progress of his efforts to date as follows: T h e British and French Governments have been discussing during the last four months the question of giving fixity and definiteness to Germany's reparations obligations. T h e British Government has stayed steadily by the view that it was vital that Germany's liabilities should be fixed at a figure which was within the reasonable capacity of Germany to pay, and that this figure should be fixed without delay because the reconstruction of Central Europe could not begin nor could the Allies themselves raise money on the strength of Germany's obligation to pay them reparation until her liabilities had been exactly defined. After great difficulties with his own people M . Millerand found himself able to accept this view but he pointed out that it was impossible for France to agree to accept anything less than it was entitled " It was announced that the reparations question was to be referred to a conference of experts which would meet in Geneva in two or three weeks' time. Conclusions were then to be referred to the various governments. ( T h e Times, July 17, 1920.) The Timet commented upon the idea of an expert settlement in its leading editorial of July 13 as follows: the Treaty gives jurisdiction to them [the Reparation Commission] "not to the experts, not to the Supreme Council, and least of all to any body on which the Germans are represented."

go

The Conference of Spa

to under the Treaty unless its debts to its Allies and associates in the W a r were treated in the same way. 37 L l o y d George then continued with a statement of the position of the British government upon the question of an inter-Allied debt agreement: Accordingly the British Government has informed the French Government that it will agree to any equitable arrangement for the reduction or cancellation of inter-Allied indebtedness, but that such an arrangement must be one that applies all round. As you know, wrote Mr. Lloyd George, the representatives of the Allies and of Germany are meeting at Geneva in a week or two to commence discussion on the subject of reparation. 38 T h e British prime minister had apparently been playing for this final maneuver. Millerand had been conjured into acceptance despite political instability in Paris. 38 A n d now reparations were to be brought to Geneva, the city which President Wilson in his capacity of executor of Paragraph 3, Article 5 of the Covenant had named as the place for the Assembly's first meeting. Lloyd George was in fact asking President Wilson to make an American contribution of tangible form at Geneva. It will be remembered that Millerand had been made to subscribe to the following preamble to the Hythe communiqué: T h e two Governments are further of opinion that, in order to provide a solution for the economic difficulties which are gravely weighing upon the general situation of the world and in order to mark a definite beginning of 40 the era of peace and also to the explicit conclusion: Accordingly experts from each of the two countries will be charged ( a ) to prepare . . . . proposals for fixing a memorandum total for the German debt which will be capable of acceptance by the Allies and at the same time compatible with Germany's capacity to pay. ( b ) T o determine the method of payment and of capitalization . . . . then to establish the conditions for 41 the division between the Allies of the payments President Wilson's reply, voicing the well-known American position Prosperity, ** Quoted by Harold G. Moulton and Leo Pasvolsky in War Debts and World pp. 65, 66. " Moulton and Pasvolsky, op. cit., p. 66. " T h e Germans also looked hopefully toward Geneva. Simons is quoted as saying on his departure from Spa that he had great hopes of Geneva; at Spa the Germans had had to discuss with a pistol at their heads. The Times, July 19, 1920. a " The Times, April 27, 1920. Ibid.

The Conference of Spa

91

that the United States could not "consent to connect the reparation question with that of inter-governmental indebtedness,"42 amounted, in as much as the United States Senate had refused to permit the executive branch of the government to collaborate actively with European governments within the framework of the League of Nations and the Treaty of Versailles, to consigning the whole reparations question to the broils of postwar European politics, the economic motivation of which appears clearly in the Allied reconstruction program elaborated at Atlantic City and Paris. The reparations controversy was destined never to find its way to Geneva. French public opinion was never warmly favorable to a reparations conference at the seat of the League of Nations. " For President Wilson's reply in full see Moulton and Pasvolsky, op. at., pp. 67, 68, 69, 70.

CHAPTER

T h e O r g a n i z a t i o n of

VI

International

Reconstruction

W

H E N the International Financial Conference, long postponed, finally met at Brussels on Friday, September 24, 1930, the reparations controversy remained still unsettled. The conference was therefore precluded from any consideration of the reparations question by the instructions approved by the Council of the League on the fifth of August, 1920, specifically stating that "none of the questions which are the subject of the present negotiations between the Allies and Germany should be discussed at the Conference." 1

The composition of the conference was something of a departure from that of the established run of international gatherings in that the representatives of the several governments attended as experts and not as spokesmen of official policy. During the war a similar principle of cooperation had been worked out within the sphere of Allied governmental departments in the various Allied committees of control. By this method it had been possible to correlate policy in the process of evolution within the several governmental departments, thereby heading off and eliminating the causes for friction among completely formulated governmental policies. The system of Allied control attempted to solve the differences before they became accentuated in fully worked out divergent governmental plans. T o facilitate the formulation and execution of policy so evolved, industrialists and business men had been invited to cooperate with the result that an amazing degree of international economic integration had been achieved.2 The Brussels conference was an attempt to carry the war1 League of Nations, The Proceedings of the international 1920), Vol. I, Report of the Conference, p. 3. ' S i r Arthur Salter, Allied Shipping Control, pp. 274-280.

Financial

Conference

(Brussels,

International Reconstruction

93

time principle of international cooperation into the formation of common policy. This technique, as we have seen, was first given expression at the International Trade Conference at Atlantic City which was held under the patronage of Allied governments and the United States. T h e same principle of governmental patronage and cooperation was carried out in the Organization Conference of the International Chamber at Paris. The Brussels Financial Conference takes its place as the foremost of these attempts to promote international business policy as a basis for whatever political agreements should become necessary. T h e organization of the conference also was unique among international conferences. In this respect the Brussels conference again followed the practical business technique put in operation at the business conferences of Atlantic City and Paris. The conference first heard reports regarding the economic conditions in the several countries and then separated into four large groups or committees, upon which every country was represented, for the discussion of: public finance; currency and exchange; international trade; and international credits. The resolutions drawn up by these committees were then brought before the entire conference for final adoption. This general organization, which gave complete international representation in the actual formation of policy in the committees, was finally adopted by the League of Nations. The Brussels conference has in this sense been called a "dress rehearsal" for the first Assembly which was shortly to meet at Geneva. T h e conference reached a unanimous report which included resolutions upon all phases of the highly technical subjects discussed. On the subject of public finance it reiterated the orthodox creed of financiers the world over, at a time when very few governments were prepared to act upon such a creed. T h e conference pointed out the necessity of carrying through a program of financial reform involving, first, the reduction of ordinary current expenditure to the limits of ordinary revenue; second, the rigid reduction of all expenditure on armaments; third, the abandonment of all unproductive extraordinary expenditure; fourth, the restriction of productive extraordinary expenditure to the lowest possible amount. T h e conference spoke in no uncertain terms upon the absolute necessity of disarmament, calling attention to the Supreme Council's pronouncement of March 8 that:

94

International Reconstruction

Armies should everywhere be reduced to a peace footing, that armaments should be limited to the lowest possible figure compatible with national security and that the League of Nations should be invited to consider as soon as possible proposals to this end. 3 T h e resolution continued: The statements presented to the Conference show that, on an average some 20% of the national expenditure is still being devoted to the maintenance of armaments and the preparations for war. The Conference desires to affirm with the utmost emphasis that the world cannot afford this expenditure. Only by a frank policy of mutual co-operation can the nations hope to regain their old prosperity. . . . The Conference accordingly recommends most earnestly to the Council of the League of Nations the desirability of conferring at once with the several governments concerned with a view to securing a general and agreed reduction of the crushing burdens which on their existing scale armaments still impose on the impoverished peoples of the world The Conference hopes that the Assembly of the League which is about to meet, will take energetic action to this end.4 The conference made an exception to the rules of economy enumerated above in the necessities imposed by reconstruction; the resolution reads: In a number of countries, however, although the ordinary charges can be met from revenue, heavy ordinary expenditure must at the present time be undertaken on Capital Account. This applies more especially to those countries devastated during the War, whose reconstruction charges cannot possibly be met from ordinary receipts. The restoration of the devastated areas is of capital importance for the re-establishment of normal economic conditions and loans for this purpose are not only unavoidable but justifiable. But in view of the shortage of capital it will be difficult to secure the sums required even for this purpose, and only the most urgent schemes should be pressed forward immediately.5 In the debate on public finance, Avenol explained the budgetary position of France in relation to reconstruction needs as follows: France has undertaken this work without waiting for the realization of the rights given her by the Treaties and I think I may say that the entire world is at the present moment commencing to profit by what has already been accomplished In our present situation then we are obliged to 'International Financial Conference, Brussels, 1920, Proceedings Report of the Conference, p. 14. i ' Ibid. lbid., p. 15.

of the Conference,

Vol. I,

International Reconstruction

95

raise temporarily by loans the funds necessary to reconstitute the fixed capital which has been destroyed. The greater part of these resources has been supplied out of the savings of the people The 25 milliards which we have expended on works of reconstruction have been derived from savings from the small capitalists who invest their savings in Treasury Certificates. H o w will this effort of reconstruction be continued? That is a question which is not for me to examine here for it is ultimately connected with the execution of the Treaties of Peace.8 It was for these reasons that France's financial policy, as Avenol told the conference, differed from the policy laid down by the experts. The relation of reparations to the German economy was clearly stated by R. H . Brand in his speech opening the debate on public finance: The governments of all the great belligerent countries must also undertake the solution of the problem of their external debt reparation, being from this point of view tantamount to the external debt of Germany and Austria. The largest creditor of the Allied nations is of course the United States to which about 11,000,000,000 dollars was owing on March 1st, 1920.7 The necessity for a settlement of these intergovernmental debts was urged by Brand as follows: What is required in the interest of public finance and of the financial community as a whole is certainty, and that this and other foreign debts should be funded and the redemption debts fixed definitely. Unless this is done every government is left in a state of harassing uncertainty which undermines confidence and tends also to affect adversely the general situation.8 The difficulties involved in meeting these intergovernmental debts were further elaborated by Brand in demanding the conservation of all resources, particularly against unwise political action. If all these countries were as prosperous as they cared to be, then political situations might be allowed to govern. But they are ruined and the resources they each possess within themselves can never suffice to extricate them from their difficulties. Thus their only salvation is freely to trade with one another and so pool their resources. N o recovery on other lines is possible. Europe must have real peace and real international co-operation I am here representing no particular country but free to regard the problems before us as a citizen of Europe. 9 * Proceedings of the Conference, Veil. II, Verbatim 'Ibid., p. 20. "Ibid., p. 2 1 .

Record

of the Debates, 'Ibid.

p. 30.

International Reconstruction

96 The

necessity f o r e c o n o m i c

cooperation

was emphasized

by

the

Italian delegate Alberto Beneduce, particularly w i t h regard to

raw

materials. W e cannot limit ourselves to insist on the necessity of balancing our commercial budgets or of balancing an interior budget of the State, but w e must likewise examine the problem f r o m another point of view. T h a t is to say, taking into account the existence of certain industrial organisations, t a k i n g into account the existence of certain quantities of w o r k , I ask myself h o w international relations should establish themselves in order to facilitate the use of these productive forces in the public interest. It is certain that any policy that would maintain divisions, that would maintain contrast, that would maintain hatred, and that isolated the economic life of different nations, could only lead to results opposite to those that w e are desirous of obtaining. 1 0 T h e difficulty in meeting intergovernmental obligations under the e x i s t i n g c o n d i t i o n of u n i v e r s a l l y d e p r e c i a t e d c u r r e n c i e s w a s t a k e n u p in t h e p u b l i c debate o n c u r r e n c y . V i s s e r i n g , in i n t r o d u c i n g the discuss i o n , stated the q u e s t i o n as r e l a t e d to the p r o b l e m of the s t a b i l i z a t i o n of m o n e y as f o l l o w s : A n d h o w will the problem be solved of the pre-War debts which were incurred in full value currency. W i l l a compromise have to be arrived at which will be humiliating for the debtor-state and would be tantamount to a position of insolvency Moreover, the entente powers have in the Peace Treaty imposed upon the Central powers the obligation to honour pre-War debts in the former gold v a l u e . 1 1 A l t h o u g h the c o n f e r e n c e w a s r e s t r a i n e d b y the C o u n c i l of t h e L e a g u e f r o m a p p l y i n g directly the g e n e r a l p r i n c i p l e s of E u r o p e a n r e c o n s t r u c tion to the special r e p a r a t i o n s situation, it d i d v e n t u r e i n t h e introd u c t i o n to its r e p o r t to m a k e t h e f o l l o w i n g o b s e r v a t i o n o n t h e r e p a r a tions situation, asserting that it f e l t j u s t i f i e d in associating itself with the hope expressed by M . L e o n Bourgeois in his report to the Council of the 5th A p r i l last, to the effect that the economic uncertainty which besets alike the countries which are entitled to receive and the countries which are under an obligation to pay reparation claims may speedily be removed since the settlement of this question is indispensable not only for the reconstruction of the countries devastated by the W a r . . . . a matter of capital importance to the re-establishment of Euro10

Ibid., p. 75.

u

Ibid., p. 54.

International Reconstruction

97

pean economic equilibrium . . . . but also for the recovery of the States on which the burden of this reparation lies. 12

Thus, although the conference could not draw up a reparations program, it did attempt to state in unambiguous terms those features of the general European reconstruction program which should be maintained at all costs, and which were well recognized to be pertinent to the controversy. And the debates had the inevitable effect of clarifying the dangers which lay in the relation between the reconstruction budgets and reparations. The question of currency reform was discussed at length in the debate on currency and exchange. Vissering elaborated in some detail possible means of rehabilitating fallen currencies. Taking the Austrian krone as a hypothetical example, Vissering outlined the main principles of a policy which was to be finally adopted in the actual rehabilitation of the Austrian krone and the German mark. Vissering's plan called for the bringing back of the "gold krone" into ser\fce again through the establishment of a rigid control of its circulation in the hands of absolutely independent persons or bodies. The re-creation of these gold kronen was to be undertaken in two ways, by floating an international loan and by putting Austria into a productive condition under the guidance of the new bank of issue. The new bank of issue would thus "ration the credit in the gold kronen and thereby entirely retain the control of the spending of these gold kronen." The gold kronen, Vissering explained, would be utilized in book form in current account "in the same form in which centuries ago the BankGuilder at Amsterdam and the Bancol-Mark in Hamburg were placed at the disposal of trade and commerce by the famous exchange banks of these two cities."13 The grave dangers inherent in the position of the United States as the greatest creditor nation and the greatest importer of European goods were discussed at some length in Vissering's outline of the world monetary situation. Vissering pointed out that the debtors of and purchasers from the United States would be compelled to bid against each other in the open market in order to be able to secure a part of the insufficient number of dollars for remittance purposes. The gravProceedings of the Conference, Vol. I, Report of the Conference, p. n . "Proceedings of the Conference, Vol. II, Verbatim Record of the Debates, p. 58. 11

98

International Reconstruction

ity of these circumstances was increased by the fact that this exceptional position of the United States must inevitably obtain for a long time. "In a word" said Vissering, "is it not to be feared that a situation would arise fatal for the debtor countries but eventually also very unfavourable for the U.S.A." A fresh equilibrium would in the long run of necessity be arrived at, but only after and at the cost of an enormous amount of trouble and misery, a further dislocation of prices and of social conditions in the greater part of the world, and the encouragement of a revolutionary and Bolshevist spirit. The United States, Vissering went on to predict, would eventually be affected by "the recoil of all this." 14 T h e final decisions of the conference on the subject of currency and exchange called for a halt in inflationary policies and asserted that "it is highly desirable that the countries which have lapsed from an effective standard should return thereto." 15 T o the accomplishment of this end a general program was elaborated, including the freeing of banks of issue from political pressure and insuring their future operation solely on the lines of prudent finance, the stopping of further issuance of governmental and municipal credit and the refunding of floating debts, the use of credit solely for real economic needs controlled merely by the normal influences of the rate of interest, the freeing of commerce as soon as possible from control and impediments to international trade, and the avoidance of all superfluous expenditure. The possibility of international cooperation in national reconstruction was foreshadowed in Resolution X I V , proposed by the commission on currency and exchange. T h e resolution read: In countries where there is no central bank of issue, one should be established and if the assistance of foreign capital were required for the promotion of such a bank some form of international control might be required. 16

Vissering in the address quoted above had proposed the creation of such an independent bank of issue under international management, citing the case of the Bank of Algeciras. 17 The Commission on International Trade brought forward resolutions, which were unanimously adopted, emphasizing the dependence of the resumption of international trade upon the " Ibid., p. 69. u Ibid., Vol, I, Report of the Conference.

" Ibid., p. 20. Ibid., Vol. II, p. 56.

11

International Reconstruction

99

restoration of real peace, the conclusion of the wars which are still being waged and the assured maintenance of peace for the future. T h e continuance of the atmosphere of war and of preparations for war is fatal, read the Resolution, to the development of that mutual trust which is essential to the resumption of normal trade relations T h e Conference trusts that the League of Nations will lose no opportunity to secure the full restoration and continued maintenance of peace. 18

Postwar economic barriers were denounced in Resolution III, which recommended that Each country should aim at the progressive restoration of that freedom of commerce which prevailed before the W a r including the withdrawal of artificial restrictions on and discriminations of price against, external trade. 19

T h e question of credit was considered very fully by the conference; the result was the drawing up of a general plan of international cooperation known as the Ter Meulen plan. The terms upon which such international assistance should be granted presupposed, the conference stated, a willingness on the part of the countries in question to assist one another in the restoration of economic life and to make every effort to bring about within their o w n frontiers the sincere collaboration of all groups of citizens and to secure conditions which give to work and thrift liberty to produce their full results.20

The plan introduced by Ter Meulen provided for the constitution of an international commission, under the auspices of the League of Nations, consisting of bankers and business men of international repute, appointed by the Council of the League, with the power ,to appoint subcommissions to exercise the commission's authority in participating countries. This commission and the subcommissions acting under its authority were to act in the capacity of an international agency for supervising the issuance of credits to needy countries. The procedure outlined by the plan required, first, the placing of specific assets in the hands of the commission for examination and assessment in gold value, as security for commercial credits to be granted by the nationals of exporting countries. The participating government should then be authorized to prepare bonds to the gold value approved by the commission, the date of maturity and the rate of interest to be determined by the participating government in agreement with the " Ibid., Vol. I, p. 22.

10

Ibid.

" ibid., p. 25.

International Reconstruction

IOO

commission. The service of these bonds was to be secured out of the revenue of the assigned assets. T h e administration of the assigned assets, while in the first instance placed in the hands of the participating government, would be subject to transference to the commission at the decision of the Council of the League of Nations under the commission's application. The bonds, having thus been issued in accordance with the recommendations of the international commission, were to serve as collateral security for imports by nationals of the participating state. It was stipulated that the bonds should be made out in such currencies and in such denominations as should be applicable to the particular transaction in respect of which they were issued. A n extensive control over the uses of these bonds was provided by the further stipulation that all applications to participating governments must furnish proof that the imports for which the bonds were to be used had been approved by the international commission, and it was provided that each bond should be first countersigned by the commission in proof of registration. After the transaction had been completed the bonds were to be returned to the government of issue. The plan provided for the assignment of the revenue from the assets, to the service of the bonds, for the purchase of foreign currencies sufficient to meet at their due date the coupons of the bonds. Provision was made for the establishment abroad in appropriate currencies of sinking funds for redemption of ten percent of the bonds at maturity and for the establishment of a special reserve in one or more foreign currencies for the redemption of bonds which might be sold in case of default in the original transaction.21 Thus an international plan of reconstruction, in opposition to Allied and national plans, was brought forward at Brussels. The Ter Meulen scheme was itself the result of years of study and discussion in circles of experts.22 The Brussels conference, therefore, brought the two systems of reconstruction clearly into the open. T h e Allied plan, as has been pointed out, in the last analysis rested upon the combination of Allied interests. On the other hand the international system of recon* Ibid.,

p. 27.

** In the discussion of the finance g r o u p of the First Congress of the International C h a m b e r of C o m m e r c e , L o n d o n , June 27 to July 1, 1 9 2 1 , Sir D r u m m o n d Fraser, o r g a n i z e r of the T e r M e u l e n scheme, asserted that the scheme had been threshed o u t in almost every possible detail f o r at least t w o years before it was launched at the Brussels conference. International C h a m b e r of C o m m e r c e , Brochure N o . 18, Proceedings of the First Congress, p. 73.

International Reconstruction

IOI

struction, in process of evolution, was based upon the realities of present business assets in a world order, dominated not by surviving alliances but by the requirements of normal international trade. These two systems were to contend for mastery over international relations. The conference at Brussels, by providing an airing for plans of international cooperation, served to concentrate public opinion upon the new postwar problems. The idea of considering questions of national public finance in an international conference is in itself indicative of the change which had taken place in economic affairs since 1914. The detailed program of international financial assistance embodied in the Ter Meulen plan was a specific product of this new international philosophy. The conference of Brussels, like its predecessors, realized the need of permanent machinery of international cooperation in economic and financial affairs. The new sphere of international cooperation was outlined as follows: During the course of its deliberations the Conference could not fail to be impressed by the fact that all or almost all of the many proposals submitted for its consideration required at some stage the active intervention of the League of Nations. The Conference is unanimously in sympathy with this tendency and believes that it is desirable to extend to the problems of finance that international co-operation which the League of Nations has inaugurated and which it is attempting to promote in order to improve the general situation and maintain the peace of the world. 23

The conference further suggested That the activities of the League might usefully be directed towards promoting certain reforms and collecting the relevant information required to facilitate credit operations. In this connection the Conference considers it well to draw attention to the advantages of making progress under each of the following heads: ( 1 ) Unification of the laws relating to bills of exchange and bills of lading. (2) The reciprocal treatment of the branches of foreign banks in different countries. (3) The publication of financial information in a clear comparative form. (4) The examination of claims by the holders of bonds the interest of which is in arrear. (5) An international understanding on the subject of lost, stolen or destroyed securities. (6) The establishment of an international clearing house. (7) A n international understanding which while ensuring the due payment by everyone of his full share of taxa" International Financial Conference, Proceedings of the Conference, Vol. I, Report of the Conference, p. 27.

International Reconstruction

102

tion, would avoid the imposition of double taxation which is at present an obstacle to the placing of investments abroad.24 In this respcct the Brussels confcrence implemented in large measure the business program embodied in the resolutions of the Organization Conference of the International Chamber of Commerce. The extensive program drawn up by the conference made clear the necessity of organizing the economic and financial side of the work of the League of Nations. The final resolution, proposed by the commission on currency and exchange and adopted by the conference, recommended to the Council of the League the setting up of a financial committee. The resolution read: "The committee should be set up both for continuing the collection of the valuable financial statistics that have been furnished for this Conference and also the further investigation of current policy.25 The conference, as Delacroix asserted in the closing session, had put into the ground the seed from which it was hoped a "powerful tree" would eventually spring up. The foundation of the useful work of international cooperation in economic affairs, carried on by the League of Nations, was laid down at Brussels. "Ibid.,

p. 26.

'Ibid.,

p. 2 1 .

CHAPTER

VII

A Business Settlement of

Reparations—

T h e First E f f o r t

T

H E Brussels conference of Allied and German experts on

reparations marked the attempt to apply the technique of international

business cooperation, elaborated

at the

Brussels

Financial Conference, to the German reparations controversy. T h e first by-product of the new approach was the improvement in relations between Allied and German reparations officials. T h e

conference

"afforded the German participants," to quote the words of Bergmann, the German delegate at the conference, "the first opportunity to associate again on an equal footing with the representatives of the Allied powers." This in Bergmann's judgment constituted a factor in the history of reparations "not to be underestimated." Versailles and Spa had seen the Germans "treated as accused to be called to account and treated accordingly." "Such treatment begets even in those w h o come sincerely with the best intentions to meet their obligations a bitterness which is bound seriously to diminish the eagerness to perform them." 1 T h e speech of the German delegate at Brussels depicting the grim economic conditions in Germany did not fail to hold out the hope that with intelligent international cooperation German affairs might improve and pledged Germany's willingness to participation in the reconstruction of Europe. T h e loud applause, which greeted Bergmann's conclusion of the German statement, was like a strange relief against the background of the overwrought atmosphere of AlliedGerman relations. T h e Financial Conference at Brussels, therefore, in a very real sense, introduced its successor, the Reparations Conference at Brussels. T h e possibility and the desirability of Germany's reentrance as a full participant upon the stage of international relations 1

Bergmann, The History of Reparations, pp. 44, 45.

104

A Business Settlement

was being continually considered during the closing months of 1920. The sentiment of international labor was expressed by the British delegate, Barnes, a Member of Parliament, at the League Assembly on November 19. When the British delegate, it was reported, turned to the "somewhat delicate question" of the admission of ex-enemy states to the League there was "a movement of attention." Speaking on his own responsibility, Barnes asserted, he believed that in the view of the working men of Great Britain ex-enemy states should be admitted into the League as quickly as possible. So far, he continued, as he could gather this was the labor view throughout the world. Ex-enemy states had been admitted as equals into both the International Labor Organization and the Brussels Financial Conference where they had played a useful part. He believed that the German people must, so far as was humanly possible, make good the damage done to Belgium and France, and, in a lesser degree, other countries, but the remedies for the present situation were the greatest possible production of goods and the greatest possible freedom in the exchange of commodities. There could be neither the one nor the other, he asserted amid cheers, so long as the world was divided into camps. Germany, he concluded, had given evidence of repentance and he hoped that in due time she would be admitted.2 A series of unfortunate political incidents, however, did much to offset the development of international cooperation in the labor and financial sphere. The Times of December 9 indicates the rising pitch of feeling in the political sphere. "Provocative Speeches and Bad Manners" ran the headline over the dispatch from Berlin recording the fact that no official answer to the Allied note on the subject of the provocative Fehrenbach and Simons speeches in the Rhineland had yet been received. The speeches, it was reported, however, had been circulated broadcast under the title "The Wound in the West." The correspondent reported a "considerable stiffening in Germany's attitude towards the entente and also towards entente subjects in Germany," which he ascribed to several causes, among which he put first "the expectation that the execution of the Treaty" could be rendered nugatory "by mobilizing the League of Nations in Germany's interest." The German press, he recounted, had been apparently "mobilized in ' The Times, Nov. 20, 1920.

A Business Settlement

105

the same direction." Each action of the entente under the Peace Treaty was being assailed as a new "robbery" or "entente swindle." A l l reparations were being characterized as extortions and the German public, who had been kept in ignorance of Germany's methods in Belgium and northern France during the war, was being studiously misinformed by old regime methods of propaganda. Wolff in the Berliner Tageblatt was singled out as the apparent leader in this campaign, which was characterized by attacks upon the correspondents of British newspapers in Berlin. The only interest, contended the Times correspondent, that these outbursts had for the British public was that they must be considered as reflections, in official Germany and in the public and press, of each weakening of the Peace Treaty. Germany, the dispatch continued, is now doing quite considerably well economically, and next year will be doing very much better. In proportion as her position improves Germany will try to escape her obligations and it is as well that symptoms of this tendency should be dealt with as they appear.8

Such incidents were a sinister prelude to the meeting of the Brussels Reparations Conference. The contrast between the development of public sentiment towards Germany and the movement of public sentiment towards Austria is suggestive of the underlying forces which were moving political waters. The Times of December 10 placed the following caption over the report of the Vienna correspondent: "Austria on the Brink— Really Worthless Currency—Allied Control Proposed." The plight of Austria was depicted as "plainly desperate," the krone having now reached the exchange point of 2,000 to the pound, and some plan of international financial control, similar to the plans outlined at the Financial Conference of Brussels, was heralded in the editorial column as the only possible way out of the Austrian problem. T h e representatives of the Allied governments in Vienna, it was asserted, were in agreement with responsible Austrians that an international loan under independent control was indispensable. Fifty millions sterling was mentioned as a possible amount to be payable by installments over a period of five years and to be secured upon all available Austrian assets and "of course to be administered by the Allied Commis* The Times, Dec. 9, 1920.

io6

A Business Settlement

sion of Control." The plan provided for the establishment of an Austrian bank of issue. Although the necessity of some form of economic and commercial union between the ex-members of the dual monarchy was apparent, the present emergency, it was contended, was too urgent to await the negotiation of such a plan. "If Austria is to be saved," concluded the editorial, "and the mishaps inseparable from her collapse are to be averted, she must be saved now. The Allies and the Associates alone are able to save her. Will they do it? If they will they must make up their minds forthwith." 4 The final reception of the German notes, in reply to the Allied notes upon the Rhine speeches referred to above, did not lessen the sinister political undertone of Allied-German relations, approaching a climax in the impending reparations conferences. The Times editorial of December 13 continues with the alternating theme of German defiance. "Notes of this kind," it was asserted, "are a bad preparation for the Brussels and Geneva Conferences." They constituted a reminder and not the only reminder that the temper of Germany was again becoming more truculent and that lenience was "worse than wasted on a large part of her people." The Germans, it was argued, had always "mistaken lenity for weakness." It was time to undeceive them and to teach them that such studied insults as the dispatch of these notes or the Cuxhaven outrage would not be tolerated and "that the whole brood of armed associations under whatever false colours they lurked must be rooted out."5 It was apparent that the general public of Allied countries was in no mood for a policy of lenity towards Germany in regard to Treaty enforcement. The day before the Brussels conference opened, Austria was admitted to the League of Nations by an all but unanimous vote of the Assembly. Viviani, the French delegate to the Assembly, speaking on that occasion, expressed the differentiation between Austria and Germany in Allied opinion. And as for Germany, he said, "She must give adequate guarantees of the sincerity of her intention to fulfill her international obligations

the Covenant is at this point bound

up with the Treaties which have been signed."6 General Allied senti* The Times, Dec. io, 1920. " League of Nations, Minutes Meeting," p. 575.

5

The Times, Dec. 13, 1920.

of the First Assembly

of the League

of Nations,

"Plenary

A Business Settlement

107

mcnt was as yet unconvinced of German sincerity. In this atmosphere the Allied and German experts met at Brussels on December 16. The official agenda of the conference called for an exhaustive examination of the financial and economic condition of the Reich with a view to discovering ways and means of meeting Allied reparations demands. The negotiations were conducted under the chairmanship of Delacroix, the Belgian delegate to the Reparation Commission. The fact that Germany and all the Allied powers, with the exception of France, sent their respective delegates on the Reparation Commission to Brussels as experts provided continuity to the discussions which before and after Spa had been carried on in the Commission. England sent Sir John (afterwards Lord) Bradbury and Lord d'Abernon; France, Seydoux and Cheysson; Italy, d'Amelio and Giannini; Belgium, Delacroix and Lepreux. The German delegation consisted of Bergmann, the German delegate on the Reparation Commission, Havenstein, the president of the Reichsbank, State Secretary Schroeder, representing the Ministry of Finance, and a galaxy of her most eminent experts.7 The discussions opened with a long and realistic account, by President Havenstein, of the German budgetary and foreign exchange position; this account failed to present any hope of German cooperation and therefore disappointed Allied expectations. After a confidential exchange of views, Bergmann quickly put the conference on its feet by developing a constructive program of possible German cooperation in a policy of fulfillment on the framework of the Spa proposals, which, as described above, originated in the confidential discussions among several members of the Reparation Commission of June 9, 1920. Bergmann made a sharp distinction between reparations in kind and reparations in cash, asserting that Germany for the time being would be unable to make any cash payments for reasons well known to all those present, but only deliveries in kind. Germany considered that her vital interests demanded that a reasonable reparations figure, including a total liability which should be within her capacity to pay, should be fixed as soon as possible. A theoretical amount impossible of fulfillment would have the effect of driving Germany into despair. 7

Bergmann, op. at., p. 47. See also Jacques Seydoux in Revue ¿'economic pp. 696-700.

politique,

1921,

108

A Business Settlement

The actual program he elaborated as follows: first, from the total reparations debt the German deliveries and cessions to date should be deducted; second, the balance of the indebtedness should be discharged in thirty annuities according to the Treaty provision; third, inasmuch as immediate cash payments were out of the question and particular interest was connected with the reconstruction of the devastated territory, a plan for practical cooperation in the work of reconstruction should be developed. The machinery of the Treaty, regarding deliveries of material for reconstruction, was too complicated to permit speedy action. An understanding should therefore be negotiated which would provide for more direct action. Although such a plan would have to be worked out, Bergmann started with a suggestion that the German government should open a large credit in marks as a fund for the payment of German contractors on account of private orders executed for the damaged parties. The details of such an arrangement should be worked out by a special commission.8 As to cash payments, Bergmann proposed that measures be adopted to secure the rehabilitation of the German currency and the balancing of the German budget, conditions which were prerequisite to any possibility of making financial payments. It was questionable whether Germany by her own efforts could successfully carry through such financial rehabilitation. Bergmann put forward the suggestion of an international credit operation on a large scale for the stabilization of the mark, inasmuch as the domestic prerequisites for the success of such an international project, namely, internal order and willingness to work, could be counted upon. Germany would start payments as soon as the budget and currency problems had been straightened out. Before this could be accomplished, however, he pointed out that certain Treaty impediments must of necessity be removed or altered, including a reduction of military occupation costs (which on the present scale would probably in themselves consume all possible payments), the adjustment of the Upper Silesian question, the release of German private property in Allied countries, the granting of sufficient ships for German trade, the reestablishment of Germany in a position of economic equality in the world, and, most important of all, complete "Bergmann, op. cit., pp. 47, 48; The Times, Dec. 18, 1920.

A Business Settlement

109

freedom "from the everlasting threat of economic reprisals." These questions were all put forward as proposals requiring extensive study.® This latest German offer proposed by Bergmann was the result, he tells us, of confidential discussions with one of the British delegates who had informed him of his determination "to establish at Brussels a firm basis for the reparation programme and to discuss definite figures for submission to the Allied governments." T h e reason given by the British delegate "for this sudden change of programme was the desire to take advantage of the momentarily favourable political conjuncture and the spirit governing leading French circles to secure an early solution of the reparation question." 10 The British delegate therefore suggested that if Germany should make an offer of yearly deliveries in kind of about two milliard gold marks at a cash annuity of one milliard gold marks on the basis of the Boulogne plan, a satisfactory foundation for reparation negotiations might be found. The deliveries in kind, he suggested, were to be credited to Germany on the most favorable terms possible in order to cover the two milliards provided for. Bergmann was "at first very sceptical." He writes that his British informant, "quite apart from the amount of payments asked for," appeared to him to take a far too optimistic view of the possibility of agreement "and was apparently prompted by the ambitious desire privately to rush a speedy solution of the great problem." Confirmation, however, came from French quarters that the "positive policy" had "of late gained considerable ground in France." It appeared to the expert proponents of such a "speedy solution" that "the conviction was everywhere taking shape, that economic co-operation with Germany was imperative to ward off the danger of an early collapse of European civilization." Accordingly it was deemed expedient to meet public opinion in France with a German offer demonstrating that Germany "was trying honestly to do something substantial for France without delay." Since cash payments were for the time impossible, Germany should make an offer to pay in deliveries of materials and in labor. Actual G e r m a n co-operation in the w o r k of reconstruction at this time, [Bergmann

writes]

was dependent

"Bergmann, op. at., p. 49; Seydoux, op. Bergmann, op. cit., pp. 49, 50.

10

at.

upon

unsolved

political

and

social

no

A Business Settlement

problems. For the present the question at issue was a reasonable and practical solution of deliveries in kind. 11 T h e German delegate at the same time was informed that the Reparation Commission "would probably be able to fix the indemnity by ist May, 1921 at an amount considerably below previous estimates." It was thought that the chances were good for an interpretation of "certain doubtful provisions of the Treaty of Versailles

in

favour of Germany so as to screw the total of the damages d o w n to about 100 milliard gold marks." 1 2 Bergmann's reply to this proposal pointed out that "the Boulogne plan on account of its fantastic figures and the character of the guarantees demanded" would be unacceptable. O n the Allied side, it was then suggested that the annuities of 269 milliard gold marks settled on at Boulogne only represented a present cash value of 85 milliard gold marks. W h e r e u p o n Bergmann asked " W h y , instead of adhering to such alarmingly high figures the 85 milliards were not taken as a starting point—not of course as the amount of the German debt but only as the amount of the damage to be fixed by ist May, 1921." 13 "This remark," Bergmann records, "fell on fertile soil." T h e discussion continued. Bergmann still further opened his mind to "the confidential Allied representatives, and without opposition" to the effect "that even this was an amount outside the reach of Germany," "but that in any event it offered at least some sort of basis, and that it would then be easier to come to an understanding than if hundreds of milliards of gold marks" were always staring the negotiators in the face. A f t e r this exchange of views the Brussels conference adjourned "with the recognition that the points discussed would require further preliminary consideration by both sides." In the meantime it was the intention "to continue the discussion in Paris within an intimate circle" and the Geneva conference was to be put off "until things had so matured that an agreement could be submitted to the ministers of the representative countries for their signatures." 14 Bergmann's report to Berlin summarized his view of the progress of the negotiations as follows: T h e car has n o w attained a h i g h speed, thanks to the pressure of some Ibid., pp. 49, 50. "Ibid., p. 50. 11

Ibid., p. 51. " I b i d . , pp. 50, 51.

13

A Business Settlement

HI

Allied representatives, and it cannot n o w be stopped without injury; it only remains to guide it cautiously on its dangerous course. I consider the progress achieved at Brussels as significant. W h e n the Conference adjourns tomorrow until January, we can well say that in spite of all danger it has passed better than w e could have dared to hope. 1 5

The frontal attack of the experts at Brussels upon the reparations question described above did not fail to rally public support. The speech of Bergmann had produced a favorable impression not only upon his colleagues at the Conference but upon public opinion. "It would seem," wrote the Times on December 18, "that the experts are agreed on the principle put forward by the German delegation," but that "it is a question of method." The new methods of conducting negotiations through personal conversations and the organization of the conference into sections for the discussion of the various aspects of the problem—in short, the business technique carried over from the Brussels Financial Conference—found a receptive public. The conference had been divided into four main committees under the chairmanship of four Allied experts, the committee on reparations in cash under the chairmanship of Lord d'Abernon, the committee on the cost of armies of occupation under Sir John Bradbury, the committee on reparations in kind and economic reprisals under the chairmanship of Seydoux, and the committee on the proposed clearinghouse for enemy debts under the joint chairmanship of Sir John Bradbury and Delacroix.16 When immediately after Christmas the discussions were continued in Paris as planned, it became at once clear that Allied political authorities had not yet reached an agreement upon the method of procedure. It appeared that the French government was opposed to a settlement by experts being submitted to a Geneva conference for mere ratification by government representatives. Strict instructions to the French delegates "to make only the necessary preparations for the latter conference at Geneva and for the decision of the Reparation Commission and the Allied governments" endangered the continuation of the Brussels negotiations. However, early in January Bergmann relates that a plan was submitted by a member of the Reparation Commission to ™lbii., p. 5'10 The Times, Dec. 20 and 21, 1920.

112

A Business Settlement

the German delegate "as his o w n idea." This plan started f r o m an indemnity at eighty-five milliard gold marks, against which a most liberal allowance was to be made for previous G e r m a n deliveries and cessions, the balance to be liquidated by a fixed annuity of three milliard gold marks to run for thirty years, and a further annuity dependent upon German economic conditions in accordance with an economic index. Deliveries in kind were to play an important part in the annuities, and some German conditions made at the Brussels conference were to be met, in particular the demand for the return of sequestrated property. This plan was rejected by all the parties to the dispute but apparently opened the way for a French counterproposal

by

Seydoux: "Germany is to pay for five years an annuity of three billion gold marks. During this period the total of the reparation debt is to be fixed as soon as possible." 17 T h e resumption of the Brussels conference postponed, Bergmann proceeded to Berlin on January 7 in order to obtain a decision on this proposal. T h e conference of Brussels therefore led to the Berlin conference of January, 1921, where the whole question was again debated in the light of Germany's economic future. Although, Bergmann relates, the opinion was expressed in discriminating circles on both the Allied and German sides that to insist upon a total settlement at this time would mean the opening of "an unbridgeable g u l f " between Germany and France, weighty arguments were advanced against a provisional settlement. " T h e Anglo-Saxon world and especially America refused on principle to do anything towards re-establishing European credit until after a final settlement of reparation." 18 German industrialists, under the leadership of Stinnes, stood firm for a definite and final solution. T h e full weight of German industry was thrown into the scales on the side of bringing the issue to an immediate crisis. T h e effect of the Stinnes intervention appears to have been as decisive as at Spa. Bergmann tersely describes the conclusion as follows: T h e industrials under the leadership of Stinnes w e r e u n a n i m o u s

that

G e r m a n y must hold out for a definite a n d not a t e m p o r a r y solution. I therefore returned to Paris w i t h instructions f r o m the G o v e r n m e n t to oppose the provisional a d j u s t m e n t suggested by S e y d o u x . 1 9 "Bergmann, op. cit., p. 52.

18 Ibid.,

p. 55.

"Ibid.

A Business Settlement

113

Britain and France, however, continued to press for an agreement upon the Seydoux proposal. Both the French ambassador and the British charge d'affaires subsequendy called on Simons to urge on behalf of their governments the acceptance of the provisional plan for five years. The German government accordingly gave way and discussions between Seydoux and Lord d'Abernon and the German representative, Bergmann, were reopened in Paris. Bergmann succeeded in eliciting another and more favorable counterproposal from Seydoux and Lord d'Abernon, cutting down the Seydoux offer of three to two milliard gold marks, and a provision for gradually raising the payments in accordance with the prosperity index. This proposal Bergmann was again unable to accept, although he stated that it might Form the basis of negotiations, if recommended by Allied experts to :heir governments; the arrangement was to be contingent, however, is heretofore, on Upper Silesia's remaining with Germany, and on \llied assent to the German conditions set forth at Brussels, especially :he reduction of the cost of occupation and the release of German aroperty.20 With this exchange the negotiations for an expert settlement of the reparations problem in 1920 were brought to a close. The :ontrol of events had now passed beyond the direction of the experts. 'The car," as Bergmann had reported to Berlin, had "now attained a ligh speed." It could not "be stopped without injury." Unhappily in he short interval between the adjournment of the Brussels Financial Conference and the unexpected meeting of the Supreme Council at 5 aris on January 24 it had become quite impossible "to guide it cauiously on its dangerous course." "Ibid.

See also Seydoux, op. at., pp. 700, 701.

C H A P T E R

Vili

T h e Return to Politics

I

N T H E January meeting of the Allied Supreme Council at Paris, reparations negotiations were abruptly taken out of the hands of the experts and placed before the Supreme Council with a view to achieving an immediate and final settlement. Important factors in the determination of this policy appear in the statements of Lloyd George, Briand, and Doumer before the Council. The negotiations had now reached a stage where a political decision had become necessary. The Allied experts brought before the conference an adapted Seydoux plan with a provisional arrangement for 1921-26 providing that the annuities should reach an average of three milliard gold marks within five years and that a considerable part of the annual payments should be discharged by deliveries in kind. It was further provided that the cost of occupation should be reduced to 240 million gold marks per annum and that further deliveries of German ships should be waived. In return Germany was to engage to put her finances in order and to pledge her customs receipts as security for the above payments. Briand, the new prime minister, entered the conference with authority from the Chamber of Deputies to press in the Supreme Council for provisional settlement for only five or if possible even for three years. 1 On the third day of the Paris conference of January, French reparations interests decisively intervened in the person of the French finance minister, Doumer, who outlined an easy solution to the tangled reparations problem. Said Doumer : On the method of fixation of the sum to be doubt; it is the sum which would represent the done by our late enemy. I think that an estimate Great Britain, France, Italy and the other Allies 1

Bergmann, The History of Reparations, politique, 1 9 2 1 , pp. 700, 701.

paid there seems to be little present cost of the damages of these damages is possible. are all able to establish with

p. 56. See also Seydoux in Revue

d'économie

The Return to Politics

115

sufficient approximation, the total amount of reparation damages which are due from Germany . . . . France has made her calculations on the basis of gold and has taken the valuation of the material damage sustained on the basis of its value in 1914. France has then tried to ascertain what would be the index number to be applied in order to harmonise this 1914 valuation with the increased cost of materials, and cost of living which has since taken place. If one examined the subject a little more deeply it was easy to observe after all that the rise in price was in direct ratio with the fall in the exchange value of the franc. . . . . The figure which I have to suggest may seem enormous, but it must be borne in mind that this is the total sum of reparation. The figure for France is estimated at n o milliard gold francs.2 A s to Germany's capacity to pay, Doumer took up the position that while he was aware that the Treaty had laid down that the Allies should consider Germany's capacity to pay, his conviction was that Germany could bear this burden. If Germany could not do so he wondered how France could hold her own in the same circumstances. If Germany, with double the population of France, with her industries practically intact, could not find twelve milliard gold marks per annum in what situation would France find herself? Of course, he continued, there was the possible risk of bankruptcy in Germany, a possibility which he was apparently able to consider without trepidation. It might be said that Germany might be led to ruin but if any bankruptcy were to take place, Doumer did not think it fair "that it should be France that should incur such bankruptcy in order that Germany should escape paying the 12 milliard per annum for the War." 3 T h e German nation appeared to Doumer to be in the position of a private individual w h o "had either to pay his debt or go bankrupt." Under these circumstances the course of procedure was made very simple. "What the private individual had to do was to set aside part of his capital or endeavour to undertake some sort of credit operation which would be practically equivalent. Germany could do that." 4 Doumer then proceeded with a consideration of the means by which Germany could make these payments. Germany had more state property than any other nation of Europe. France had no state mines and no state coal fields, as Germany had; nor had Great Britain, nor had 5 Quoted by Lloyd George in The Truth about Reparations ' Ibid., p. 36. ' Ibid., p. 37-

and War-Debts,

p. 35.

ii6

The Return to Politics

Belgium, nor had Italy. Germany had what are called "fiscal mines," and she could hand over this property to a company, or the transfer might be accomplished in any other form that might be evolved. Then there were the railway systems, of which Germany possessed the whole. These state properties, Doumer contended, were not absolutely essential to German national life. Let Germany alienate part of her own state property if she found it impossible to meet the bill. She had enormous forests. Germany had the assets "which she could simply set aside out of her capital in order to meet her obligations even in the first year." Doumer was inclined to say that it was her business to do so. She had accepted the debt, she had signed the Treaty of Versailles because she found at the time an advantage in so doing, because she feared that she would be otherwise confronted with worse conditions. Germany, Doumer asserted, must now meet these obligations and he believed that "what would urge her to do so would be to impose penalties." This, he continued, had happened before in the case of other countries which had been made to live up to their engagements. Commissions had been set up "for instance in Turkey and in other countries in order to collect revenue through customs and other sources." Although Doumer was willing to admit that "this sort of sanction" was "rather a painful one which it would of course be better to avoid," he considered that "if such a penalty were hung over the head of Germany she would feel it incumbent upon her to do everything she could to meet her obligations to pay what the Allies wished her to pay

" but at any rate, he asserted that Germany must

pay and pay now because the Allies could not wait any longer. France was practically at the end of her resources. The Allies had been paying on account of Germany ever since the armistice and France had set aside for purposes of reparations forty milliard francs. Doumer's remedy was sanctions.5 When pressed by Lloyd George as to the methods by which Germany could possibly obtain the required amount of gold marks for such an annual exchange operation, Doumer professed complete confidence in the ability of Germany "to make up whatever deficit exists between her trade balance and the 7 milliards demanded by restrictions on imports." It may have been true that Germany's position before the ' Ibid., pp. 37, 38.

The Return to Politics

117

war had enabled her to afford an import surplus. In those days she could afford certain commodities which she was not obliged to buy. Before the war she imported not only raw materials and her necessary foodstuffs but also manufactured articles and other things. Germany might say that she was unable to pay but nevertheless she could diminish her expenses.8 Germany must adjust her affairs so that her export trade figures would be above her import trade figures. T o do this she must work. It would be too easy if after letting Hell loose upon the world she had nothing more to do than before the War. Germany must be able by her own work to produce enough to pay her debts. A n d the difference must be equivalent to 12 milliard gold marks. 7

A t this point Doumer admitted that as long as German external revenue continued to fail to bring in sufficient money she would have to find that sum elsewhere. "Up to that time, he asserted, what will she do? Well she can borrow. France cannot balance her exports and imports and she is bound to borrow and Germany must do the same."8 Doumer had just reminded his audience that before the war Germany, as everyone knew, had a considerable trade and he thought that British industries as well as French industries had reason to remember this. Reverting to a consideration of German industry, he continued with the observation that he understood the balance of trade was improving and that Germany had now been able to reach a proper equilibrium between exports and imports and that in the very near future her productive capacity would be increased still further. Either Germany, he concluded, would have to pay or the Allies would have to pay, and after all he believed it to be up to Germany to pay her own debts.9 Lloyd George, in the course of the colloquy between the French and the British delegates, reminded Doumer that the German economic position before the war had been largely dependent upon Russian, Austrian, and Central European markets which no longer existed, and pointedly asked Doumer whether he was to understand that the French proposal meant "that Germany should increase her exports to France and diminish imports from other countries; that is, she should increase her exports to France and that she should diminish the imports that 'Ibid., p. 42. ''Ibid., p. 40.

J bid. 'Ibid., p. 41.

8

n8

The Return to Politics

she buys from France." 10 To this Doumer naively replied that the Allies were not the only customers of Germany, that France and Great Britain would know how to defend their own industries, but that the whole world was open to Germany. Doumer believed that one could rely on Germany's ability to find customers and that while limiting her expenses she would be able to find the necessary balance.11 The intervention of the French finance minister in the third session of the conference thus created a new situation which resulted in general bewilderment in the minds of the delegates.12 Events having reached this critical pass, the conference adjourned on the third day, after Lloyd George had asked Doumer for permission to postpone his reply until the following day. 13 Apparently the moment had arrived for one of those quick turns of diplomacy so characteristic of Lloyd George. In regard to the sudden change of Allied front which took place at this critical juncture, Bergmann writes: "It appears that Lloyd George suddenly discarded the generally accepted idea of a provisional settlement, and that in this he was supported by Loucheur, who had lately re-entered the French Cabinet."14 As to the reasons which motivated this decision, Lloyd George himself, in the formal British reply to Doumer on the following day, mentioned a conversation with Briand in which Briand "emphasized the difficulty in making the budget meet in France." 15 Lloyd George evidently considered French budgetary difficulties as one of the main obstacles to be overcome, for he devoted himself straightway to explaining the difficult budgetary position of Great Britain, asserting: It is true that our budget balances but if our budget balances it is becausc in order to do so we imposed heavier taxation upon our people than any other country in the world. I put that in order to show that Great Britain has a deep financial interest in securing as high an indemnity as it possibly can. 1 6

After dealing at some length with the inevitable effects upon international trade of the imposition of a high German indemnity, Lloyd George came to the vital question of the conference's acceptance or rejection of the experts' solution described above. 10

Ibid., p. 43. ibid., p. 44. "Bergmann, op. cit., p. 56. " Lloyd George, op. cit., p. 39. u

" Bergmann, op. cit., p. 56. " Lloyd George, op. cit., p. 47. w Loc.cit.

The Return to Politics

119

Now these are questions [asserted Lloyd George] for experts to consider. There is a margin which Germany can pay . . . . she must pay her indemnity in such a way as not to damage the industries of Allied countries and it is a very difficult problem to find the means of exacting an indemnity in a way which will not injure the industries—the essential industries, the vital industries of France, of Great Britain, of Italy, and of Belgium. That is the business which experts have been examining with great care. W e have turned on some of the ablest experts which our respective countries could choose for this purpose If we discredit our experts and start afresh . . . . we shall have another set of experts and this will go on and on and meanwhile Germany will go on printing paper marks, and not all the camions in France will be able to carry indemnity across the frontier because the mark will be so depreciated 17 that it will require at least one camion for a gold franc Lloyd George had had another important conversation on the preceding evening, this time with the British ambassador to the United States. Regarding a final reparations settlement, the American stand from the days of the Paris Peace Conference to Lausanne is a matter of history. Lloyd George now quickly assumed the position of the international banker, the position of the international investor w h o demands stability based upon certainty. Citing American opinion just communicated to him by the British ambassador to Washington, he came out for the American position which at the Paris Peace Conference he had rejected as dangerous: Within limits the speedy settlement is more important than the best settlement—within limits, of course. The failure to settle this question is helping to unsettle Europe. They tell me the same thing from America. T h e British Ambassador from America, whom I met last night, told me that America was convinced that the fact that there was no settlement of the indemnity question with Germany was having a very injurious effect upon trade, com18 merce and industry throughout the world F r o m this moment until the appointment of the Dawes committee, reparations negotiations and Germany's economic future endured the perils inevitable in such a venture into the troubled waters of international politics. Lloyd George was to strive valiantly with all the diplomatic finesse and brilliance for which he was noted to bring this perilous journey "Ibid., pp. 49, 50.

"Ibid., p. 50.

120

The Return to Politics

to a successful end. In concluding his speech quoted above he pleaded for a "practical proposal." W i t h respect to M . D o u m e r [he asserted] I do not think his proposal is even a debatable one. I have never heard any expert in his most sanguine moments after g i v i n g time for the examination of the problem express an opinion that G e r m a n y was capable of paying 12 milliard of gold marks per a n n u m — n e v e r . A n d I should like M . D o u m e r to name any expert w h o has g i v e n time and thought to the problem w h o w o u l d say so. I am not criucizi n g M . D o u m e r ; he has only been in office for a f e w days. H e has not had time to g o into the question. H e has not devoted as m a n y hours to it as others have devoted weeks

19

Lloyd George and Briand had evidently made up their minds that it would be best, under the circumstances, to secure some sort of a settlement, even an unworkable settlement, at all costs, rather than to permit a further delay which might prove disastrous to Briand's position in the French Chamber. Briand, in his reply to Lloyd George, likened the difficulties which confronted the Allies to a man confronted by a high wall and forced to seek for some chink through which he might proceed. Briand felt confident that with good will the Allies would pass through the present difficulty. France was not unreasonable in this matter. French public opinion w a s always ready in the long run to b o w before impossibilities, but they must be real impossibilities, based on the complaints and grievances of the ex-enemy as realities

French public opinion was intensely suspicious of the pro-

ceedings of G e r m a n y and demanded that the Allies should enquire the extent to which G e r m a n y was dissembling

France certainly w o u l d never

agree to imperil her future by m a k i n g what she w o u l d regard as a premature and unsatisfactory settlement at the present. . . . . 20

Negotiations had now arrived at the inevitable impasse between the British position and the French position—between the proposal to fix a final lump sum figure in the interests of world trade and stability, and the proposal for a large but partial settlement on an undetermined total dictated very largely by the French budget, and French industrial opinion, fully explained in the opening speech of Doumer. If France were to accept a final lump sum figure it must, therefore, be so high as to assure the rehabilitation of her budget and also to insure her "Ibid.,

p. 51.

xlbid„

pp. 52, 53-

The Return to Politics

121

industries against the risk of a dangerous German industrial revival. This meant a retreat from the Boulogne position and a summary setting aside of the expert solution so painfully negotiated through the preceding months. . . . . T h e French Government, stated M. Briand, could not, therefore, stand by the Boulogne figure, but he personally was prepared to devote all his energies to reaching a satisfactory setdement on the basis he had suggested and he would particularly accept the principle of the temporary annuities and investigate further the question of a lump sum. By adopting this policy the French people would gradually get informed as to the true position and perhaps learn the necessity for accepting a lower figure than they would contemplate at present. 21

In attempting to turn the flank of the growing French nationalist opposition to a moderate Briandist policy, Lloyd George and Briand were to leave their experts far in the rear and altogether lose contact with German supporters of a moderate reparations settlement based upon international cooperation. The Brussels and the Seydoux plans were to perish, with all hope of a settlement between the Allies and Germany, in the stormy atmosphere which, after the calmer interval of the Brussels negotiations, once more invaded the Allied-German relations.22 The London conference of March, sanctions, the final acceptance, under duress, by the German government of the London Schedule of Payments of May 5, 1921, carried reparations negotiations far into the territory of coercion, a venture that led eventually to the occupation of the Ruhr. * Ibid., p. 53. " F r e n c h labor, led by Jouhaux, was at this time pressing the French government to utilize German labor and industry in the reconstruction of the devastated areas. See Sir Arthur Salter, Recovery, p. 1 6 1 .

CHAPTER

IX

T h e First Congress of the International C h a m b e r of C o m m e r c e

D

U R I N G the first period of reconstruction, terminating with | Allied dictation of the London Schedule of Payments of May 5, 1921, the business reconstruction movement was in transition from an Allied to an international organization. T h e first congress of the International Chamber of Commerce, which met in London from June 27 to July 1, provided the first open forum for the expression of general business opinion on world reconstruction. This congress showed the organization of the International Chamber to have attained an international character. Of the thirty-six countries which sent representatives to the congress, twelve, Austria, Belgium, Czechoslovakia, Denmark, France, Great Britain, Italy, Luxemburg, the Netherlands, Poland, Sweden, and the United States, had formed national committees and become affiliated with the organization of the International Chamber. Three other countries, the Argentine Republic, Japan, and Spain, announced in the final meeting of the Chamber their application for affiliation. 1 In addition Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Cuba, Finland, Guatemala, Honduras, India, Liberia, N e w Zealand, Norway, Peru, Portugal, Rumania, Siam, the Union of South Africa, and Switzerland, although not yet affiliated with the Chamber, were represented by delegates nominated by their respective governments. 2 T h e League of Nations was represented by Jacobsson of the Economic Section of the Secretariat. The work of organization and of preparation necessary for the conference had been carried on throughout the year following the Paris 1 International Chamber of Commerce, Proceedings July 1 , 1 9 2 1 ) , Brochure No. 18, p. 5. 'Ibid., pp. 5, 36, 187-189.

of the First Congress (London, June 27-

The First I.C.C. Congress

123

organization by thirteen select committees drawn from the several interested national groups and by the newly formed Secretariat, at International Headquarters in Paris, under the direction of ¿douard Dolleans (the secretary-general), Clementel

(the president of the

Chamber), and the Council (at first composed of representatives of the five charter members, Belgium, France, Great Britain, Italy, and the United States, to which had been added during the course of the year, Denmark, Luxemburg, the Netherlands, Poland, and Sweden). The Council had held four meetings, in June, October, January, and March, at which the organization of the Chamber and the agenda of the first congress had been shaped.3 The first congress, therefore, which met a month after German representatives signed the London Schedule of Payments, saw the international organization of private business in full operation, with one of the ex-enemy states, Austria, in attendance. The work of the conference, as at Paris and Atlantic City, featured the European reconstruction problem. The conference was divided into five commissions or groups upon which every country was represented: Finance, Production, Distribution, Transportation and Communications, and Devastated Regions. A t London, for the first time, these group meetings as well as the general meetings were public. It was not realized either at the conferences of Atlantic City and Paris or at the League Conference at Brussels that it would be possible to hold the commission meetings in public. This practice, however, found feasible at the first congress of the International Chamber at London, 4 was adopted by the second League assembly and became customary at League assemblies and all League conferences. It meant an important development in the organization of international conferences, inasmuch as it permitted the general public, through the press, which cooperated very fully at the London conference,5 to be informed of the early stages of discussions which were to result in the formation of policy. The British government was represented at the congress by Viscount Birkenhead, the Lord Chancellor, Sir Robert Home, formerly President of the Board of Trade and then Chancellor of the Exchequer, and 'Ibid.,

p. 189.

'Ibid.,

p. 6.

'¡bid.

124

The First I.C.C. Congress

Cecil Harmsworth (later Lord Cecil Harmsworth), Undersecretary of State for Foreign Affairs. Lord Birkenhead, in his opening address welcoming the delegates, remarked: It may be the business of other people to consider the wrongs which preceded the War, the wrongs that accompanied the War, the animosities which have survived and some of which no doubt for a long time will continue to survive the War. But such preoccupations natural and inevitable as they may be, do not seem to me to be specially your preoccupations, and your recommendations ought in my judgment to be entirely divorced from the moods to which I have made reference. 6 Speaking directly upon the question of the final inclusion of Germany in the International Chamber, the Lord Chancellor, after stressing the nonpolitical character of the congress, said: I cannot conceive that in the present situation of the world anything is to be gained by the ostracism from these discussions of any nation. Such an ostracism could only be defended if your point of view was that the business community in all the world would be benefited by the permanent exclusion for a very long period of a late enemy from the business of the world. 7 But quite obviously, Lord Birkenhead continued, dealing with the Treaty of Versailles, such was not the view which had been taken by the statesmen who drew up the Treaty. Large indemnities, as you gendemen very well know, are not under any existing circumstances or under any circumstances that are likely to occur, to be expected in gold It follows that those who have imposed upon Germany indemnities and reparations and who intend to exact them must equally prepare themselves to render easy a transition under which it will be possible for those reparations to be paid, simply in order that the labour may not be sterilised which, and which alone, will make the payment of such reparations conceivable.8 Alluding to the speeches made by American representatives at the Atlantic City and Paris conferences, which, he explained, he had made it his business to read, Lord Birkenhead observed that whatever the political goal of America, "not even the Monroe Doctrine," at any rate, as far as the world of business was concerned, could prevent the realization of the great truth that the world was one and indivisible, 4

Ibid., p. 31.

7

1b,d.

'Ibid., p. 32.

The First I.C.C. Congress

125

and that the United States of America, not only geographically but by every material standard by which the greatness of nations was measured, was a part of the world. 9 Therefore without running the risk that any of our guests will think I am too particular in the mention that I make of the American share of this new enterprise, I very specially say that we, the Government, are well aware of the part which the great American republic is so specially qualified to play, that we welcome them amongst us and are confident that the exchange of so much experience operating upon so much goodwill, will afford to us the most rapid relief of our sufferings which the extent of our difficulties renders possible.10

The wide range covered by the agenda of the conference carried the action of international business initiated at Paris still farther into the realm of normal peace-time affairs. The Production Group brought into the discussions of the conference the subjects of raw materials, statistics, fuel economy, standardization, industrial and commercial liberty, general industrial problems, and construction. 11 The Distribution Group took up the questions of commercial arbitration, the international protection of industrial property, the treatment of commercial travelers, unification of tariff nomenclature, import and export tariffs, embargoes on imports and exports, emigration and immigration, and calendar reform. 12 The Transportation and Communications Group considered the work of the Barcelona conference and general transport communications problems, such as through freight trains, telegraph and telephone facilities, uniformity of ship's tonnage measurement, single bills of lading for combined transport by rail and sea, uniform international ocean bill of lading, dangerous merchandise, trade terms, port conditions and charges, free zones in sea ports, international postal service, and passports and visas.13 A n d the Finance Group carried forward the work on double taxations, export credits, control and regulation of business by the state, finishing credits, foreign banks, and bills of exchange. 14 The debates upon these subjects and the resolutions adopted marked another stage in the international discussion of these questions. The conference came in contact with the postwar economic problems of reparations and reconstruction, in the work of its Finance and Re• Ibid., p. 33. 10 Ibid.

11 Ibid., pp. 82-96. "Ibid., pp. 97-108.

u 11

Ibid., pp. 109-124. Ibid., pp. 56-81.

126

The First I.C.C. Congress

construction Groups. This was the first time that an international conference comprising former Allies, neutrals, and an ex-enemy was permitted to express an opinion upon both these questions. The international reconstruction program adopted at Brussels formed the avenue of approach to a consideration of German and Central European conditions. Sir Drummond Fraser was present at the conference and participated in the discussions of the Finance Group. Here the international reconstruction program, drawn up at Brussels and sponsored by the League of Nations, was confronted with all the private, national, economic interests backing separate national policies and, in particular, the interests behind the policy of reparations enforcement. In outlining the agenda of the Finance Group, Walter Leaf, the chairman, remarking upon the expected attendance of Sir Drummond Fraser (who had been appointed, by the Financial Section of the League, organizer of the Ter Meulen scheme), said that the Group might then have before them a practical plan for the rehabilitation of Austria which he characterized as the "first step in the reconstruction of the world, and a question which called for a full and generous recognition of the fact that the world was an organism which could only perish if any of its members were allowed to suffer from economic gangrene." 18 T h e discussion of the Finance Group opened with a sharp debate on the proposed resolution on exchange. T h e debate commenced with a vigorous attack by the well-known monetary authority, Gustav Cassel of Sweden, upon a section of the resolution advocating deflation. Cassel contended that the objective of a policy of world financial rehabilitation should be exchange stability, which in his view meant neither inflation nor deflation but the cessation of movement in either direction. Alluding to the memorandum which he had contributed to the Brussels conference, he asserted that at that time he had recognized that the policy, then imminent, of increasing the internal value of the dollar within the United States would result in immensely increasing the difficulties of European nations. This policy had since been carried out to an unprecedented degree and with the feared results. The diffi11 International Chamber of Commerce, Finance Group, Proceedings Brochure No. 1 8 , pp. 50, 5 1 .

of the

First

Congress,

DR. WALTER LEAF PRESIDENT OF THE INTERNATIONAL CHAMBER, 1925-1926

T h e First I.C.C. Congress

127

culties thereby created by American monetary policy had "proved very serious, not only for Europe, but for the United States itself." 1 * Cassel considered that it must be recognized that "one of the main reasons at any rate for the present serious depression of trade and the unparalleled degree of unemployment in some countries" was the result "mainly of these efforts to increase the internal value of money." He, therefore, considered that such countries as had a fairly good standard of currency—the United States, Great Britain, Sweden, Holland, and others—should not only make an end of any signs of inflation which might arise but should also, by adopting a policy of giving credits, check any signs of a contrary deflationary movement. He, accordingly, advocated the adoption of such measures in England and the United States as should bring the deflationary movement in those countries to an end. In this way an internal monetary stability would be established which would automatically be followed by exchange stability. Finally, Cassel advocated the restoration of the highest degree of freedom in international intercourse and the revival of production in order that trade might be resumed on a large scale.17 Sir Felix Schuster, representing the British bankers' association, joined issue with Cassel. T h e policy of inflation in some Central European countries had been carried to such an excess, asserted Sir Felix, that financial rehabilitation was impossible without deflation. Although this deflation would no doubt have to be gradual, it was none the less necessary. Bankers of the United Kingdom, he continued, were determined to adhere in their own country to a policy of gradual deflation at any rate. It was recognized that such a process might be carried out too rapidly, but though it should take five or ten years British bankers were determined not to rest until they were back to the sound gold basis by which Sir Felix apparently meant the prewar gold parity. If confidence were restored and measures contemplated for rehabilitating Central Europe were taken, in Sir Felix's view credits and production would follow. 1 8 Lewandovski, delegate of the French bankers' association, fully supported the British position. In France, he maintained, the question was not merely an international one. It was also a national question. T h e prewar circulation of five milliard francs had now reached thirty-seven "Ibid.,

p. 52.

17

Ibid., p. 53.

" I bid., pp. 53, 54.

128

The First I.C.C. Congress

milliards and it was recognized universally that gradual deflation was one of the most effective means of restoring the French exchange. Upon this point Lewandovski asserted the French government and bankers had taken up a perfectly definite position. Complete confidence in the bank note and the steady appreciation of the franc abroad were the essentials of the financial policy of a victorious nation determined to place its credit beyond all question. 19 F . O. Watts, president of the First National Bank of St. Louis, representing the Chamber of Commerce of the United States, and William Thys, administrateur-délégué of the Bank of Brussels, also supported the position as set forth by Sir Felix Schuster. 20 Cassel replied that a policy of progressive deflation, particularly in countries like Great Britain, the United States, and France, would produce a long period similar to the year through which they had just passed, with fearful depression, no spirit of enterprise, and an alarming degree of unemployment. T o increase the value of currencies, he concluded, would but add to the crushing burden of national debts.21 Giorgio Mylius, vice president of the Italian section of the International Chamber of Commerce and president of the Italian cotton association, supported Cassel's contention, maintaining that deflation by countries whose money was so greatly appreciated would only embarrass countries with depreciated currencies and add to the instability of the exchange. Benefits from the decrease in the cost of production in the United States would, therefore, be offset in countries with depreciated currencies by the variation in the exchange. Amendments proposed by both the Swedish and Italian delegates were voted down 22 and the Finance Group went on record as advocating a policy of progressive deflation, apparently aiming wherever possible at the reëstablishment of the prewar gold standard. This section of the exchange resolution, which was adopted by the congress, was the only resolution submitted by the Finance section without the unanimous endorsement of the Group. Leaf, in presenting the report of the Finance section to the congress, alluded to the division upon this question as the one exception to the unanimous recommendations of the Finance committee and added that the division on deflation had been noticed a good deal in the press, due to Cassel, who, he "Ibid., p. 54.

"Ibid.

Ibid.

a

Ibid., p. 55.

a

The First I.C.C. Congress

129

thought he might say, had "exploded rather a bombshell" by a most interesting and suggestive speech.23 The passage of arms between Cassel and the leading bankers occasioned by this resolution is notable inasmuch as it is one of the first of a long series of similar encounters in which Cassel stoutly maintained against all comers the primary importance of international exchange stability. The terse endorsement of national deflationary policies by the national, industrial, trading, and financial interests assembled at the London congress, in view of subsequent events, deserves careful comparison with the exchange resolution dealing with this question passed unanimously by the Brussels Financial Conference. The Brussels resolution began by underscoring in italics the uselessness of attempting "to fix the ratio of existing fiduciary currencies to their nominal gold value" for unless sufficiently favorable conditions existed within the country concerned to make the fixing of the ratio unnecessary "it could not be maintained." Furthermore, the resolution continued, the reversion to an effective gold standard would in many cases demand enormous deflation. The resolution concluded with the grave warning ". . . . it is certain that such . . . . Deflation, if and when undertaken, must be carried out gradually and with great caution, otherwise the disturbance to trade and credit might prove disastrous."24 The financial interests of the dominant powers, in voting down the Swedish and Italian amendments at London, brushed aside the warning of the Brussels resolution and endorsed an out-and-out deflationary policy, regardless of the effect upon international exchange stability and world trade. This action was taken despite the fact that the preamble of the final resolution adopted by the congress gave the International Chamber's "emphatic approval to the recommendations of the Brussels Financial Conference." 25 The consideration of the section of the resolution calling for a study of inter-Allied debts was abruptly halted by a protest of the American delegation. A prepared statement read by Watts noted that the original draft of the resolution prepared by the Finance committee had been "Ibid., p. 140. 24 International Financial Conference (Brussels, 1 9 2 0 ) , Proceedings of the Conference, Vol. I, Report of the Conference, p. 20. ^'International Chamber of Commerce, Proceedings of the First Congress, Brochure N o . 18, p. 1 0 .

130

The First I.C.C. Congress

altered. "The American Committee," Watts continued, "respectfully recommends that no action upon the subject be taken at this time." Without taking any position upon the merits of the proposal, the American committee maintained that the time for such a declaration was inopportune. The committee took it for granted that all members of the Finance Group and of the International Chamber would agree that at this time it was undesirable to do anything that might seem to weaken the integrity of obligations between nations or between international groups or individuals. The American committee assumed that the proponents of a review of intergovernmental debts desired only that an agreement should be reached by common consent, "as the result of conviction among creditor and debtor countries alike," that such action was "just and necessary to the restoration of a normal state of trade and credit in the best interest of all." The committee then stated their conviction that American public opinion would not at that time justify the American delegation's support of the proposal or justify the United States government in entertaining it. On the other hand, concluded the statement, the American people were well aware of the importance of restoring normal trade and industry throughout the world and were interested in cooperating fully to this end. The pending arrangements for deferment of payments had found a receptive public opinion and the committee expressed their confidence "that the interests of debtor and creditor countries" would "be found to be so associated and harmonious that a settlement of their indebtedness" would be eventually accomplished "without serious embarrassment or hardship anywhere." 26 An impasse having been reached, the discussion of the debt question was postponed and the committee hastened to the adoption of the subsequent noncontroversial clauses of the resolution.27 After a session devoted to reconciling divergent views on the policy of double taxation, the Finance Group returned to the more dubious ground of postwar problems in a detailed discussion led by Sir Drummond Fraser on the proposed Ter Meulen scheme. Sir Drummond, in describing progress to date, recalled that the scheme had been adopted by the Brussels conference in September, 1920, and by the League of "International Chamber of Commerce, Proceedings of the First Congress, Brochure No. 18, pp. 55, 56. " Ibid., p. 56-

The First I.C.C. Congress

131

Nations in December. As organizer, his first step had been to collect information regarding the internal situations of the various countries and to put before interested governments the opportunity of availing themselves of the scheme.28 Shortly afterwards the Supreme Council had inquired whether it could be applied to Austria and, after a conference in Paris, it had been decided to send three delegates, of whom Sir Drummond was one, to Vienna for investigations on the spot into the fundamental causes of the Austrian breakdown. The report of this investigation had then been laid before the Finance Committee of the League, which had decided a month previously on May 3 1 , to adopt the proposals made by the committee of investigation and to ask the League to put them into action.29 "The root idea" of the plan was to provide "impoverished nations" with "essentials." Complete restoration was dependent upon the reestablishment of general financial stability. This involved budgetary and tax reforms, the curtailment of paper currencies, and the stabilization of the exchanges, which in turn was dependent upon governmental stability. It was necessary that the process of reconstruction be carried out "with a minimum of interference with the existing machinery of trade through the ordinary individuals, the customary exporters and importers."30 This meant that the "method must be to stimulate growing trade, to promote a regular, continuous, accelerated flow along the normal and usual channels, causing exports and imports to revolve once again in their usual sequence."31 The general solution, in short, required the transformation of the reservoir of prewar, short-time credit—sterling bills of exchange—into "an after-war reservoir of credit—Ter Meulen Bonds." 32 This general solution the League was attempting to apply to the Austrian situation. Austria had fulfilled the preliminary requirement by taking such governmental measures "as prove that the people of Austria are willing to do all in their power to help in her internal rehabilitation." The Austrian government had undertaken to pledge assets—the customs revenue, the tobacco monopoly, the revenue from the forests—and had offered to give a four percent mortgage on all the real property of the country in order to place the government in position to carry on until her finances and credit could be restored. 'Mi.. P. 62. 23 Ibid., p. 63.

" Ibid. Ibid.

31

"Ibid.

132

The First I.C.C. Congress

T h e scheme met the demand created by the two essential facts of the postwar situation—namely, that the debtor half of Europe was crying out for goods, and the creditor half, with its highly equipped machinery and highly developed organization, was crying out for full employment—by providing a flow of credit which could be tapped by exporters, thereby preserving intact the ordinary channels of trade. A s to security, borrowing countries would be required to hand over national securities as collateral credit to be used either by the government itself or by its duly accredited nationals. National securities so used "must be continuous revenue-producing securities." The nature and value of these securities were subject to the careful examination of the International Commission provided by the scheme, a commission which should fix a gold value to them and grant the issue of Ter Meulen bonds to that amount. Sir Drummond saw no reason why an American should not be a member of the commission. T h e bonds would be payable, as to both principal and interest, in the currency of the lending countries or in any other currency agreeable to the exporter, and the revenue assigned to the International Commission would be adjusted to meet the three specific demands of the credit operation: the payment of the maturing bond, the provision of interest and sinking fund, and finally the sale of the bonds held against the debt of defaulters. In addition, just as one essential feature of the scheme was that the bond was a guarantee, it followed that another essential feature was "that the bonds must not be thrown wholesale on the market." 33 Further, where the credit was of so extended a nature as to make it desirable not to finance the transaction through the ordinary commercial banking channels, the Ter Meulen bonds might be financed by holding companies. America had led the way in this direction with the Edge Act. Sir Drummond pointed out that it would be "immensely profitable" to develop a wide export investment interest in such holding companies "by showing that in addition to providing a sound investment they also stimulate the trade upon which the investor depends." 34 This idea, as is shown by the discussion at Atlantic City particularly in the speech of Governor Harding of the United " Ibid., pp. 63, 64.

84

Ibid., p. 65.

The First I.C.C. Congress

133

35

States Federal Reserve, was not unfamiliar to American business minds. Sir Drummond appealed for support of the scheme as "a sound business proposition." "Every exporter should consider it his duty to his country and to the whole European problem to use every means at his disposal to induce the importing countries to apply for the issue of these bonds as the only collateral security with a gold value," which had "stood the test Qf criticism of the leading financial experts in all countries."36 This clear expose by the League's administrator provided the occasion for an interesting exchange of national business opinion. The chairman, Leaf, opened the general discussion by introducing the following resolution: T o this end the Congress is prepared to support the Ter Meulen scheme as modified and put into operation by the Provisional Economic and Financial Committee of the League of Nations. Further, this Congress advises the establishment of permanent Committees of business men and bankers in all the countries affected, to furnish all information and to lend all assistance in the choice of credits and participations. 37

Wilhem von Ofenheim, the Austrian delegate of the Industrial Association of Vienna, in a moving speech expressed the thanks of the Austrian delegation for the kind reception of the congress. It was proof that the members of the conference realized that they must forget the differences which lay between them and seek after bonds of union. Austria, he asserted, was full of admiration for the businesslike and sympathetic manner in which Sir Drummond Fraser's mission had carried out its work. She fully agreed to the scheme proposed. Austria not only intended, but was convinced of her ability, to carry out her part of the bargain. Acknowledging the fact that many of the countries represented in the meeting had been extraordinarily good to Austria philanthropically and had saved the lives of hundreds of thousands of children, Von Ofenheim asserted that Austria did not want to be a beggar. Like Czechoslovakia she had all the elements of potential prosperity. Austria's reputation in science, art, music, and industry was second to none. For the moment her financial position 36

See above, Chapter II. International Chamber of Commerce, Proceedings of the First Congress, p. 65. "Ibid. 38

Brochure No. 1 8 ,

134

The First I.C.C. Congress

was difficult; her bank note was but a promissory note; she had to pay £100 for every pound she bought. Austria needed money to buy material to enable her to sell her finished products. The significant and hopeful feature of her case was that comparatively small sums lent quickly would put an end to the situation.38 George E. Roberts, vice president of the National City Bank of New York, representing the Chamber of Commerce of the United States, followed with a full statement of the view of the American delegation on the general European reconstruction situation, including, in particular, reparations and the possibilities of American cooperation. The United States realized American responsibility but in the path of American aid there were difficulties which he would like to explain. American financiers had viewed with concern statements from certain countries of an impending offer of reparations bonds on the American market. The American market was an eight percent market. These bonds, lacking the sentimental appeal of Allied bonds and based upon something of an economic experiment, namely, not only the ability of Germany to export goods but the willingness of other countries to import them, could scarcely rank in the first class, and yet he understood it was proposed that they should be offered at only five percent. Under these circumstances they could be moved in the American market only at a low price, which, if anything like a competitive situation developed among sellers, might lead to the demoralization of the market, with disastrous effects on all efforts to aid the European situation. American bankers were, therefore, concerned with preventing these reparations bonds from being placed on the American market at low prices, inasmuch as such a transaction would lead to disappointment all around: the countries receiving them as indemnity would be critical of American terms as extortionate, and Germany would be aggrieved over being compelled to pay so much more than was actually realized.39 The American delegation was convinced, and believed the American people generally were of the opinion, that national prosperity was impossible without a resumption of international trade. They asked, however, that importing countries desiring credit should do their part and supply the best basis possible, remembering that American bankers

® ¡bid., p. 66.

" Ibid., pp. 67, 68.

The First I.C.C. Congress

135

"who desire to work with them are obliged to go out to the public market and find the money with which to pay for the things that arc wanted." 40 Leaf called attention to the distinction between the reparations bonds and Ter Meulen bonds. Roberts had referred mainly to the placing on the American market of the German reparations bonds and Leaf felt that the position might be different with regard to the Ter Meulen bonds. F. O. Watts cautiously replied that the American delegation considered the Ter Meulen plan well devised to meet the difficult conditions attendant upon trade with some countries at that time. They felt that the International Commission should give assurance that the bonds were issued against definite security values pledged by importers to their respective governments in order that the transactions might as far as possible be self-liquidating.41 Credit would be more readily obtainable if the enterprises in question were known to be productive and the importing governments were known to be cooperating in the promotion of sound and normal trade and if the payments from government revenues were intended in exceptional cases only. The value of governmental participation depended upon national observance of the fundamentals affecting public credit laid down by the Brussels conference. In so far as these principles were put into effect the Ter Meulen plan promised to be of assistance.42 Lewandovski expressed the full agreement of the French delegation with the main principles of the Ter Meulen scheme. He favored a broad interpretation of the term "essential raw materials." Silk, for example, might be considered a luxury in England whereas it was as essential in France as cotton.43 A . J. Hobson, chairman of the British National Committee, although he hoped Sir Drummond Fraser's efforts would be successful, feared that it would be some time before the Ter Meulen scheme was actually in operation. In the meantime the scheme of the British government for aiding its own national exporters by taking a substantial share of the risk of bills drawn in particular cases for six months and six months' renewal was operative.44 "Ibid., "Ibid.,

p. 70. p. 71.

'-Ibid., "Ibid.,

pp. 71, 72. p. 72.

"Ibid.

136

The First I.C.C. Congress

Kovncl Stodola, Czechoslovakian deputy, and Counsellor of the Government for Rail and Post, after thanking the meeting for the hearty reception accorded his delegation, expressed Czechoslovakia's endorsement of the T e r Meulen scheme. Czechoslovakia had inherited eighty percent of the industries of the old monarchy and now stood in dire need of raw materials. There were, however, sure signs of the potential recovery of the country, which he described as the child of the people and governments of the Allied nations.40 Giuseppe Zuccoli, director of the Banque Française et Italienne pour l'Amérique du Sud, gave the full support of Italy to the scheme and also hearty support to the French interpretation of essential raw materials. He expressed misgivings over that provision of the scheme requiring governments to give a revenue guarantee. Italy had never exacted such a guarantee from any country and so far as he knew such a thing was unprecedented. 48 In concluding the discussion, Sir Drummond explained that the scheme had been threshed out in almost every detail for at least two years before it was launched at Brussels. T h e provision for regulation by an international commission of business men would in any event ensure sufficient elasticity. Sir Drummond emphasized the fact that the very first thing that had to happen before any Ter Meulen bonds were issued was the stopping of the printing press. Moreover this was a prerequisite to the gold valuation of goods by the international commission of business men. 47 Leaf's resolution supporting the Ter Meulen scheme was unanimously adopted.48 While the Finance Group had been discussing the Ter Meulen scheme with the representative of the League of Nations, the Devastated Regions Group under the chairmanship of Raphael Verwilghen, director of the Office of Devastated Regions in the Belgian Ministry of the Interior, were discussing the financial aspects of Allied reconstruction involved in the London Schedule of Payments. The discussion of both these groups, of necessity, was concerned with bonds and markets. The Finance Group, as has been noted, at the instance of the American delegation, appeared to make a sharp distinction between "¡bid.,

p. 7 3 .

" Ibid.

"Ibid.,

p. 74-

" Ibid.

The First I.C.C. Congress

137

the bonds in question—the Ter Meulen bonds and the reparations bonds. The markets which figured in the discussion of these two committees were identical, namely, the world markets centering in New York and London. Verwilghen, in opening the meeting of the Devastated Regions Group, remarked that there was no comparison between the general postwar world crisis and the special social problems facing devastated countries. The reports before the congress showed reconstruction to be progressing satisfactorily but much remaining to be done. The problem, while applying especially to certain countries, was, the chairman maintained, essentially international, not only because international help was necessary, but because a fundamental principle of justice, which demanded the attention of the entire world, was involved. Devastated countries were to rely not only on former allies but also on those who understood that the work of reparation could be based on nothing but equity and justice.49 Louis Nicolle, French delegate of l'Association centrale pour la reprise de l'activité industrielle dans les régions dévastées and of the Premier groupement économique régional, also welcomed the support of ex-neutral countries such as the Netherlands in the work which still remained to be done.50 A. A. van Sandick, member of the Netherlands Commission at Amsterdam for the devastated regions of the north of France and general secretary of the Royal Institute of Netherland Engineers, thanked the French and Belgian delegates, remarking that the Netherlands had given financial and other assistance already and had undertaken the rebuilding of Lens and Liérain in the department of Pas-deCalais in addition to rendering private assistance in many ways. 51 After discussing the statistical summary of reconstruction work already effected and work awaiting completion and reviewing the methods of reconstruction, the committee came to the financial aspects of the problem. The resolution which the French National Committee proposed put forward the following propositions for international endorsement: ( 1 ) no extension of time or reduction in amount in relation to payments on the order of the Reparation Commission of May 5, 1921; (2) the "Ibid.,

p. 1 2 7 .

50

Ibid.

51

Ibid.,

pp. J 2 7 , 1 2 8 .

138

The First I.C.C. Congress

organization of German export supervision in such a way "that the whole of the 26 per cent, export tax should be duly collected"; (3) consideration, by public authorities and financial organizations of the various countries, of the conversion of the reparations bonds, so as to provide resources for reconstruction of the devastated regions, while at the same time providing the necessary safeguards against any serious influence on the monetary exchange market. The reasons justifying these proposals, as advanced in the preamble of the resolution, were: ( 1 ) the enormous difficulties facing devastated countries due to the systematic destruction of their most productive and profitable resources; (2) the reduction of the indemnities; (3) the work of war sufferers and "substantial financial and directive assistance extended to them by the authorities"; (4) German obligation to pay; (5) the nonavailability of German bonds without conversion and the exchange difficulties of this procedure; and (6) the inability of Allied countries to take payment in kind without causing "a slackening of industrial activity, thereby involving a depreciation in trade concerns and a certain amount of unemployment."52 The introduction of the French resolution was followed by an interesting and significant debate between the American delegate, A. E. Marling, representing the Merchants Association of New York, and the French delegate, Nicolle. Marling raised the question as to the desirability of specifically mentioning in the resolution the twenty-six percent export duty inasmuch as it was covered by the orders of the Reparation Commission on May 5, 1921. 53 Nicolle agreed that the twenty-six percent duty was included in the orders of May 5 but stated that the French delegation desired to see the resolution lay special stress upon the collection of that particular duty.64 Verwilghen and Antonio Panceno, president of the Cassa di Rispiermo of Venice, said that the Belgian and Italian National Committees supported the desire of the French delegation.66 After further discussion, it was decided that the resolution should be adopted by the Group but that the financial questions involved should be discussed with the Finance Group.66 In the joint session of the Finance and Devastated Regions Groups, which followed, Marling, speaking for the American delegation, con12

Ibid., Ibid.,

pp. 1 3 2 , 1 3 3 . p. 133-

"Ibid. "Ibid.,

"Ibid. p . 134-

The First I.C.C. Congress

139

tinued the discussion on the advisability of demanding the enforcement of the twenty-six percent export tax by the Reparation Commission. The American delegation on the Devastated Regions Group had suggested the joint meeting with a view to discovering whether there was anything in their own proposal inconsistent with the views of the Finance Group, especially in view of possible changes which might be made with regard to the twenty-six percent duty. Apart from that, the American delegation considered that specific mention of the tax added nothing to the strength of the preceding paragraph of the resolution.67 Alfred de Brouckere, president of the Section in bois de la chambre de commerce d'Anvers, asserted that the Belgian delegation were anxious that this clause should be retained as it was of the greatest importance to them in connection with the reconstruction of their devastated regions.58 Leaf then interposed, asserting that he appreciated the French and Belgian point of view and that in his opinion the clause was an addition to the resolution. It was one thing, he asserted, to ask a man to pay, and another thing to insist that he should pay by a certain method.69 The American objection to mention of the tax was apparently, however, later sustained either by informal agreement within the Finance and Reconstruction Groups or by the Resolutions Committee.60 The final resolution adopted by the congress omits all mention of the export tax. Nor does the other clause of the original resolution deprecating German payments in kind, in which Allied industrialists were particularly interested, appear in the adopted resolution. A comparison of the resolution supported by the French, Belgian, and Italian National Committees81 and the final resolution62 adopted by the International Chamber is interesting. Clause One of the revised resolution was inserted, stating that the question "of the restoration of the devastated regions" was of international interest, and those sections of the original version were retained which were apparently considered relevant to the jurisdiction of an international business organization. Clause Two of the international version, setting forth "the enormous "•Ibid., 00

m

p. 74-

lbid.

"Ibid.

T h e resolutions f r o m the G r o u p committees w e r e sent to the Resolutions C o m m i t t e e , w h i c h

" c a r e f u l l y revised them altering the w o r k of the G r o u p s as little as possible." A . J . acting c h a i r m a n at the G e n e r a l Session, ibid., p. a

Ibid„

pp. 1 3 2 ,

133.

135. "Ibid.,

p. 24.

Hobson,

140

The First I.C.C. Congress

difficulties" with which the devastated countries were faced, shows the deletion of the word "systematic" from the phrase "owing to the systematic destruction," thereby relieving the International Chamber of the responsibility of making any implied political judgments whether of a historical nature or not. Clauses T w o , Four, Six, Seven, and Eight of the National Committee draft, dealing respectively with reparation reductions, "the dictates of common justice," "requisitions in kind," "extension in time or reduction in amount," and the twenty-six percent export tax, were stricken out. Clause Three of the original draft, taking account "of the determination and good will" of the sufferers and the financial assistance of their governments, was retained, and the final paragraph of the first draft, with the somewhat vague resolve that "the public authorities and the financial organizations of the various countries shall consider forthwith . . . the conversion of the bonds handed over by Germany," was altered to provide for the practical action of the Chamber, with the definite proposal for forming "an International Financial Committee to make suggestions to the various countries as to the best means" of conversion. This proposal was preceded by the simple statement of the Chamber's support of a policy of fulfillment of "the agreements made with Germany regarding payment of the indemnity," thus carefully avoiding all implication of sanctions or arbitrary procedure of any kind whatsoever. The policy of international assistance in the restoration of the devastated regions as defined and advocated by the International Chamber was plainly stated in the full text of the resolution unanimously adopted by the first congress, as follows: Whereas the question of the restoration of the devastated regions is of international interest; and In view of the enormous difficulties with which the invaded territories are faced owing to the destruction of their most productive and most profitable resources; and T a k i n g due account of the determination and good will which the inhabitants who bore the brunt of the invasion have displayed in the reconstruction of their homes, farms and businesses, as well as the substantial financial assistance and organizing facilities provided for them by the authorities; This Congress of the International Chamber of Commerce recommends that the agreements made with Germany regarding payment of the in-

The First I.C.C. Congress

141

demnity be fulfilled and that an International Financial Committee be formed to make suggestions to the various countries as to the best means by which the conversion of the German Bonds may be effected, so as to provide for the reconstruction of the devastated regions, while at the same time providing the necessary safeguards against any serious influence on the monetary exchange market. 63

At the final meeting of the Finance Group, Walter Leaf placed before the committee the result of the informal conference between the American, French, and Belgian delegations on the third clause of the exchange resolution, dealing with inter-Allied debts. The modified resolution drafted after this conference read: "That a study be made of the effect upon the International Exchange of the present position of interAllied debts and of possible remedies, and a similar study of the payment and utilization of the German reparation." 64 Lewandovski formally proposed the adoption of the amended draft, remarking that the two aspects of the question of international exchanges, fiducial inflation and general lack of economic balance, had been discussed in the Committee but there was a third cause affecting the situation: the inter-Allied debts. H e recalled that prior to 1914 France invested abroad forty milliard francs, seventy-five percent of which were government securities in England. Due to the war, France found herself in debt to the sum of eighty-five milliard francs, mainly to Great Britain and the United States. They felt this to be a debt contracted in the name of all the Allies. They did not ask their British and American friends to renounce their claims, but they did desire to reestablish French finances and this problem was closely linked with reparations. 65 F . O. Watts gave the support of the American delegation to the amended resolution. Although American public opinion was not yet prepared for definite suggestions, those who formulated American policy would welcome the result of the serious study of the question by a special commission. 66 Giorgio Mylius supported Lewandovski. Italy was meeting her financial difficulties as far as possible by increased taxation and diminished expenditure. She would welcome consideration by her American " Ibid. "Ibid., p. 7 5 .

"Ibid. "Ibid.

142

The First I.C.C. Congress

friends of the German indemnity as a sort of collateral guarantee in relation to inter-Allied debts.67 In the general session of the congress the resolution on foreign exchange was still further amended at the instance of the American delegation and a preamble was substituted for the original, emphatically endorsing the recommendations of the Brussels conference and calling attention to "the little progress" as yet made by governments in carrying out the necessary measures. This final draft, submitted by Leaf, was unanimously adopted.68 The formulation of international policy upon the treacherous ground of postwar problems by business delegates at the London congress presents an instructive example of the process of international cooperation. The French delegates came to the congress pledged to a policy of financial reparation only, linked to German trade restrictions, strict enforcement, the immediate flotation of reparation bonds for financing Allied reconstruction of the devastated regions, and a speedy settlement of inter-Allied debts. Americans went into the conference skeptical of the workability of the reparations agreement, certain of the impossibility of immediately floating reparations bonds on the American market, and opposed to discussion of inter-Allied debts. Between these divergent views the congress managed to lay down a course of international action by private business. No single national view dominated the congress. The reversion to coercive practices noted at Atlantic City and Paris, which had crept into business thinking during the wartime political domination of private business, was abandoned at the first congress of the International Chamber of Commerce. This was an achievement. Industrial demands for international support of a one-sided blind policy of reparations enforcement by political weapons were ruled out in favor of a normal course of business procedure—a study by a business commission of the effects of these political acts upon international business interests as a whole in the world money markets. The London congress, in the Resolutions on Foreign Exchange and Restoration of the Devastated Regions, allowed the international organization of private business interests to be officially seized of the two primary economic controversies left by the war, reparations and inter" Ibid.

"Ibid., p. 140.

The First I.C.C. Congress

143

Allied debts. The discussion of reparations had been disallowed by the Supreme Council and the Council of the League of Nations in the terms of reference limiting the agenda of the Brussels Financial Conference. The Brussels conference, despite these limitations, ventured in its report, as pointed out above, to associate itself "with the hope expressed by M. Leon Bourgeois in his report to the Council of the 5th April last, to the effect that the economic uncertainty" occasioned by the lack of a settlement might be removed on the grounds that "the settlement of this question is indispensable not only for the reconstruction of the countries devastated . . . . but also for the recovery of the States on which the burden of this reparation lies."69 Since the adoption of this resolution matters had progressed a step further. A settlement had been made. Bonds bearing the mark of the Supreme Council's negotiation were ready to be put on the world markets beside the bonds bearing the endorsement of the League's Financial Conference. The reparations bonds and the Ter Meulen bonds were submitted to the London congress of business men for the inevitable international rating. The world of business at the first congress of the International Chamber of Commerce thereby asserted an international interest in the vital territory of the exchanges. This interest, first asserted at the London congress by business men, was finally to receive political sanction in the appointment of the Dawes and McKenna committees. The London congress both established the grounds for this action and indicated the suitable instrument of settlement in providing for the appointment of a fact-finding international commission of business men to study "the effect upon the international exchanges of the present position of inter-Allied debts and of possible remedies and . . . of the payment and utilisation of the German reparation."70 "International Financial Conference (Brussels, 1 9 2 0 ) , Proceedings of the Conference, Vol. I, Report of the Conference, p. 1 1 . International Chamber of Commerce, Proceedings of the First Congress, Brochure N o . 18, 'Resolutions Adopted," p. 1 0 .

CHAPTER

X

T o w a r d the D a w e s Plan and European Reconstruction

W

H I L E the reparations controversy was drifting out of the hands of politicians toward an attempt at a military settlement, the idea of a business settlement of reparations was taking form in the continuous collaboration of business men within the International Chamber of Commerce. This project was evolved in connection with the work of the International Chamber on European reconstruction, carried on in collaboration with the Economic and Financial Organization of the League of Nations. These activities were of particular importance in establishing contact between American and European business opinion. The October meeting of the International Finance Committee, which consisted of business men, including two future members of the Dawes committee, examined the reparations question. American and European views of a reparations settlement were presented and plans were laid for securing the interest of American business men in European affairs. The proposal for the institution of a business committee as an advisory body to the Reparation Commission was discussed. The project was further developed in subsequent meetings of the Finance and Executive Committees of the International Chamber. The London Schedule of May 5, 1921, apparently the best reparations settlement obtainable at the time, failed to solve the problem. T h e movement toward a moratorium which followed the London Schedule's adoption, as Bergmann points out, 1 was a mistake in that it failed to offer any definite plan of relief to an economically overburdened France. The immense French outlay for reconstruction had been financed through internal loans, for the most part through the short-term "bons de la défense nationale." From this heavy debt bur1

Bergmann, The History of Reparations, p. n o .

The Dawes Plan

145

den Francc now cricd for relief. T h e enormous costs of the armies erf occupation had practically eaten up the indemnities to date. Out of the German payment of a milliard gold marks in the summer of 1921, France received only 140,000,000 gold marks, 500,000,000 gold marks going to England for the cost of occupation up to May 1, 1921, and the balance to Belgium. In the face of such economic realities, the move of German politicians for a moratorium, supported by British politicians after Rathenau's negotiations of December, 1921, 2 with Lloyd George and his entourage in London, was, as recognized by the business mind of Bergmann, a phantom chase after "a political and psychological chimera." 3 This conviction, Bergmann tells us, was deepened by discussions with French financiers, who, of their own accord, called on him during his visit to N e w York in the autumn of 1921. The French financiers, who were in America as experts attached to the Briand delegation at the Washington Disarmament Conference, were anxious to find a workable economic solution to the political tangle, a solution which would give common relief. They "thoroughly recognized the paramount importance of stabilizing the mark, not only for Germany but also for France." 4 The history of Cannes, Genoa, and the Committee of Bankers, asked to advise the Reparation Commission in the spring of 1922, all demonstrated, however, the impossibility of freeing these economic and financial interests from the all-entangling meshes of the web of economic unreality which was being continuously woven by extreme nationalist elements. During this period of vain attempts to reach the goal of a workable reparations agreement eventually ending in the Ruhr, the fundamental principles of a business settlement and the necessary technique for its negotiation were being developed by business men within the organization of the International Chamber of Commerce in connection with its general program of world reconstruction. The main Chamber organs through which the evolution of this policy took place were the International Finance Committee, the Executive Committee, the Council, and the Secretariat. The work of these organs of business opinion was by no means confined to a study of the reparations problem. They were functioning as a part of the organization of international business opinion which, in 'Ibid., p. 102.

'Ibid., p. n o .

4

Ibid., p. i n .

146

The Dawes Plan

the period between the first two congresses of the International Chamber at London and Rome, was establishing a position of influence in international affairs. New contacts between business and government were being made, new channels of influence were being opened up at the multitudinous points where business activity impinges upon the sphere of government. The International Chamber, in the words of its constitution, had become "a confederation of the main economic forces of the countries included in its membership, united in each country by a national organization." The manifold activities involved in the starting of this organization and its principal features (the council, general meetings, national committees, secretariat, conferences of experts, referenda, inquiries, and publications) were centralized at the International Headquarters in Paris and had been continuously pursued since the Paris Congress of 1920.8 Technical committees were engaged in constant study of the many detailed aspects of business problems in the international field. These activities not only required the formation of policy by I.C.C. experts but the coordination of this work with existing international machinery and in particular with the newly organized technical committees of the League of Nations. During 1920, 1921, and 1922 this process of coordination was carried successfully forward in the many aspects of finance, distribution, transportation and communications, and production. By the end of 1922 the liaison machinery between the various technical services of the League and the International Chamber was largely in operation. As early as January, 1922, it had been established that the Secretariat of the Economic Section of the League would consult the International Chamber as the representative of business men.6 The chief liaison officer of the International Chamber and the League of Nations was Pirelli, who, as member of the Council and the Finance Committee of the International Chamber and also of the Economic Committee of the League of Nations, contributed much to the working out of principles of collaboration. In 1922, the active cooperation between the Chamber's committee on 11 International Chamber of Commerce, Constitution and Rules of Procedure (1932 edition), Brochure No. 79, Article i , p. 5. 'International Chamber of Commerce, "Minutes of the Executive Committee, January 27, 1 9 2 2 " (unpublished).

The Dawes Plan

147

bills of exchange and the League organization was initiated in preparation for the League conference of 1923. The International Chamber committees on statistics7 and transport8 established touch with the League organization in those fields. The transport section of the Chamber was in collaboration at this time with the League Secretariat in preparation for the Second General Conference of Communications and Transit to be held at Geneva, in November, 1923.9 Similar contact in the matter of commercial arbitration was established between the Secretariat of the Chamber and the League. 10 The Chamber committee on the protection of industrial property commenced its long work of active collaboration with the International Bureau for the Protection of Industrial Property at Berne. 11 The evolution of reconstruction policy, was the dominant factor in a complex of international business interests lodged at the International Headquarters of the Chamber at Paris. The general objective of the cooperation carried on through all these instrumentalities was to establish conditions suitable for the restoration of world trade. This involved first of all the stabilization of Europe. International business sought to make Europe once more a paying concern. The International Chamber sought to make it safe to do business in Europe. Due to Europe's impoverished condition, this first involved the problem of making Europe safe for investors. The discussion, therefore, had always in the background the marketability of the two classes of security which had been created for European reconstruction, the reparations bonds and the Ter Meulen bonds. The International Finance Committee appointed in accordance with the London resolutions of the International Chamber, met on October 6, 1921, under the chairmanship of Clementel, president of the International Chamber. The committee comprised representative business leaders and experts, some of whose names were to become closely associated with European reconstruction. Great Britain was represented by Walter Leaf, Sir Felix Schuster, and J. E. McCulloch; France, by Clementel, Lewandovski, Louis Nicolle; Italy, by Giorgio Mylius, Alberto Pirelli, Gino Olivetti, and Giuseppe Zuccoli. The '/An/., p. 14. "Ibid., p. 6. ' I d e m , "Minutes of the Executive Committee, July TO, 1 9 2 2 " (unpublished), p. 1 2 . 10 Ibid., p. 4. " Ibid., p. 1 8 .

148

The Dawes Plan

United States sent E. H. Goodwin, Nelson Dean Jay, F. N. B. Close, Edward A. Filene, and Owen D. Young; Belgium, William Thys, Paul Ramlot, and Gustave L. Gerard. Other members were H. R. du Mosch (the Netherlands), Edstrôm (Sweden), and François Hlavacek (Czechoslovakia). None of these names, with the exception of Clémentel, was of general international repute in 1921 outside business circles. The committee, at the suggestion of Clémentel, elected Walter Leaf permanent chairman of the group. 12 The terms of reference of the committee as stated in the London resolutions called for three parallel investigations: ( 1 ) into the effect of inter-Allied debts upon the exchanges and possible remedies; (2) into the payment and utilization of the German reparations; (3) into the conversion of the German bonds.13 The committee had before it two memoranda representing respectively the European and the American points of view. The first memorandum, presented by Roger Picard, set forth at some length the familiar case for a comprehensive settlement of reparations and interAllied debts under the general item of intergovernmental obligations. Picard dealt in particular with the reasons making advisable the acceptance of reparations bonds in payment for inter-Allied debts. The second memorandum, prepared by the two spokesmen for American financial opinion, George E. Roberts, vice president of the National City Bank of New York, and F. O. Watts, president of the First National Bank of St. Louis, proposed a solution to the problem of converting the reparations bonds by the adoption of policies calculated to make the bonds a good investment risk. These two memoranda illustrated the opposite approaches to the reparations question made by French and American business minds. The French approach led for the most part through political territory, the American through a business consideration of the possibilities of a more economic use of European resources in the actual work of reconstruction. American suggestions for actual use of German industry and labor in the devastated areas included an interesting proposal for payment to both German and Allied industry in reparations bonds. Such u International Chamber of Commerce, "Minutes of the Internationa! Finance Committee, Paris, October 6, 1 9 2 1 , " Archives 1627 (unpublished), pp. 1, 2. 13 International Chamber of Commerce, Proceedings of the First Congress, Brochure No. 18, "Resolutions Adopted," pp. 10, 24.

The Dawes Plan

149

a distribution of the reparations risk in the form of the German bonds to the industrialists, who were profiting from reconstruction contracts, was designed to place financial responsibility for reparation collection upon those interests which, as we have seen, had been the leading advocates before the I.C.C. of a policy of coercive collection. The discussion in the committee developed along the following lines. It was urged that, inasmuch as the problems before the committee verged upon high politics, it might be inadvisable to express any opinion before the Washington Disarmament Conference which was shortly to meet. 14 On the other hand it was advanced that it would be a good thing to communicate definite suggestions to the different governments on the subject of conversion and the effect which the present state of inter-Allied debts had upon international exchange, that the financial committee of the I.C.C. should take the necessary initiative and plan out a line of action. 15 The Picard memorandum was advanced from one quarter as an excellent basis for the committee's work. 1 6 At the same time the necessity of cooperation between the United States and Europe in the reestablishment of business conditions was generally recognized as the first requisite. The American delegation pointed out that all business men appreciated this fact, citing the report of the delegation from the Chamber of Commerce of the United States, which had just made an inquiry into the state of things in Europe. 17 It was, therefore, decided that the committee should first publish a resolution to this effect and the American delegation was asked to draft a suitable text with a view to its wide circulation in America. 1 8 The committee was reminded, however, that all discussion should be based upon the question of exchange in accordance with the London resolution. The International Chamber of Commerce should try to find a solution to the question of the investment of the German bonds. It was greatly to the political and economic interest of the nations receiving these bonds to get the public to take them up; although this was at the time impossible, the foundation should be laid for the future. The bonds must be invested in such a way that the rate of exchange would gradually and not suddenly improve. In this connection it was remarked that there was reason to hope that as soon as possible all the 14

International C h a m b e r of C o m m e r c e , " M i n u t e s of the International Finance

Archives 1 6 2 7 ( u n p u b l i s h e d ) , p. 2.

»Ibid.

"Ibid., p. 3.

"Ibid.

a

lbid.

Committee,"

150

The Dawes Plan

sums paid over by Germany would be devoted to the service of the bonds and that this service would function without interruption. Such an arrangement, it should be noted, was designed to eliminate all indeterminate payments such as the costs of military occupation and put the entire transaction on the basis of a regular governmental loan.19 The opinion was advanced that the Washington Disarmament Conference would exercise great influence on public opinion and necessarily affect the question of reparations. The president of the Chamber, Clémentel, urged that the subcommittee should certainly be in a position to submit its suggestions before the Washington conference.20 Pirelli, in particular, urged the advisability of the subcommittee's determining exactly under what conditions Germany paid her first milliard and what was the precise effect upon the rate of exchange.21 In this connection, Clémentel quoted a passage from the recent report of the Chamber of Commerce of the United States requesting that a commission of bankers and business men be created which might lend its help to the Reparation Commission by studying the question of the payment of the German indemnity and of its effect on international trade and finance. The subcommittee, Clémentel suggested, might go into this question.22 The subcommittee23 was composed of: Thys, Gérard (Belgium); Hlavacek (Czechoslovakia); Lewandovski,Nicolle (France); Leaf, Schuster (Great Britain); Pirelli, Giannini (Italy); Ter Meulen, De Beaufort (the Netherlands); Janasz (Poland); Edstrôm (Sweden); Jay, Close (United States). The Executive Committee, which met on November 29, took up the report of the Finance Committee in connection with the general problem of European reconstruction, centering about the League's Ter Meulen scheme. The plan for the application of the Ter Meulen principles to Austria, outlined by Sir Drummond Fraser at the London congress the preceding May, had failed of realization due to the failure of the legislative branch of the United States government to release the liens held by the United States as one of Austria's creditors, which blocked the granting of banking facilities.24 The entire question of international credits, moreover, was still in abeyance. The committee therefore decided, at the request of Sir Drummond 20 21 " Ibid., pp. 5> 6. ¡bid., p. 8. Ibid., p. 9. 52 23 Ibid. Ibid. " League of Nations, Ten Years of World Co-operation, p. 184.

SIR ALAN ANDERSON PRESIDENT OF THE INTERNATIONAL CHAMBER, 1926-1927

T h e Dawes Plan

151

Fraser, to place the International Chamber's machinery of a general referendum in operation on the subject of the application of the Ter Meulen scheme. Sir Drummond in particular asked for a judgment by business men on the following points: ( 1 ) the granting of credits to governments destined exclusively for public works; (2) the granting of credits for particular projects undertaken by well-established institutions, the bonds being issued in order to cover new operations. Sir Drummond, in urging that the International Chamber conduct the referendum, was quoted as saying that in his capacity as organizer for international credit plans he attributed much weight to a referendum by the International Chamber of Commerce on this subject.25 At the same meeting the report of the Finance Committee was unanimously adopted. The report urged that disarmament was necessary to the establishment of economic order in the world and asked that national committees insist that their respective governments arrive at an accord on the subject of armaments at the forthcoming Washington conference. After confirming the resolution insisting upon American participation (voted at the Paris meeting of the sixth of October and quoted above), the report continues with a resolution proposing that the International Chamber explore the possibilities of the suggestion made in the report of the United States Chamber of Commerce that a committee representing bankers, industrialists, and merchants of the principal countries be constituted, in order to collaborate in a permanent manner with the Reparation Commission in the examination of the question of the payment of reparations and other great financial problems which might present themselves in the course of the next ten years. The committee accordingly asked that the American delegation consult the Chamber of Commerce of the United States and request that they submit a resolution making definite proposals for the creation of such a committee. Bedford, representing the American national committee, stated that the American Committee considered that the Finance Committee of the International Chamber was best qualified to constitute the organization destined to collaborate with the Reparation Commission. It was, thereupon, decided to adjourn the publication of the resolution in order to permit the Executive Committee members to 25

International

November

C h a m b e r of C o m m e r c e ,

1921"

Digest N o . 9, p. 3 .

(unpublished),

"Minutes

of the E x e c u t i v e

pp. 3 , 4. 5. See also International

C o m m i t t e e , Paris, Chamber

of

29th

Commerce,

152

The Dawes Plan

get into personal touch with their countries' delegates on the Reparation Commission. It was desirable, the committee decided, in effect, that the Reparation Commission ask the collaboration of the International Chamber of Commerce. 29 A t the meeting of the International Finance Committee of the International Chamber on the thirtieth of March the question of American participation in European affairs again came up for discussion. T h e French delegation, recalling the resolution of October 6 quoted above, considered that it would be of interest to know whether the United States was still of the same mind regarding European cooperation. T o this the American delegate replied that the best answer to the question was to be found in the fact that the Chamber of Commerce of the United States, which included 40,000 members, had chosen as the keynote of its annual meeting in May the relations between the United States and Europe. The American delegate continued with a description of the preparatory work then being carried on for the conference. It was stated that each department of the American Chamber was preparing a report upon a special subject. It was maintained that there need be no dobut that the interest and sense of responsibility held in the United States toward European problems had not lessened. The period of neglect was over, although it was admitted that the statement applied more particularly to business men than to politicians.27 Interest was expressed in the course of American opinion on the Ter Meulen scheme and an article appearing in the February number of the Federal Reserve Board Journal endorsing the plan was in particular commented upon by the French delegate. The committee recommended that the Council pass a formal resolution expressing the satisfaction of the International Chamber with the program for the annual meeting of the American Chamber stressing the American relation to European problems.28 The movement toward some form of general settlement, which should include reparations as a part of European reconstruction, was apparent in the decision to attempt a general economic conference, * International November 17

1921,"

C h a m b e r of C o m m e r c e ,

" M i n u t e s of the E x e c u t i v e

( u n p u b l i s h e d ) , pp. 9, 10,

International C h a m b e r of C o m m e r c e , " C o m i t é

1 9 2 2 , " ( u n p u b l i s h e d ) , pp. 1, 2.

"Ibid., p. 3.

Committee,

Paris,

29th

11. financier

international, reunion d u 30 mars

The Dawes Plan

153

reached at the meeting between Lloyd George, Briand, and Loucheur in London from the eighteenth to the twenty-second of December, occasioned by the German statement of inability to meet the coming reparation payments of January 15 and February 15, 1922. The official press communique of December 2229 explained the proposed method of negotiation. No definite decision had been reached, it was stated, but "a line of action" had been agreed upon. Representatives of British industry and finance were to confer with the prime minister and his colleagues on the following day to discuss in fuller detail the proposals with which the conversations had dealt. The French government would have similar conversations with business men and financiers in Paris. The result of all these negotiations would then come up for review at the forthcoming conference at Cannes. It was probable that the proposals of the two governments to be submitted at Cannes would include one for the summoning of a general European economic conference for the purpose of enabling European nations to cooperate in building up their economic systems and generally restoring the welfare of their people. The Allies, the statement concluded, would decide what nations would be represented at this conference. At the approach of the Genoa conference, business forces again looked for some recognition of business interests through an international political accord. Although the International Chamber was not invited to send a delegation to the conference, the Executive Committee, in its meeting of January 27, 1922, recommended that national committees get in touch with the several governments with a view to advising in the selection of representatives of industry, commerce, and finance for the formation of the committees of the conference.30 And at the meeting of March 31, the Council was informed that such collaboration was being successfully carried out in France and Italy. It was reported that in the case of France twenty-four of the thirty delegates from the Ministry of Commerce were on the lists of the French National Committee, while the Italian government had especially called upon the National Committee of the Chamber for collaboration in the preparatory work of the conference. The Council, in the meeting of the same date, endeavored to throw the weight of the International Chamber behind the "The Times, Dec. 23, 1 9 2 1 . w International Chamber of Commerce, "Minutes of the Executive Committee, 27 January, 1 9 2 2 " (unpublished), p. 3.

154

The Dawes Plan

movement for such a political settlement as would make possible collaboration between business men and governments in the work of reconstruction. The resolution, asserting the necessity of a recognition of the interdependence of all nations, demanded that the Genoa conference establish as quickly as possible the political basis for effective economic collaboration between all states, taking account of the suggestions of the representatives of industry, commerce, and finance.31 T h e failure of the conference of Cannes to reach a reparations agreement before the overthrow of the Briand ministry, the policy of the Poincaré government, and the Treaty of Rapallo doomed the Genoa attempt at general economic cooperation under political leadership. The attempt was in large measure frustrated by the action of those economic forces within France which dictated the vote of censure of the Finance Commission of the Chamber of Deputies recalling Briand from Cannes. T h e commission, as the resolution stated, was moved by the grave repercussions upon the restoration of the devastated regions and French finance which would result from the contemplated reduction in reparations payments. The failure of Allied leadership at Genoa placed the initiative with the League. Events moved slowly toward the realization of plans for Central European reconstruction. Since the failure of the 1921 Assembly of the League of Nations to put into effect a scheme for the reconstruction of Austria, due, as noted above, to the refusal of the United States government to release the liens held in its name, American and European business men had, through the instrumentality of the Chamber's referendum, given the principles of such an international reconstruction project wide discussion. American and European opinion had made considerable progress toward an acceptable formula of international reconstruction. T h e need for such a plan and for full international cooperation in its accomplishment was now universally recognized. The good will of the American executive, to which the League Financial Committees had a year previously paid tribute, was in July, 1922, made effective by the American legislature and the last obstacle, in the shape of creditor's liens, was removed. 32 When the Assembly of 1922 met in September, therefore, the way was clear for League action. 81

International Chamber of Commerce, "Minutes of the Council, 31 March, 1 9 2 2 " (unpublished), pp. 3, 4. 32 League of Nations, Ten Years of World Co-operation, p. 184.

The Dawes Plan

155

After this long preparatory period of business discussion the principles of international action in the financial reconstruction of Europe brought forward at Brussels were given successful application. The international financial and economic cooperation, which finally materialized in the three protocols signed at Geneva in October, 1922, had its origin in the beginnings of the reconstruction movement itself in the February Memorial of 1920 asking for the convocation of an international financial conference. The Allied business conferences of Atlantic City and Paris, the Brussels Financial Conference, the Financial Organization of the League of Nations centering about the Financial Committee, the First Congress of the I.C.C., and the continuous collaboration carried on within the far-reaching organization of the I.C.C., the Council, the Executive Committee, the International Financial Committee, the national committees, the resident national administrative commissioners, and the secretariat at Paris were all instrumental in formulating that world business opinion which finally received governmental ratification at Geneva. In this process the Financial Organization of the League functioned very largely as a liaison body between the governments and the general business community represented in the I.C.C. The referendum, which the I.C.C. conducted on lines suggested by Sir Drummond Fraser, enlarged beyond measure the scope of international policy-forming. The referendum idea, which was taken over from the system employed by the United States Chamber of Commerce, was designed by its American proponents to accomplish exactly this end in the larger international field.

CHAPTER

Danubian

XI

Reconstruction

T

H E years 1921 and 1922 saw determined efforts to promote economic and financial rehabilitation in Southeastern Europe. These efforts finally culminated in the successful action of the League of Nations in the formation of the Austrian financial reconstruction scheme. Financial reconstruction, however, as shaped by events did not involve the acceptance by nationalist governments of any plan of economic cooperation designed to recreate the shattered economic system of the Danubian Valley. Reconstruction was accepted by business men as a problem in financial rehabilitation rather than as a problem in the more fundamental sphere of commercial policy. The discussion of European reconstruction in business circles did not, at this juncture, result in the turning of the international business movement toward economic disarmament. Like Western European reconstruction by reparations, Central and Eastern European reconstruction by the League of Nations avoided the issue of direct economic cooperation in market sharing by business interests. T h e issue, however, was raised in a proposal by the Carnegie Endowment for International Peace. On March 1 1 , 1921, there was held at Porto-Rosa a conference of the Austro-Hungarian succession states for the purpose of bringing together the succession states and Italy in an effort to reestablish normal economic relations in this part of Europe. T h e chief sponsor of the PortoRosa conference was Colonel Browning Smith, the American relief commissioner in Vienna. 1 Alongside this diplomatic conference, and growing out of the subsequent failure to secure the adoption of its plan, a new and in some ways even more far-reaching scheme for Danubian reconstruction was sponsored by the Carnegie Endowment for Inter1 See James T. Shotwell, International Conciliation, published by the Carnegie Endowment for International Pcace, July, 1922. (This account of the Porto-Rosa Conference is, so far as the author is aware, the only published account of the conference.)

Danubian Reconstruction

157

national Peace in a project for an unofficial conference of Danubian business men to be called by the I.C.C. with a view to the promotion of policies of economic cooperation. Would such a conference, had it been permitted to meet, have been able to effect economic reconciliation on the Danube and have led to the acceptance of the Porto-Rosa program ? Although the conference itself proved to be stillborn, its proposal occasioned conferences upon Danubian problems among officials of the Carnegie Endowment, the I.C.C., President Masaryk, Premier Benes, Schumann of the Austrian Foreign Office, Gratz, former Minister of Finance of Hungary, and other prominent government officials and business men of Southeastern Europe at a time when statesmen at Geneva were struggling for agreement, and finally resulted in the Rist economic survey which was successfully utilized by the League of Nations and the Austrian government in the preparation of League financial reconstruction. Rist was himself able to complete the task of an economic enquiry as one of the committee of two experts sent by the Council of the League to make an official report in 1925. It was the Rist-Layton report of 1925 which eventually proved to be the first step toward more positive action by the League in the broader field of economic policy. The scheme for a Danubian conference of business men on local economic problems grew out of the experiences of James T. Shotwell in Vienna in 1920 as editor of the War History. Confronted with the stark realities of the terrible suffering in university circles in Vienna, Shotwell considered the possibilities of assisting economic rehabilitation as distinguished from mere relief. Liberal use was made of such funds of the Endowment as were available, to create research jobs for starving university professors. (The task of the Endowment, however, was from the start conceived to be one not of relief but of constructive economic rehabilitation.) When Hoover sought a grant of $200,000 from the Endowment for relief work in 1919 this proposal had at first strong endorsement by members of the Board of Trustees, but on hearing the report of possibilities of constructive economic rehabilitation in actual relief, Elihu Root, the president of the Endowment, won its consent to the scheme for promoting economic cooperation in that part of Europe which was still almost in a state of economic siege. In the autumn of 1921 a further plea for relief from Baron Franken-

158

Danubian Reconstruction

stein, Austrian ambassador to London, was made the occasion for a discussion of a tentative plan for the conference. This plan was further discussed with Schuller, permanent head of the Austrian Foreign Office, and with Masaryk, son of the President of Czechoslovakia, who took it up with his father and with Benes, the Prime Minister. All were cordially in favor of the suggestion, and President Masaryk added that such a nonpolitical gathering would be more sure of success if held at a sufficiently long interval from the Porto-Rosa conference to avoid an appearance of confusion between unofficial and official negotiations. In view of this suggestion Shotwell, therefore, recommended to the Executive Committee of the Endowment at its meeting of February 14, 1922, that the conference be held in June or July of 1922 under the joint management of the Divisions of Intercourse and Education and Economics and History. Shotwell further suggested that President Butler should preside over the general sessions. On the strength of this recommendation the Executive Committee resolved to undertake the calling of a "Conference of representatives of the business organizations in those countries for the purpose of considering their common economic and financial problems and facilitating commercial intercourse between them," and the sum of $10,000 was allotted for this purpose. During the year 1922, Shotwell carried on continuous negotiations concerning the calling of the proposed conference. The plan as originally formulated contemplated the cooperation of the I.C.C. at Paris in the calling of a conference of chambers of commerce of the succession states which should study the ways and means for giving practical effect to the principles initiated at Porto-Rosa. In the plan of the Endowment the starting point of the proposed effort was the Conference of Porto-Rosa of November, 1921, in which the succession states, of the former Hapsburg Monarchy, under the presidency of Italy, laid down general principles of economic policies in matters of commerce and international intercourse. The failure of the official government conference at Genoa to achieve anything of practical value in the carrying out of the Porto-Rosa program and the atmosphere of distrust between the Little Entente and the Great Powers in which the conference closed intensified the difficulties of organizing in the

Danubian Reconstruction

159

spring of 1922 an unofficial conference such as was contemplated by the Endowment. According to the philosophy of the Endowment, there could be no hope for really positive reconstruction unless it were possible to set local interests and local machinery in motion to solve pressing problems in a local way and then let these solutions grow into national and international solutions. With this objective clearly in mind, Shotwell took up the proposal of the Carnegie Endowment with the Executive Committee of the I.C.C. in Paris on May 26. After some discussion in which Sir Shirley Benn, representing the British Association of Chambers of Commerce, opposed the plan, with some support from other delegations, it was finally decided, mainly through French support, that the Secretariat of the I.C.C. should carry out an investigation in the countries concerned, asking for their opinion on the proposition in general and for special suggestions for the agenda. Although the spirit of the Executive Committee of the I.C.C. was all that could be desired from the standpoint of the Endowment, it was apparent that there was considerable hesitancy in undertaking the enterprise, due to a difference of opinion concerning practical ways and means. Shotwell made plain the philosophy governing the Endowment's policy in regard to the manner of assistance by continually refusing to assume responsibility for drawing up the agenda for the conference or to take any action which might be interpreted as an effort to dictate to Danubian business men a predetermined program for their adoption. The council of the I.C.C., in its meeting of July 10, 1922, debated the Endowment's proposal for a Danubian conference on the basis of the reports from the national committees of Austria, Italy, Poland, Czechoslovakia, Denmark, and Switzerland. The council finally resolved that the time was not ripe for the I.C.C. to take the initiative in calling a Danubian conference, but proposed to the Endowment that a special section devoted to Danubian questions be established at the forthcoming Rome congress of the I.C.C. and offered its services to the Endowment for the furtherance of its research. Hlavacek, on behalf of the Czechoslovakian Committee, opposed the Endowment's proposal for a Danubian conference on the ground that it would fatally open those political questions which Czechoslovakia consid-

160

Danubian Reconstruction

crcd settled. Filene of the United States urged the calling of a special conference in accordance with the proposal of the Endowment. Before abandoning for the time the possibility of calling a conference either through the I.C.C. or by the Endowment itself, Frederick P. Keppel, then the American commissioner at the I.C.C., took the matter up with Benes and President Masaryk in Prague. On the advice of Benes and of Schuller, it was decided to let the plan slumber awhile. Since Benes and Schuller, however, regarded the idea as fundamentally sound, Shotwell suggested that the plan be held up to await a favorable turn in events. Negotiations had broken down mainly owing to the conditions consequent upon the conference of Genoa. T h e effects of the Genoa conference continued to make themselves felt until the month of August, 1922. It had become evident that the Chambers of Commerce of Southeastern Europe could not alone serve as effective instruments to secure the ends desired. The economic problems were too complicated for ready discussion and the international relations in some cases were matters of delicate negotiations between the different foreign offices. It had become clear that economic experts must prepare the agenda of the conference before the business men on the one hand and politicians on the other could take it up. This conclusion was especially emphasized by Benes, when consulted as to the feasibility of the plan. T a k i n g advantage of the new situation created in August by the action of the League of Nations in promising the necessary credits for the stabilization of the Austrian currency, Shotwell discussed the whole matter in the light of the new possibilities with Sir Arthur Salter and other members of the Secretariat in Geneva. The situation in Geneva, it was found, confirmed the soundness of the plan of the Endowment, for while the financial reforms of Austria had been well thought out and gave promise of effective operation, the commercial and general economic situation was not only untouched as yet, but the facts themselves were unknown, the report of the economic commission of the League not offering any light on the subject which the Endowment proposed to investigate. It was therefore evident that in order to secure effective action in an economic conference of the Danubian states, it would be necessary for the Endowment to prepare the ground itself, since neither government nor business organiza-

Danubian Reconstruction

161

tions would be in agreement as to either data or agenda, were such a conference to be held. In pursuance of this object, Charles Rist, Professor of Economics at the University of Paris, was asked to prepare a report on the commercial situation in Austria which might indicate the missing data concerning those questions of commerce and industry which would have to be discussed at the proposed conference. Rist accepted this mission and prepared an influential but as yet unpublished report, containing the first and at that time the only authoritative statement of the balance of trade of Vienna, incidentally pointing out the popular error, to which some statesmen had subscribed, that Vienna was a handicap to Austria, whereas it was its largest asset. At the request of the officials of the League of Nations and of the Austrian government, a synopsis of Rist's conclusions was sent them. Both expressed themselves as under great obligations to Rist for help which he had given them in analyzing the economic problems of Austria at a time when the vast credits of the great European states had been placed at the disposal of Austrian reconstruction. During the course of the Rist investigation in Vienna and Prague, Shotwell, in conference with experts, including Gratz from Budapest, came to the conclusion that if a conference of Chambers of Commerce were to be held it should take place only after a conference of economic experts who should prepare the material for the agenda in ways similar to the careful analysis of the Austrian situation which had been prepared by Rist. The difficulties involved in attempting to further a well-informed business movement in the Danubian area were further revealed by negotiations carried on in the late summer and autumn of 1922 with Aristide Blank, the leading Rumanian banker. From these negotiations it developed that business leaders in these states were so closely associated with the practices of politicians and upon the whole so largely under their influence that to reverse the situation and expect business men to bring politicians to their point of view was scarcely understandable. Even idealistic business leaders like Aristide Blank were unable to think in terms of other than political issues. The Endowment, in its efforts to promote a thoroughgoing scientific economic survey of the Danubian states, set in motion research activity which was finally utilized by the League to the extent deemed

162

Danubian Reconstruction

feasible under existing political circumstances. These efforts were undertaken after a long conference in Prague between Shotwell, Masaryk, and Benes. President Masaryk and Benes were frankly of the opinion that the best way to cooperate in Southeastern Europe at that time was along the line then taken, namely by preparing a series of studies such as that of Rist, showing the real conditions in commerce and industry which at present were so much a matter of conjecture, studies which might be placed at the disposal of statesmen and publicists in the countries immediately concerned, and so might influence policies there as well as public opinion in the Great Powers. It was President Masaryk's opinion that there should be an economic survey of each country under the direction of an American institution like the Carnegie Endowment and that after it had pointed out the commonsense economic policies for these new states, real pressure might be exerted to overcome the pettiness and international ill-will which blocked the free course of international relations in the Danube Valley. A conference seemed to Masaryk less important than a survey. Colonel Logan, the American observer on the Reparation Commission, after consultation with Shotwell, expressed his full agreement with such a project and submitted anonymously to the Endowment a carefully worked out program of research for a body of economic experts such as the Endowment proposed to command. Gratz also drew up a carefully conceived and detailed questionnaire on economic conditions and possible policies leading to reconstruction. Meanwhile the League was getting under way, the work thus begun was transferred to Geneva. Rist continued his work in cooperation with Sir Arthur Salter. Having set in motion the machinery for financial reconstruction, the League undertook to strengthen its economic action in Austria. Thus the modest intervention of the Carnegie Endowment, which caution made the I.C.C. refuse to consider, found in the League an efficient agent for improving conditions in the old metropolis of the Danubian area.

CHAPTER

XII

T h e U n i t e d States Sponsors a Business Settlement of Reparations

T

H E United States Chamber of Commerce gave its full support to the efforts of the I.C.C. to enlist American participation in European reconstruction. As a result of the efforts of the American Chamber in this direction an American business policy with regard to European affairs was developed. This policy affected the formation of international opinion. The Tenth Annual Meeting of the Chamber of Commerce of the United States, which met in May of 1922, served through the medium of the I.C.C. organization to aid in the shaping of the international program of business for world reconstruction. In July Frederick P. Keppel, who as first American administrative commissioner had effectively laid the basis for American cooperation in the work of the Chamber, retired to take the secretaryship of the Carnegie Corporation. He was succeeded by Basil Miles, for fifteen years member of the American diplomatic corps. Miles's wide international experience included service as secretary of the Root Mission to Russia in 1917 and of the American delegation to the Washington Conference for the Limitation of Armaments. As adviser of the Committee on Foreign Affairs of the Chamber of Commerce of the United States, Miles had been active in the work of the Tenth Annual Meeting. His appointment as American administrative commissioner at this time had the effect of bringing the I.C.C. into close touch with the American movement. Miles, in a sense, came to Paris as the special emissary of the Tenth Annual Meeting. His report on the international significance of the American conference was published and given wide distribution by International Headquarters under the heading "Tenth Annual Meeting of the Chamber of Commerce of the United States of America" (Digest No. 30).

164

A Business Settlement

In this short resumé of the conference, Miles quoted significant excerpts from speeches delivered at the congress by President Harding, by Secretary of State Hughes, by Secretary of Commerce Hoover and by leading American business men, explanatory of the aims of American private business as interpreted by both the American government and leading citizens. The report concluded with a statement by A. C. Bedford, vice president of the I.C.C. and president of the American section, pointing the way to practical realization through the I.C.C. of the new theory of international economic adjustment by world business cooperation put forward as the central theme of the Tenth Annual Meeting. T h e I.C.C., through its activities and its annual meetings, offers to the nations of the world opportunities for real economic conference gatherings at which the business men of the world can discuss, without hindrance of politics, the solution of just these great problems. 1

T h e discussion of the settlement of the most momentous international problems of the postwar era by such a nonpolitical body had become the objective of the American business movement. " W e are sailing," said Bedford, "in uncharted seas, and new soundings must be made. But I believe we are making headway and that, as prejudices and animosities recede, we shall be able to deal effectively with these problems with ever-increasing confidence and assurance of success."2 In concluding his report to world business on the tenth meeting of the American Chamber, Miles announced the commitment of American business men "to a policy that the United States should be represented in European affairs more definitely." In particular the resolutions included "an expression of conviction on their part that the Government should procure official representation on the reparation commission and should also adhere to the International Court of Justice." Further study of European conditions and their relation to American business would be continued by the work of the National Chamber's Committee on Foreign Affairs, which would give constant attention to foreign developments and report from time to time to 1 The International Chamber of Commerce, "Tenth Annual Meeting of the Chamber of Commerce of the United States of America," Digest No. 30, p. 4. ' Ibid.

A Business Settlement

165

the members of the Chamber "with a view to establishing a foreign policy for American business."3 Business opinion upon the general problem of European reconstruction had from the beginning of 1920 interpenetrated the political realm not only through national governments but also through the international machinery of the League of Nations. International business opinion upon the special postwar problem of reparations lacked such an international political organ of expression, unless the Reparation Commission and the Allied Supreme Council be so described, inasmuch as the Allied powers had refused to surrender their sole jurisdiction over this section of the Treaty of Versailles. After American political withdrawal, consequent upon the refusal of the United States Senate to ratify the Treaty of Versailles, both the Reparation Commission and the Allied Supreme Council had fallen under the complete control of the dominantly interested Continental powers, led by France. The American movement for a business settlement of reparations had concentrated its efforts, at the Tenth Annual Meeting of the National Chamber, upon securing American representation upon the Reparation Commission on behalf of American business interests. Although this objective was not reached, the American Chamber had the satisfaction of seeing the American secretary of state, Hughes, place its proposal for a business settlement before world opinion in the celebrated New Haven speech. The International Financial Committee of the International Chamber had in November, 1921, it will be remembered, attempted, without success, to launch this idea through the medium of confidential conversations with the members of the Reparation Commission. The eventual appointment of the Loan Committee of Bankers by the Reparation Commission in the spring of 1922 had failed of results due to political interference. Hughes's advocacy of the committee idea therefore placed the business conception of the nonpolitical method of attaining a reparations settlement clearly before the world. His speech was the culmination of the influence of the American and international business movement to date. The decision to make the American pronouncement was apparently under contemplation as early as the summer of 1922 or immediately after the failure of the Loan Committee. 'ibid.

i66

A Business Settlement

T h e United States was at this time unofficially represented on the Reparation Commission by Roland W . Boyden, whose association with the international business movement in the organization of the International Chamber at Paris and the Brussels Financial Conference has been noted above. Boyden was also in close personal contact with Miles, the resident American administrative commissioner at the International Headquarters of the Chamber at Paris. W h e n Boyden returned to America in the summer of 1922, Hughes is reported to have asked him to submit a document setting out what he thought should be done. This Boyden did. H e proposed that the United States suggest to the Allies the appointment of a joint tribunal to study and report upon the German situation, to enunciate the economic principles involved, to determine, so far as possible, what Germany's capacity is, to make any and every useful suggestion. 4 This tribunal, he advised, should be unhampered in its investigations, unhampered by the governments represented, and should sit as a " S u preme Court of Business Judgement." 5 T h e plan for a business settlement, as fully elaborated by Secretary Hughes in the N e w Haven speech, stressing the fundamental requisites of its successful application, namely, a committee personnel of the highest authority with wide competence and complete independence, was as follows: T h e first condition of a satisfactory settlement is that the question should be taken out of politics There ought to be a way for statesmen to agree upon what Germany can pay, for no matter what claims may be made against her that is the limit of satisfaction If statesmen cannot agree, and exigencies of public opinion make their course difficult, then there should be called to their aid those who can point the way to a solution. Why should they not invite men of the highest authority in finance in their respective countries—men of such prestige, experience and honour that their agreement upon the amount to be paid, and upon a financial plan for working out the payments, would be accepted throughout the world as the most authoritative expression obtainable? Governments need not bind themselves in advance to accept the recommendations, but they can at least make possible such an inquiry with their approval and free the men who may represent their country in such a commission from any responsibility to foreign offices and from any duty to obey political instructions. In other words, they ' I d a Tarbell, quoting from private unpublished documents, in Owen D. Young, p. 1 6 1 . • Ibid., p. 162.

A Business Settlement

167

may invite an answer to this difficult and pressing question from men of such standing and in such circumstances of freedom as will insure a reply prompted only by knowledge and conscience. I have no doubt that distinguished Americans would be willing to serve in such a Commission. If governments saw fit to reject the recommendation upon which such a body agreed, they w o u l d be free to do so, but they would have the advantage of impartial advice and of an enlightened public opinion. People would be informed, the question

would

be rescued

from

assertion

and

counter-

assertion, and the problem put upon its w a y to solution. 6

"Both Great Britain and Germany made it clear that they would warmly welcome the proffered assistance" of America made in the Hughes declaration. The French government, however, "took a different view." "This lack of unity," as stated in the British note to the United States of October 13, 1923, was "the sole reason" why the proposal was not "proceeded with." On January 1 1 , 1923, French and Belgian troops entered the Ruhr. It is said that Poincaré finally determined to take the fateful step after a conference with President Millerand, who put forth the case of the French steel interests for occupation as a means of securing a constant supply of coke and coal, and a further apparently conclusive interview with Le Trocquer, then Minister of Transport, who presented figures to show that French military administration would result in reparations profits.7 Whether this report be accurate or not these two interests, steel and the budget, appear to have been the invariable champions of a policy of strict reparations enforcement. * Speech of Secretary Hughes before the American Historical Association at New Haven, Dec. 29, 1922. New York Timet, Dec. 30, 1922. * Bergmann, op. cit.. p. 174. This account as given by Bergmann represents Poincaré as still hesitant until after the Le Trocquer interview. Bergmann writes: "I cannot vouch for the absolute accuracy of the story, but I have it from a well informed source and it sounds probable."

CHAPTER

XIII

T h e Rome Business

Congress

T

H E second congress of the International Chamber met at Rome at a moment when the future of the entire movement for European reconstruction hung in abeyance. The struggle between the two ideas of reconstruction had been brought to a climax. The Allied method of reconstruction by reparations had assumed such an unmistakably coercive form as to justify fully those implications which were apparent from its origin. On the other hand, the League method of international cooperation was rapidly transforming the ruined state of Austria into a self-supporting national community. The trial of these two methods before world opinion was in full swing when the Rome congress assembled on March 18, 1923. The movement of opinion toward a sound nonpolitical reconstruction of Europe had before it the definite objective of a business reparations settlement as outlined in Hughes's New Haven speech. French political objections stood athwart the Hughes program. The French government refused to submit her claims to an international body. No international political body could place the reparations question upon its agenda without the consent of the interested governments. In the face of this political caveat the Rome congress showed the independence of the international business movement centered in the I.C.C. While French troops were waging the Battle of the Ruhr, business men at Rome, under the chairmanship of a Frenchman distinguished both in politics and in business, openly set about to lay down the principles of a voluntary setdement of reparations. Although the nonpolitical character of the Rome congress was proclaimed as its salient feature, it was accorded that governmental recognition which has become customary on the occasion of I.C.C. congresses. The opening session of the congress resembled a grand function of state, with Mussolini in the chair and the full diplomatic

The Rome Congress

169

corps, excepting the German ambassador, in attendance. Sir Arthur Salter represented the League of Nations. Mussolini sounded the keynote of the congress. The time was at hand to remove "the last relics of 'war harness' from the shoulders of the forces of production in every country and examine economic problems in a spirit undisturbed by those passions which the necessities of war conditions made inevitable."1 As business representatives they were in Rome "to discuss the best means of reviving those great currents of trade which, before the War, had increased the wellbeing of the people and brought their standard of living to a higher level." These were problems "both weighty and delicate, problems which often show interferences of a political and moral sort." Mussolini pleaded for a world view. In order to solve them they must "be guided by the conviction" that it was not alone Europe which must be brought back to its full efficiency. There were other nations and continents which in the future might "be the field of a greater economic activity. Mussolini pointed to the significance of the presence of the large American delegation. It could only mean, he asserted, that in spite of the fact that American "official political policy" continued to be "one of reserve," American business men felt it impossible to avoid taking an interest in what could or could not be done in Europe.3 Clementel, the president of the Chamber, struck the same note of peace-time cooperation. A "sympathetic understanding of the painful, but imperative necessities" imposed upon those nations that had been "ravaged, plundered, crushed by the war" and acknowledgment of the "strict obligation to restore the ruins and repair the disaster" were no longer considered a fitting introduction to French pleas for treaty enforcement. Clementel's allusion to reconstruction concluded significantly with an appeal "to close for ever the hateful book of war." The outstanding feature of the I.C.C.'s business hearing on reconstruction was the report from the League of Nations on Austria, delivered by Sir Arthur Salter, who was attending the congress as the official representative of the Secretary General, Sir Eric Drummond. The active collaboration of Sir Arthur Salter brought the congress into 1 Mussolini, in International Chamber of Commerce, Proceedings (Rome, 1 9 2 3 ) , Brochure No. 32. 8 'Ibid. Ibid.

of the Second

Congress

170

The Rome Congress

the closest touch with the most recent developments in international reconstruction. This movement for business reconstruction naturally looked to the actual functioning of the League system in Austria. Sir Arthur, who as director of the Economic and Financial Section and of the Section for Communications and Transit of the League of Nations was the chief executive of Austrian reconstruction, rose to this occasion and in a masterly presentation fully expounded the system of international reconstruction, then successfully being applied to Austria. Recovery, he told the congress, was everywhere impeded by great unsolved problems which could be settled by no single country but which imperatively demanded international agreement. It was now four and a half years since the end of the war and the most important of these problems were still unsettled. Austria presented not only a problem but a solution of a problem. The experiment then being worked out in Vienna was, he suggested, the most interesting and significant experiment seen by the world since the war. It was an experiment that was at once "constructive and international."4 Sir Arthur concluded with a stirring appeal for the League method of reconstruction. There was a great contrast, he told the congress, which one must consider. In the three years following the war some $75,000,000 of foreign money was lost in Austria. Her financial position seemed worse than ever. There was a good prospect that in the next two or three years Austria would not only have been kept alive, but she would have been restored, and the cost to the foreign countries would have been literally nothing. Austria's own assets, if all went well, would meet the service of the loan and the guarantees would not be called on. What is the explanation of this difference: cost 75 million, result nil; cost nil, result restoration: It is just the difference between separate piece-meal assistance, given without control and without a plan; and, on the other hand, real international co-operation enforcing a complete and comprehensive scheme of reconstruction. 5

In the same session the congress listened to a further exposition of Austrian reconstruction by Giorgio Mylius, Italian member of the 4 Sir Arthur Salter, in International Chamber of Commerce, Proceedings gress (Rome, 1923), Brochure No. 32, p. 108. 6 Ibid.

of the Second

Con-

The Rome Congress

171

council of the I.C.C., who, as a member of the board of the new national Austrian bank which had taken part in the subscription of the necessary capital, was an active participant in the League scheme. Mylius concluded with a description of Italian cooperation with her ex-enemy. Italy had joined France, England, and Czechoslovakia in contributing, and, although terribly burdened herself, had given generously. Italy "hoped to see Austria put in the way of earning her own living, of preserving her independence, and of being able to maintain with her those friendly relations of neighbourliness, which alone permit the development of a profitable commerce."6 International reconstruction had progressed beyond the stage of paper schemes. The hearing on Austrian reconstruction had placed clearly before the congress an account of the business principles in action under a system of international cooperation. Both Sir Arthur Salter and Mylius had urged the general applicability of these principles. The problem of applying these principles to the Franco-German situation the congress dared not evade. At a preliminary meeting of the Finance Group on Friday afternoon, March 16, the question was raised by the American delegation "in a spirit of generous determination to admit the facts and to meet the difficulties."7 It was decided after considerable discussion to place the question in subcommittee charged to prepare a report and draft a resolution. The subcommittee had as chairman Fred I. Kent, vice president of the Bankers Trust Co. of New York. The other members were Willis H. Booth, vice president of the Guaranty Trust Co. of New York; Maurice Despret, president of the Board of Directors of the Banque de Bruxelles; Maurice Lewandovski, director of Comptoir National d'Escompte de Paris; Alberto Pirelli, delegate of the Executive Committee of the Associazione fra le Società Italiane per Azioné; Sir Felix Schuster, delegate of the British Bankers' Association, director of National Provincial and Union Bank of England; K. A. Wallenberg, ex-Foreign Minister of Sweden, president of the Stockholm Chamber of Commerce; and W. Westerman, president of the Rotterdamsche Bankvereeniging. * Giorgio Mylius, in International Chamber of Commerce, Proceedings of the Second Congress (Rome, 1923), Brochure No. 32, p. 108. 'International Chamber of Commerce, Proceedings of the Second Congress (Rome, 1923), n

1

M

172

The Rome Congress

This committee worked continuously throughout the session of the conference with the expert assistance of the secretary to the committee, Basil Miles. Miles's latest role at an international conference was played at the Washington Disarmament Conference, where he acted as secretary to the American delegation headed by Hughes. The resolution which the committee finally submitted to the congress deserves a place beside the Dawes plan itself as a notable contribution of postwar business diplomacy. Under the heading "world restoration" the resolution proceeded, scrupulously avoiding all political entanglements, to lay down a program to this end. T h e problems underlying economic disorder were: ( 1 ) reparations; (2) inter-Allied debts; (3) unbalanced governmental budgets and uncontrolled inflation; (4) disturbance of international credits; and ( 5 ) abnormal exchange fluctuations. The first and general proposition governing all of these problems alike was stated to be a "recognition of the interdependence of the different parts of the world's economic organization, the futility of partial remedies, and the necessity for comprehensive consideration of these inter-related questions." T h e restoration of confidence, and increased production and consumption, were prerequisite to the revival of international commerce. The resolution then took up the five problems one by one in the order named in the preamble and laid down the specific principles deemed applicable to the fair settlement of each question. Within this general regime of world restoration the I.C.C. recommended that drastic treatment be applied to the kindred political problems of reparations and inter-Allied debts. In the statement of principles which followed, the international interest was in each instance carefully identified with the national good. Upon this theory the I.C.C. prescribed the following course of reasoning for national politicians: ( 1 ) "final disposition" in the general interest of the "permanent improvement of world economic forces"; (2) recognition of "the full extent and moral character of obligations with restitution and reparation . . . . to the utmost extent of the debtors resources, whether internal or external, from whatever sources derived." Thus were international interests and French interests balanced in the forefront of the I.C.C.'s program of settlement. In particular the international handle of the French problem of collection, namely, German foreign balances,

The Rome Congress

173

was seized firmly in the French interest. From the French viewpoint the dramatic return flight of the Austrian krone which had taken place under the League reconstruction of Austria, as graphically described to the congress by Sir Arthur Salter, was a suggestive feature of the possibilities for reconstruction. From these two principles the derivative principles were simply formulated: (3) Consideration of "the amount of reparations" must be linked with "such measures" presumably regarding payment "as will assure certainty of ultimate settlement and extend reasonable hope for the maintenance of all nations." (4) "The discharge of reparation obligations is not of itself sufficient." This transaction must be linked with the restoration of confidence, the provision of security against the fear of "the violation of frontiers," and the reduction of armaments. (5) "Such security" was "not only indispensable to the establishment of world peace but" on the economic side it was "required to make available international credits, necessary to the rehabilitation of commerce and industry, and consequently, the relative stability of exchange," for "the savings of the world cannot be mobilized for the investments necessary for reconstruction and development without convincing assurance of established peace." Thus international business proclaimed the economic principles underlying national selfdetermination. Critics of the doctrine of self-determination as embodied in the Treaty of Versailles have never been lacking. It is, therefore, interesting to note the defense of the doctrine implicit in the I.C.C.'s application of business principles to the reparations controversy. Article X of the Covenant of the League of Nations sets forth the doctrine from the political angle, dealing with sovereignty over territory. The Rome resolution applies its economic interpretation to the occupation of the Ruhr in the terminology of "the maintenance of all nations," "restoration of confidence," security necessary "to make available international credits." Business principles were applied to "inter-Allied debts" in the terms of the resolution as follows: ( 1 ) "Restoration and further expansion" in industry and commerce is dependent upon the "integrity of obligations." (2) The settlement of inter-Allied debts is "a matter for adjustment between the nations directly involved but the principles which should be applied should be settled with the least possible

174

T h e R o m e Congress

delay." (3) The Allied debts were "obligations undertaken in good faith and do not admit of repudiation " (4) The peculiar circumstances under which they were contracted—"They were contracted in a common cause and during a period of tremendous sacrifice of life and property"—indicate that "a proper factor in any adjustment . . . . should be the present and probable future ability of each debtor." (5) This factor should be determined by "reasonable consideration" of "the effect on its present and future earning capacity . . . . from a sound national budget . . . . savings resulting from the reduction of excessive military expense made possible by the assurance of peaceful conditions," and of "the settlement of its claims for reparation and restitution." After a reiteration of previous resolutions demanding balanced budgets, governmental economy, and tax reduction, the Chamber's statement of economic and financial principles for world restoration condemned intergovernmental loans and credits as "undesirable largely because of the political complications which inevitably accompany such transactions," denounced inflation and "artificial stabilization of exchange," and closed with the traditional endorsement of the gold standard. The resolution concluded with the advocacy of a world economic conference and the following offer, which derived special significance in view of the recent Hughes declaration: This Chamber fully recognizes that it would be inopportune now to propose any suggestions for the settlement of the present situation which exists between the Allied nations and Germany. Yet, believing that at the proper time Governments may wish to avail themselves of the practical experience of the business men of the several countries, this Chamber agrees to hold itself in readiness to render to the interested nations such assistance as may be desired. Meanwhile, the International Chamber of Commerce will undertake to promote among the business men on whose behalf it speaks, continued careful study of all the elements in the international financial problems here reviewed and it urges upon its members, as well as the governments, the serious consideration of the suggestions herewith respectfully offered. Therefore be it Resolved that the Council be and hereby is instructed to appoint such committees and to take such action as may be necessary to make effective the purposes herein set forth. 8 "International Chamber of Commerce, Brochure No. 3 1 , pp. 1, 5, 7, 9.

The Rome Congress

175

The resolution was presented to the finance group in a speech by the president of the drafting committee, Fred I. Kent, vice president of the Bankers Trust Company of New York, a speech which was eloquent of the new American business leadership inspiring the congress. He agreed with the President of the United States when he said that there should be "more business in government and less government in business." Business men must stop the destruction of the commerce and industry of the world. He felt that business men in Europe would wish to know the attitude of business men in America. There could, in the first place, be no doubt whatever that in America there was a feeling that bad politics was "the principal cause for the slow-moving restoration of European economic reconstruction," bad politics representing "the expression of very powerful forces" "emanating from the broken morale of all peoples."9 Kent asserted that the American interest was that of an investor. The real question which confronted America was whether or not, in exchange for the cancellation of a portion of the Allied indebtedness, European governments would agree to correct those things in their countries which were economically unsound and which must be corrected before peace and prosperity could return to those countries. The mere cancellation of indebtedness could be only harmful unless accompanied by economic readjustments. Mere cancellation would tend to increase extravagance in both the civil and military departments of governments. Even if agreements were obtained, they would be absolutely ineffective "unless at the same time the whole reparation tangle" was "settled once and for all, and arrangements made that would enable the stabilization of the German situation. Insofar as it" could "be seen at the moment, the ability of Germany to pay her reparations before the lapse of many years" depended "largely upon whether she" could "obtain an external loan and whether such a loan, if obtainable" were "properly made use of." 10 He believed, therefore, that at the same time as negotiations were being undertaken concerning the possible trading of indebtedness for prosperity in Europe "positive agreements must be made between the * Fi:d I. Kent, in report of Group Meeting on World Restoration, in International Chamber of Conmerce, Proceedings of the Second Congress (Rome, 1923), Brochure No. 32, p. 139. 10 Irid., pp. 142, 143.

176

The Rome Congress

Allies and Germany in connection with reparations, including the amount and methods and times of payment that can and will be lived up to—or, in other words, that can be accepted in sincerity by both sides." 11 If the committee's plan seemed good to the congress, it should be developed. If it does not, get together a small body of able men and find one that does. Select men who can work with speed and certainty, those whose rise in the world has been due to their ability to make quick decisions because they have had back of them clear thinking and sound judgement. Set those men to work, with instructions to deliver, and to deliver promptly. Place upon them a great responsibility. Inspire them with your trust and your confidence, and they will succeed, as all great business enterprises do succeed when so inaugurated. If you will do this, we in America will deliver the completed message of those men to a great waiting group in the United States, who, if they believe in it, will carry it to the uttermost parts of the country. This group is made up of two representatives from each of many of the greatest business organizations in the United States. It already includes representatives from our great farmers' societies, from the Chamber of Commerce of the United States with its tremendous affiliations, from the American Bankers' Association with its membership of 23,000 banks and bankers, from several of the great industrial and manufacturing associations, from business, credit, statistical and exporting and importing organizations, and still other groups are to be asked to join with them. This body of men is now actively engaged in formulating plans that will enable them when ready to promptly place before their various organizations for approval any constructive suggestions that may result from this meeting, and further, upon receipt of such approval, if obtainable, ways and means to present the matter to all individual members of the organizations concerned, and to every citizen of the United States of America. 1 2

Kent believed that the business men from every country represented there could carry out the same idea and by telegraph start the formation of such groups. W h a t is to be accomplished is not the destruction of governmental power by force, but just the opposite. T h e effect should be first to find the progressive solution of the economic problems confronting the world through a small, quick-acting, central group, and then the formation of a public opinion in every country involved that will back up government in putting it u

Ibid.,

pp. 144. 145-

"Ibid.

The Rome Congress

177

into force—a public opinion which will be positive, intelligent, constructive, and hopeful; and that will overwhelm the demagogue and the ignorant, and absolutely destroy their power for harm—a public opinion that will lead your government into paths of progress, and remove from your official representatives the political shackles which today hamper equally those with the greatest honesty and intelligence, as they do all others. 13

The speech of the American chairman of the subcommittee which drafted the Rome resolution has been given in some detail to show the line of reasoning which influenced the drafting committee. The voice of the American investor had commanded attention from the beginning of the reconstruction movement at the International Trade Conference at Atlantic City in the autumn of 1919. The speech of Kent deserves comparison to the speech of the Federal Reserve Board governor, Harding, on that occasion. Between these two bankers' statements lay three years of continuous collaboration with European business men through the organization of the International Chamber of Commerce. Out of these efforts American business men had shaped a definite foreign policy for American business. At Rome, American business was ready to take its place at the conference table with the business interests of European states. The result was not an American policy nor a European policy but an international business policy. The unanimous adoption of the resolution on world restoration at Rome was followed by the immediate appointment of the drafting committee with the addition of the newly elected American president of the International Chamber, Willis H. Booth, vice president of the Guaranty Trust Co., to direct the campaign for the adoption of the Rome principles.14 This campaign was vigorously carried out through the organization of the International Chamber and the several national committees. " ib,J. " I B M . , p. 152.

CHAPTER

XIV

T h e Rome Congress and W o r l d Opinion

T

H E Rome resolution mobilized public opinion in both Ger-

many and France on behalf of a business settlement of the reparations controversy. Business men in both countries were

given a clear view of the way out. In Germany, business opinion was encouraged to believe that French business interests would eventually meet German offers. T h e stage was set for the entrance into power of Stresemann and the conception of the policy of "rapprochement." Stresemann's early participation in the prewar International Congress of Chambers of Commerce has been mentioned above. N o doubt remembering the Boston congress and possibly recalling the difficulty which the German delegation at that time found in supporting the resolution on arbitration, which infringed the political domain, Stresemann did not fail to see the significance of the French delegation's support of the Rome resolution or of the opportunity of international cooperation which it offered to Germany. Speaking in the Reichstag on April 17, Stresemann pointed out the possibilities which lay open to German statesmanship to lift the struggle for German rights above the plane of passive resistance into the field of political activity by ap-

pealing to world opinion. Germany, in the view of Stresemann, should take opportunity to make known her willingness to cooperate in a business solution. Alluding to the delay in the publication of the last German offer, he asserted that the German offer should be held ready for the moment when the necessity of finding a solution substituting international accord for armed force should be discernible in France. 1 Stresemann continued with an analysis of the reasons dictating an international business settlement, quoting the words of the English prime minister, Bonar Law, at the recent Paris conference on the following points: 1

Gustav Stresemann, Vermächtnis, I, 45.

Rome Congress and World Opinion

179

They [the Allies] could only hope to approach the question successfully by taking it in the inverse order as to how much Germany could pay. T o do that, the first thing was to find out not only in the opinion of the Allies themselves, but of fair-minded people outside, how much Germany could pay. T h e only chance of obtaining early [payments] from Germany was by means of the loan and without re-establishment of credit that was impossible. 2 Streseraann then turned to the possibilities of securing F r e n c h consent to such a program of international cooperation. H e was looking for signs of possible F r e n c h business support of the G e r m a n offers of cooperation which he was demanding the government should not cease to make. H e argued: If you consider that Bonar Law is prejudiced in our favour—to France, anyone outside the immediate entourage of the politicians is prejudiced—I will recall a decision of the International Congress of Chambers of Commerce [Stresemann used the title of the prewar organization in which he had participated] adopted by the French delegates. For in this resolution, every clause of which shows how carefully it was drafted in order not to offend any of the many nations there represented, the following words are used with reference also to the R u h r : "It is futile to attempt again to consider the amount of reparations without at the same time establishing such measures as will assure certainty of ultimate settlement and extend reasonable hope for the maintenance of all nations. " T h e discharge of reparation obligations is not of itself sufficient. It is also necessary that confidence be restored, and such security provided that violations of frontiers no longer need be feared and that the world be relieved of the burden of unnecessary armaments." I do not think that in declaring against the burden of useless armaments, this international Congress was thinking of our "Schutzpolizei," and that in affirming that confidence could only be reestablished when the fear that frontiers might be violated should be removed, the Congress was thinking of the security of France as menaced by an attack from Germany. In this resolution, to which the representatives of economic France have given their agreement is the most plain condemnation of the adventure of the Ruhr; and it says that the economic life of the world has been shaken for long by political policy actually yet in force at Paris. 3 O n the second of May, the G e r m a n government made such an offer as Stresemann advised; in the offer, provision was suggested for an impartial international commission ( t o consist either of the consortium *lbid., p. 47.

1

Ibid., p. 48.

180

Rome Congress and World Opinion

which had advanced the first twenty milliards, or of a committee of international business men on which Germany was to be represented on a footing of equality, or of representatives of the German government and the Reparation Commission with a third member to be appointed, in the last resort, by the President of the United States) to determine "whether, when, and h o w " specified payments and interest were to be made. 4 On the twentieth of July, Lord Curzon again gave reiteration to the original Hughes idea for a settlement in the British proposal of that date. Lord Curzon's plan called f o r : ( i ) an undertaking by the German government to abandon passive resistance; (2) steps to be taken, upon the cessation of passive resistance, for the resumption of civil administration of the Ruhr and to provide for progressive evacuation; (3) a body of impartial experts to be set up to advise the Allied' governments and the Reparation Commission as to Germany's capacity to pay and as to the mode of payment; the cooperation of an American expert to be sought and arrangements to be made for consultation with German experts; (4) the same body or a like body to be constituted to advise the Reparation Commission as to the pledging of German economic sureties and guarantees; (5) inter-Allied discussions to be opened without delay for the purpose of elaborating a comprehensive plan of general and final financial settlement; (6) the occupation of all German territory outside the limits laid down by the Versailles Treaty to end with the placing in operation of the pledged economic sureties.5 On the fourteenth of August, Stresemann became chancellor of the Reich. On the twenty-seventh of September economic realities forced the abandonment of German passive resistance and French politicians could listen to that "economic France" whose voice Stresemann had heard in the Rome resolution.8 4 Belgian Grey Book Document 20. "British Parliamentary Paper hereafter cited as C m d . 1 9 4 3 , Doc. 5. * T h e importance assigned to the Rome resolution by the French government is evident in the following citation from the communiqué of N o v . 1 1 , discussing the scope of the proposed investigation by experts which the French government was then disputing with the British and American governments: "Il a été indiqué dans le communiqué d'hier que le travail des experts devait consister d'abord à établir le bilan des ressources de l'Allemagne, ressources extérieures tant qu'intérieures. Cette demande est conforme à la décision prise par la Chambre de Commerce internationale au cours du Congrès qu'elle a tenu à Rome au mois de mars dernier, sous la présidence du délégué Américain, M. Willis Booth et dont voici le texte: ' L a liquidation du problème des réparations est une condition préalable à l'amélioration durable de l'état économique du monde. Il importe au plus

Rome Congress and World Opinion

181

O n the thirteenth of November, Barthou, the French delegate on the Reparation Commission, moved to this effect as follows: In order to assure the application of Article 234 of the Treaty of Versailles, and in accordance with the provisions of Paragraph 7 of Annex 11, the French delegation considers that when the Germans have been heard a committee of experts belonging to the allied and associated countries should be set up. This committee would be entrusted with estimating Germany's present capacity to pay, and with furnishing the reparation commission with information enabling it to determine the amounts of German payments to be made during 1924, 1925 and 1926. In the opinion of the French delegation, the experts, who will take the schedule of payments as the basis of their labours, will endeavour to estimate Germany's resources, internal as well as external, and in particular German assets abroad. 7

T h e true business and international character of the Rome resolution is evident in the effect which it produced both in Germany and France. As Stresemann observed in the Reichstag, the care of the drafters of the Rome resolution to avoid offence to national sensibilities is apparent in every phrase. The committee on world restoration did its work well. The Rome resolution was citable in support of an international settlement on business principles by both Stresemann and Poincaré. In particular the principle enunciated in the Rome resolution of "reparation . . . to the utmost extent of the debtors' resources, whether internal or external, from whatever sources derived" apparently enabled the Poincaré government to approve an international committee of business men and led directly to the appointment of the McKenna committee. The provision for the McKenna committee made possible French acceptance of the Dawes committee. 8 haut point que soient reconnus par le débiteur toute l'ctendue et le caractère moral de ses obligations et que restitution et réparation soient faites jusqu'à l'extrême limite de sa capacité en faisant, état de toutes ses ressources tant intérieures qu'extérieures. Cela signifie que tous pouvoirs devraient être donnés aux experts pour les mettre à même de rechercher partout où ils se trouvent les capitaux allemands indûment exportés et se trouvant aussi bien dans les banques françaises que dans les banques anglaises, Américaines ou d'autres pays. Le gouvernement français aurait été fût à faciliter cette enquête sur son territoire dans les plus larges mesures.' " 7 Reparation Commission communiqué of Nov. 13, 1925 (French text in Le Temps, Nov. 15). 8 Regarding the decision of the Reparation Commission to appoint two committees, Bergmann writes "The members of the Reparation Commission had agreed upon this formula in order to assure the assent of all interested Powers, and of France in particular In the form presented, the resolution sounded perfectly harmless even to the ears of Poincaré. N o word was said about investigating Germany's capacity to pay, the fixing of the reparation debt, or the occupation of the Ruhr. What was likely to please Poincaré especially, was the proposed investigation into the flight of German capital abroad, a hobby horse which he had been riding in all his speeches." Bergmann, op. cit., pp. 220, 221.

CHAPTER

XV

T h e Business Settlement of Reparations

T

HE

task w h i c h f a c e d the D a w e s a n d M c K e n n a

committees

a p p e a r e d to present almost insuperable difficulties. C o m m e n t i n g upon the ultimate a c h i e v e m e n t of the D a w e s committee,

B e r g m a n n writes:

N o admiration is too great for the work which these men accomplished in less than three months. They were called together by the Reparation Commission at a time when the German economy seemed to be collapsing under the pressure of the occupation of the Ruhr. Political relations among the Allies were strained to the breaking-point. All attempts to advance the reparation question by way of negotiation had failed. T h e Reparation Commission's hope of finding a way out of this desperate situation, with the assistance of the experts rested on a weak foundation. Yet it was the last resort left in the emergency, and it had to be tried. 1 N o observer w a s better q u a l i f i e d to pass an authoritative j u d g m e n t o n the chances of an expert settlement in 1924 than B e r g m a n n . T h e record of previous expert committees p r o v i d e d " a w e a k f o u n d a t i o n f o r h o p e of finding a w a y o u t . " 2 With all this in mind [continued Bergmann] one could but marvel at the cheerful confidence with which the American members of the Committee in particular attacked their task; they were men who were held in high esteem in the United States and of whom much was expected. If they failed they jeopardized their great reputation. But they were confident from the start that they would succeed. Perhaps this very optimism aided them in passing over all difficulties and brought about success; or perhaps the time was ripe when, after many failures, success finally had to come. 3 T h e o p t i m i s m a n d assurance of the A m e r i c a n

m e m b e r s of

the

c o m m i t t e e in the f a c e of o v e r w h e l m i n g difficulties is only c o m p a r a b l e to the m o o d and t h o u g h t of those A m e r i c a n business representatives 1

Bergmann, The History of Reparations, 'Ibid.

p. 223. 'Ibid.

Business and Reparations

183

who since the war had been in continuous and active collaboration with European business men within the organization of the International Chamber of Commerce. Two of the three American representatives on the Dawes and McKenna committees, Owen D. Young and Henry M. Robinson, as members of the Council of the International Chamber and leaders in the American business movement toward cooperation in European affairs, had participated in the formation of an international business policy upon the subject of reparations. Young, as noted above, as early as the autumn of 1921 was sitting in conference upon this vexed question as a member of the International Finance Committee of the Chamber in company with another prominent member of the Dawes committee, Pirelli, under the chairmanship of Clementel, who was destined finally to accept the Dawes Plan for the French government in the signing of the Treaty of London. Of the fifteen members of these two committees the complete list of active leaders in the International Chamber numbered, in addition to Young, Robinson, and Pirelli, Mario Alberti (Italy, McKenna committee), and Albert E. Janssen (Belgium, McKenna committee). Sir Josiah Stamp (England, Dawes committee) later joined this group as an active member of the International Chamber committee on world restoration under the chairmanship of Fred I. Kent. Commenting further upon the difficulties before these two committees of experts, Bergmann sums up the task of working out an acceptable settlement as follows: But, if all went well, what in the most favorable event could be expected from the work of the experts? N o one dared to hope when the Committee met that it would be able to bring about a thorough settlement of the German reparation debt' and a reasonable adjustment of the R u h r conflict. It did not even seem possible to harmonize the different views of the individual members, most of whom had never met before, and whose countries were divided by sharp political and economic conflicts.4

This analysis, based upon Bergmann's wide experience in the toils of actual reparations negotiations, suggests the importance of the strength of the nonpolitical international business movement with which an important section of the group had been associated. Five of the members of these two committees drawn from three • ibid.

184

Business and Reparations

of the four nations represented on the Dawes and McKenna committees stood pledged to support an international business solution of reparations along the lines laid down in the Rome resolution.5 In the minds of the business leaders of the International Chamber, the Dawes attempt was not a forlorn hope, "the last resort left in the emergency," but the first step in the execution of the Rome resolution. The American members, in particular, were conscious of the fact that they were the representatives of American business, sent to put into action the philosophy of business leadership championed by Secretary Hughes in the New Haven speech, which with the adoption of the Rome resolution by the Chamber, had become the great objective of organized business opinion in international affairs. The Dawes and McKenna committees differed from previous expert committees in that they represented not only great technical skill but an organized international business opinion. Moreover the same technical skill and ability of the secretariat and committees of the League of Nations, notable in the collaboration of the League and business interests within the I.C.C., is apparent in the method and technique of the Dawes committee. The mind of organized business, represented by these two committees, was thoroughly familiar with the League method of international reconstruction— from the Brussels conference and the Ter Meulen plan to the Hungarian reconstruction scheme then in process of formation. The same helpful League influences, which had made possible the formation of a unanimous business opinion in the I.C.C. reparations committee at Rome, were working to assist the Dawes and McKenna committees in their labors at Paris. The success of the efforts of these committees depended primarily upon their adoption of a broad and statesmanlike interpretation of their terms of reference. W h a t would be the practical value [writes Bergmann] of a report, however excellent, on German finances and currency? For, strictly speaking, the task of the First Committee did not extend beyond the presentation of a report on what was necessary to balance the German budget and to stabilize the currency. T h e question of the currency . . . . had been an6 International Chamber of Commerce, Proceedings of the Second Congress (Rome, March 1824, 1 9 2 3 ) , Brochure No. 32, p. 145.

Business and Reparations

185

swered as long ago as November 1922, by a committee of prominent international experts but without producing the slightest practical results. Their terms of reference in no way entided the experts to touch the heated reparation problem or even to include it in the scope of their investigation. 6

It should be noted, however, that the exchange approach to the reparations controversy was not unfamiliar to members of the International Chamber. It was upon this ground that the Finance Committee at the first congress of the Chamber in London as early as March, 1921, undertook a study of the kindred problems of reparations and inter-Allied debts. Organized business opinion, through the International Chamber, had preceded the Dawes and McKenna committees in the line of reasoning necessary to a broad interpretation of the committee's terms of reference formulated by the Reparation Commission. The committee started with an unqualified acceptance of the fundamental basis underlying international exchange stability, namely, currency stability. The scope of the investigation was construed as primarily covering the question: "What can Germany pay for reparation without endangering the balance of her budget and the stability of her currency?" 7 This, in fact, was "the starting point" which the Financial Committee of the League of Nations had usually chosen as the point of departure for the financial reconstruction work of the League. The line of reasoning followed by the Financial Committee in the practical application of financial principles to reconstruction in Central Europe is stated in an account published by the League secretariat on the Principles and Methods of Financial Reconstruction Work undertaken under the auspices of the League of Nations ran as follows: H o w can this currency be stablized on a gold basis? T h a t was in effect, and in its simplest form the first, the most insistent question. T h e rest followed naturally. There must be a central bank with a secured independence, an adequate gold or foreign exchange reserve, and a free exchange market. But it is impossible to stabilize the currency without dealing with the budget situation if there are deficits. H o w can the budget be made to balance permanendy ? 8

The Dawes and McKenna committees conceived their task as such a 7 • Bergmann, op. cit., p. 224. Bergmann, op. cit., p. 227. 8 League of Nations, Publications II: Economic and Financial, 1930, II, 16, Principles and Methods of Financial Reconstruction Work, Undertaken under the Auspices of the League of Nations.

186

Business and Reparations

projcct in international reconstruction. The attitude of the committee is clearly stated in the introduction to the summary of their report: (a) The standpoint adopted has been that of business and not politics. (b) Political factors have been considered only in so far as they affect the practicability of the plan. (c) The recovery of debt not the imposition of penalties, has been sought. (d) The payment of that debt by Germany is her necessary contribution to repairing the damage of the War. (e) It is in the interest of all parties to carry out this plan in that good faith which is the fundamental of all business. Our plan is based upon this principle. (f) The reconstruction of Germany is not an end in itself; it is only part of the larger problem of the reconstruction of Europe. (g) Guarantees proposed are economic not political.9

This interpretation by the committee of the purpose of the investigation was, as Bergmann writes, "a bold transposal of its task."10 The philosophy of business cooperation as applied to a reparation settlement expressed itself in terms of Germany's obligation rather than in terms of Allied coercion. "The doctrine of Germany's obligation and of Germany's strength" was "wholly in the line of thought of Owen D. Young," the chairman of the drafting committee of the Dawes Report. 11 The extent to which the proceedings of the Dawes committee were dominated by the business point of view and technique is shown in the committee's solution of the specific problems confronting it. Upon the question of the contribution of German industry to reparations, it is to be noted that Pirelli was the foremost advocate of the device, finally adopted by the committee, of a special reparation debt for German industry. This proposal, designed to eliminate French industrial charges of unfair German competition which had previously been largely responsible for the blocking of a settlement, was seconded by the American and British members of the committee. 12 Before the adoption of the provision, the consent and cooperation of German industry was made certain by confidential discussion with Buecher, the business manager of the Central Union of German Industries.13 Although there is no evidence to show that any understanding was 'White Paper Cmd. 2105. 10 Bergmann, op. cit., p. 226. u Ibid., p. 253.

" I b i d . , p. 234. Ibid.

u

DR. ALBERTO PIRELLI PRESIDENT OF THE INTERNATIONAL CHAMBER, 1927-1929

Business and Reparations

187

definitely reached between Allied and German industrial leaders at Rome, it is interesting to note that Stinnes was in Rome for a time during the congress of the International Chamber and that confidential conversations were carried on between Clementel and Stinnes while the Rome resolution was being drafted. 14 The same thesis of German industrial cooperation, in the payment of reparations outside the budget of the Reich, received further application in the provision for separate railway and industrial interest payments on an accelerating scale during the years of transition in which German public finance was undergoing reorganization. T h e acceptance of German solvency as the primary consideration precedent to the drafting of any scheme of payments involved the application of the principles of sound public finance upon which the entire system of international reconstruction was based. Before the financial reconstruction scheme in Austria and Hungary could be successfully launched it had been necessary formally or informally to settle outstanding difficulties arising from each country's indebtedness, whether such indebtedness took the form of debts between Governments (reparation, war debts, relief credits) or of loans from private bondholders to the Government concerned, the service of which had been suspended, with the result that the way was not clear for the issue of a new public loan. 15

In the case of Austria, it had not proved difficult to secure the release of the Austrian budget from the service of reparations claims, inasmuch as those claims had of necessity been early reduced to insignificance due to Austrian economic conditions. In the case of Hungary, however, it had been necessary to provide some means of satisfying reparations creditors while at the same time safeguarding Hungarian financial stability. The report of the League Financial Committee of December 20, 1923, solved this problem by placing the payment of claims of reparations creditors on a par with those of other claimants, in the hands of a master of the budget called a commissioner-general. Sir Arthur Salter summarized this provision as follows: A t any time during the currency of the loan, a Commissioner General is " The above fact was quoted to the writer in private conversation. " L e a g u e of Nations, Publications II: Economic and Financial, 1930, II.16, Principles and Methods of Financial Reconstruction Wor% Undertaken under the Auspices of the League of Rations, pp. 33, 34.

188

Business and Reparations

to be in office, if b u d g e t e q u i l i b r i u m is in d a n g e r , a n d w h i l e he is in office n o R e p a r a t i o n s p a y m e n t s can be m a d e except w i t h his assent, i.e. e x c e p t w h e n he j u d g e s that they are possible w i t h o u t p r e v e n t i n g the execution of his p r i m a r y w o r k , the establishment of b u d g e t e q u i l i b r i u m a n d m a i n t e n a n c e of the security of the loan. T h e T r u s t e e s representing the bondholders h a v e the right to ask the C o u n cil to appoint a C o m m i s s i o n e r - G e n e r a l

w i t h these p o w e r s w h e n e v e r

they

can s h o w that the e q u i l i b r i u m of the budget a n d the security of the loan is threatened. 1 6

The acceptance of this general principle necessitated its application to the question of payments across the exchanges as follows: "The Reparation payments are made in Hungarian crowns. They can only be converted into foreign exchange so far as such conversion is compatible with the maintenance of the exchange value of the crown." 17 The idea of safeguarding the value of a currency through the control of an independent bank of issue under international management was, as has been noted above, implicit in the earliest of League reconstruction schemes. Vissering, at the Brussels conference in 1920, explained in some detail the method to be employed in currency stabilization.18 The provision, in the Hungarian reconstruction scheme, for the establishment and control, under an international authority, of a credit balance in crowns, charged to reparations, had a profound effect upon the relations between debtor and creditor on the reparations account. This new system of transfer operated to release the debtor country from responsibility over a transaction beyond national control. The Dawes committee found this principle already applied in the Hungarian reconstruction report published on December 20, 1923. Its further application to Germany, as provided in the Dawes plan, made the payment "in gold marks or their equivalent in German currency into the Bank of Issue to the credit of the 'Agent for Reparation Payments . . . the definitive act of the German Government in meeting its financial obligations under the Plan." 19 This recognition of the international character of the transfer problem follows a line of reasoning for some time current in the discussions of the International Chamber of Commerce. As noted above, the International Finance " S i r Arthur Salter, in League of Nations, Monthly Summary (May, 1924), Supplement. 17 u 10 Ibid. See above, Chapter VI. Bcrgmann, op. cit., pp. 242, 243.

Business and Reparations

189

Committee, in the autumn of 1921, resolved on the motion of Pirelli to study the exact effect of the first German payment under the London schedule on the exchange. And the Watts-Roberts Memorandum noted above concluded with the following significant observation, T h e first payment of reparation funds occasioned a considerable disturbance of exchange rates, which obviously it is desirable to avoid in the future. There is reason to believe that this is fully appreciated by the Authorities, and that they, and the Governments concerned, will take the advice of competent bankers in arranging subsequent cash payments. T h e precise means to be used naturally will vary from time to time. 20

T h e elimination of the transfer peril by placing all German creditors, political and commercial, on the same footing under the protection of an independent international authority served not only to make the reparations contract itself acceptable as a sound business document but also to insure the stability of the whole complex of private commercial documents upon the security of which business, both public and private, primarily depends. Confidence in Germany's financial and economic position was restored with the placing of strong international safeguards around the Bank of Issue. The transfer provision of the Dawes plan insured world business against an untimely rush on the bank by political depositors on the reparations account. By their acceptance of the Treaty of London, governments elected to take their chances with other creditors as partners in German economic activities. The most striking feature of the Dawes settlement is its initiation of the return of ex-belligerent politico-economic groups to normal business rules. This fact is nowhere more marked than in the findings of the McKenna committee. Such a denial of a fundamental principle of banking practice as that involved in any attempt to ferret out the private affairs of depositors by the employment of coercive methods in an investigation on an international scale would have turned to naught all the labors of the first committee. Judged by the utterances of Poincaré and the French communiqué noted above, it was hope of securing international business cooperation in such a procedure which had largely motivated the French government's halting acceptance of " M e m o r a n d u m by G e o r g e E. Roberts, vice president of the National City B a n k of N e w

York,

and F. O . W a t t s , president of the First National B a n k of St. Louis, in International C h a m b e r of C o m m e r c e , " M i n u t e s of International (unpublished).

Financial C o m m i t t e e , October 6, 1 9 2 1 , " A r c h i v e s

1627

190

Business and Reparations

the proposal to call the expert committees. The philosophy of cooperation had come to dominate organized business opinion in the international sphere to such an extent that a procedure so foreign to customary business practice was utterly unacceptable. The entire policy of organized business represented by the International Chamber, with which a majority of the committee had been actively connected, was directed against such governmental restriction and interference with private business as this Poincare proposal to international business. When one recalls the graphic description, by the Belgian member of the McKenna committee, Janssen, at the Atlantic City Business Conference, of the coercive banking practices employed by the German government in occupied territories, one is impressed with the enormity of the political obstacles to business cooperation which it had been the task of organized business to remove. The McKenna Report, over the signature of Janssen, marked the return of Allied business minds to the normal business principles of peace. The replacement, at the London conference, of sanctions by provisions for arbitration completed the transformation of the reparations contract from a political settlement guaranteed by military coercion to a commercial contract with an arbitration clause. All of this was in the philosophy of the distinguished advocate of business cooperation of the International Chamber who so usefully expounded the principles of the Dawes plan to the representatives of the governments at the London conference. The extension of arbitration to cover the entire sphere of commercial contracts had been one of the principal objectives of the International Chamber from its organization. The business world, through the work of the Chamber's International Court of Arbitration, had become thoroughly conversant with the doctrine and principles underlying the system of commercial arbitration. Young, who was chairman of the Committee on Commercial Arbitration of the Chamber of Commerce of the United States, had been one of the principal organizers and exponents of the arbitration court of the International Chamber.21 The Economic Committee of the League of Nations, on September 24, 1923, four months before the assembling of the Dawes and McKenna committees, had secured the approval by n See International Chamber of Commerce, "International Commercial Arbitration," Digest No. 3 , by Owen D . Y o u n g .

Business and Reparations

191

the Assembly of the League of Nations of a draft protocol on the subject of the international validity of the arbitration clause in commercial contracts.22 Young must have felt a poetic satisfaction in seeing arbitration clauses inserted in the reparations contract. The soundness of the Dawes plan and of the philosophy of business cooperation embodied in the institution of the International Chamber of Commerce was given speedy substantiation by the long-prophesied response of American investors to a business settlement of reparations and a stabilization of currencies on the gold standard. The year 1925 saw an increase of $1,100,000,000 in loans on securities held by American banks over the length and breadth of the United States. One of the principal factors accounting for the rapid growth in bank loans on securities was the exceptionally heavy volume of foreign securities floated during that year.23 These figures explain the extent to which small investors fulfilled the expectations expressed by American business leaders at conferences from Atlantic City to Rome. The ideal of international business cooperation was realized within the organization of the International Chamber of Commerce by the admission of Germany on November 6, 1925. The correspondence between Franz von Mendelssohn, president of the Deutscher Industrie und Handelstag, and Secretary-General Édouard Dolléans of the International Chamber supplies an important commentary upon the significance of the Rome resolution and the Dawes plan in the history of Allied-German business relations. In January, 1925, during the course of the preliminary negotiations, President von Mendelssohn asked the secretary-general of the Chamber for an interpretation of the clause of the Rome resolution dealing with the moral character of the reparations obligation. The resolution read: "It is imperative that the full extent and moral character of the obligation should be recognized." Von Mendelssohn pointedly asked whether the phrase "moral character" implied a recognition by Germany of responsibility for the declaration of war. T o this the secretary-general replied as follows: 22 International Chamber of Commerce, "Supplement to Record No. 8, December, 1 9 2 3 " ; also League of Nations, "Treaty Series," Vol. XXVII (1924), No. 675, p. 158. 23 Federal Reserve Board, Twelfth Annual Report (covering operations for the year 1 9 2 5 ) , Washington, Government Printing Office, 1925, p. 10.

192

Business and Reparations

T h e R o m e resolution is concerned with the international economic situation resulting from the war and has no bearing upon the origins of the war. A n d , in fact, the International Chamber of Commerce is essentially an organization of an economic character founded upon the community of interest which exists among the different nations of the world. It has no political character. A s to the rest, the economic character of the studies and the work of the Chamber has been marked by an adherence to the principles laid down in the R o m e resolution of March, 1923. Out of the action of the International Chamber taken with the authority of its national committees in each of the affiliated countries has grown the work of the Committee of Experts. It is the R o m e resolution the principles of which have been applied in the D a w e s plan of April, 1924. T h e acceptance of these principles has permitted the practical business solution of the problem of the payment of reparations. O n this point, let me draw your attention to the following passage from Chapter I, Part I of the Report submitted by the first committee of experts [the Dawes committee] to the Reparations Commission, April 9, 1924: " W e have been concerned with the practical means of recovering this debt, not with the imposition of penalties, and the guarantees which we propose are economic and not political. A t the same time it is no ordinary debt with which w e deal, for Germany suffered no appreciable devastation, and her primary moral obligation is toward those who have suffered so severely through the war." 2 4

This interpretation of the Rome resolution by the secretary-general was made authoritative by the Council and cordially accepted by the leaders of German business. In the phase of European reconstruction opened by the Dawes report the organization of the International Chamber of Commerce was strengthened by the admission of Germany. 14 The International Chamber of Commerce, correspondence files of the secretariat, letter (translated by the author) from the secretary-general to President von Mendelssohn, January 3 1 , 1 9 2 5 (unpublished).

Part III ECONOMIC DISARMAMENT

CHAPTER

XVI

The Evolution of International Tariff Policy

D

URING the postwar period, terminating with the Dawes plan, I the I.C.C. was primarily concerned with the task of evolving a plan of cooperative action for European reconstruction. Such a plan on its political side called for the removal of the menace of coercive government action in the form of indemnities and military penalties. On its economic side the problem was largely that of promoting the revival of European production. These problems, reparations and the priming of European industrialism, were both, as has been pointed out, approached as problems in finance. European reconstruction was viewed by the business world as primarily a problem of credit. The reparations bonds of the Allied Supreme Council were proved worthless as reconstruction credits on the money markets. The League reconstruction securities, on the other hand, in the form of the Austrian bonds netted full value. The necessities of the reconstruction budget thereupon forced upon would-be European borrowers the substitution of business for retaliatory principles. Allied interests were compelled to adopt the League system of European reconstruction expressed in the various articles of the Dawes plan. In this evolution of European reconstruction policy, business opinion was acting upon the familiar dicta of prewar international finance—the well-grounded principles of the gold standard world. The financial regime of international capitalism was founded upon solvent, competing, national capitalist units of production. In the face of Communism the menace to this regime in the form of national financial and economic deterioration was very apparent. Nationalism as reemphasized by the conference of Paris was discovered to be impotent without financial underwriting by international capitalism. The Dawes plan was a victory for the regime of private capitalism in that private investors largely displaced governments in financial control.

196

International Tariff Policy

This victory meant the inclusion of German capitalism in a new regime for the financial reconstruction of Europe. As stated in the Rome resolution of the I.C.C., however, "the maintenance of all nations" was conceived as the first consideration of reconstruction policy. This national emphasis tended to run economic activity into national forms of enterprise required by the demands of national solvency. The rigors of the regime of budgetary reform and exchange stabilization imposed by the very system of international cooperation in the financial sphere thus tended inevitably to stiffen the resistance of separate national economic units to cooperative action in the field of production and distribution. The financial requirements of the American investment market upon European governments, as stated by the Democratic Secretary of the United States Treasury, Carter Glass, "to live within their incomcs, increase production as much as possible and limit their imports to actual necessities,"1 were not calculated to inspire international trade. There existed from the start a fatal contradiction in the thinking of the leaders of postwar international capitalism. Secretary Glass's world financial regime of increased national production and budgeted imports looked "towards the restoration as promptly as possible of normal conditions, the removal of Government control and interference and the restoration of individual international free competition in business." The political naïveté of the proponents of international financial policy covers the official and unofficial records of the years of early European reconstruction. Even such an oracle of economic and financial wisdom as the Brussels Financial Conference of 1920 gave utterance to such ambiguities as: "The complimentary steps for arresting the increase of inflation by increasing the wealth on which the currency is based, may be summed up in the words: 'increased production and decreased consumption,' " 2 and in the same resolution "Another urgent need is the freest possible international exchange of commodities." Again: VI Commerce should as soon as possible be freed from control and impediments to international trade removed. Equally urgent is the necessity for decreased consumption in an impover1

See above, Chapter III. * International Financial Conference, Proceedings of the Conference, Vol. I, Report of the Conference, p. 19.

International Tariff Policy

197

ished world where so much has been destroyed and where productive power has been impaired. It is, therefore, specially important at present that both on public and private account and not only in impoverished countries, but in every part of the world . . . . VII

All superfluous expenditure should be avoided. To attain this end the enlightenment of public opinion is the most powerful lever.

VIII

It is highly desirable that the countries which have lapsed from an effective gold standard should return thereto? It is difficult, in view of the dynamic history of industrialism, to understand today a political optimism so artless as to have inspired, on the one hand, a world-wide campaign of nationally increased production, decreased consumption, and progressive deflation, and, on the other, to have expected any practical results from such pious endorsements of laissez-faire economics as that of the Supreme Council of the eighth of March, 1920, reaffirmed at Brussels: that the States which have been created or enlarged as a result of the war should at once re-establish full and friendly cooperation and arrange for the unrestricted interchange of commodities in order that the essential unity of European economic life may not be impaired by the erection of artificial economic barriers. 4 that within such limits and at such time as may appear possible, each country should aim at the progressive restoration of that freedom of commerce which prevailed before the war, including the withdrawal of artificial restrictions on, and discriminations of price against external trade. 5

The objective of international business leadership of 1920 was to recreate the prewar international capitalist system in toto—gold standard and nationally competing sheltered industrialism—in all the curiously variegated patterns of the expanding economic nationalism of the early 1900s. A n d even President Wilson, who was largely responsible for Article 23 (e) of the Covenant which enshrines the phrase "equitable treatment for the commerce of all members of the League," is quoted by David Hunter Miller as elucidating the proposed League '¡bid.

'Ibid.,

p. 22.

'Ibid.

198

International Tariff Policy

principle in the commission's discussion at Paris as follows: "Not any restriction on any State in regard to its fiscal policy, no thought of curtailment of right of customs duty, port charges, etc.—in my mind that old arrangement of retaliatory tariffs and discriminatory tariffs should be done away with."6 The extent of international thought in 1920 upon the subject of tariff control may be accurately gauged by the program of the American and British experts at the Peace Conference. This program provided means for somewhat softening the bitterness of prewar tariff controversy through the introduction of draft conventions aiming at the elimination of retaliation and discrimination from the sphere of tariff policy.7 The sentiment at Paris, however, made utterly impractical any multilateral treaty on tariff policy on even such a limited scale as that proposed by President Wilson. Point Three of the Fourteen Points called for "The removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance."8 This point was postponed at Paris while the experts redrew the national boundaries of Europe. Like the more famous fourth point, providing for "adequate guarantees given and taken that national armaments will be reduced to the lowest point consistent with domestic safety," it was set aside to await the reconstruction of European nationalism. National disarmament, both economic and military, was left for future negotiations by the League of Nations. Even the League's vague grant of authority in Article 23 (e) reading Subject to and in accordance with the provisions of international conventions existing or hereafter to be agreed upon, the members of the League: (e) Will make provision to secure and maintain freedom of communications and transit and equitable treatment for the commerce of all members of the League.

was only obtainable at the price of the reparations-reconstruction loophole appended in the final clause: "In this connection the special 'Miller, The Drafting of the Covenant, I, 197. See also Felix Morley, The Society of Nations, p. 1 0 1 . 7 For texts of draft conventions prepared by American and British experts see Miller, The Drafting of the Covenant, Vol. II, Doc. 4. " R a y Stannard Baker and William E. Dodd, "The Public Papers of Woodrow Wilson," Vol. I, War and Peace, p. 159.

International Tariff Policy

199

necessities of the regions devastated during the war of 1914-1918 shall be borne in mind." The force and character of national tariff interests at the Peace Conference is clearly shown by the statement of the French representative, Larnaude, who insisted upon the addition of the final clause. "The plan of a Covenant," contended Larnaude, "was the outcome of the war and of the condition of distress created in Poland, Belgium, and many other countries by Germany. So long as this situation remained unrelieved, we could not talk of 'equitable' commerce; the word would not be understood. Throughout a period of uncertain length, it would be just to ask that we be permitted to take restrictive precautions, which would protect us from the invasion of enemy goods."9 The evolution of international trade policy was predetermined by the politico-economic factors which followed in the wake of the financial reconstruction of the European national state system. An international tariff policy was not formulated during this period for the same reason that a revival of Cobdenism did not menace neo-mercantilism prior to 19x4. National barriers failed to cut the main arteries of trade. Before the World War factors adverse in the world currents of trade were constantly liquidated through British financial control and European imperialistic expansion. Had anyone of the closed Continental tariff systems become powerful enough to dispute financial control with the great London market, this process of liquidation might have been interrupted and the main currents of international trade, unsupported by British credit policy, reduced to a mere trickle over national tariff walls. Similarly, after the war, uneconomic national divisions of production and distribution, marked off by the maze of postwar European tariff walls, were at first scarcely discernible against the postwar background of political hatred. They were later submerged in the flood tide of American goods and credits which swept in from the West upon the acceptance by European governments of the war debt settlements, the reestablishment of the gold standard, and the execution of plans for financial reconstruction under the League and Dawes regimes. Later, when a reconstructed European industrial system attempted to ship its cargoes of products in repayment, the American tariff wall loomed up out of the welter of American prosperity. " Quoted in Morley, op. cit., p. 100.

200

International Tariff Policy

The high American tariff stopped European repayment through the normal working of international trade and thrust back European goods into the restricted channels of the postwar European tariff system. The threatened blockade of European-American trade turned American and European thought to the possibility of opening other routes and other markets to free competition within the confines of Europe itself, thereby staving off the impending American credit-tariff blockade. The movement to hew a way for international trade straight through the economic armaments of Europe followed numerous minor attempts by international conferences to secure freer trade by the limitation of various forms of political blockade. The objectives of these preliminary campaigns, however, were limited to the conception laid down at Paris by the advocates of liberal trade policy, namely, the elimination of discrimination and retaliation from the various phases of commercial policy. In general, as has been pointed out, this movement for the elimination of war practices from economic policy ran parallel to the kindred movement for the ending of coercive practices in financial policy. Because of its limited character, however, and its necessary dependence upon success in the financial field, the formation of trade policy before 1925 never claimed more than secondary public interest. The accomplishment, however, of collective action in this field not only reinforced international cooperation in the financial sphere and aided in developing the system of cooperative action between the business men of the I.C.C. and the machinery of the League, as noted above, but cleared the ground for the great business movement of 1927 against the tariff system. While the League's Disarmament Section and the Temporary Mixed Committee were breaking technical ground in the field of national security in an effort to initiate a general movement towards military disarmament in fulfillment of President Wilson's fourth point, the Economic Committee and the Economic section of the Secretariat, together with the International Chamber of Commerce, were breaking similar ground, preparatory to a general advance into the territory of nationalism preempted by President Wilson's third point, dealing with economic disarmament.

GEORGES THEUNIS PRESIDENT OF THE INTERNATIONAL CHAMBER, 1929-1931

CHAPTER

XVII

A W o r l d Customs Conference in Preparation

I

N I N I T I A T I N G League activity under Article 23 (e) of the Covenant, the Council, in a resolution of September 19, 1921,1 afterward confirmed by a resolution of the Second Assembly, 2 directed the Economic Committee to prepare an opinion upon the meaning and scope of the provision relating to equitable treatment of commerce. During the following year the Economic Committee devoted itself to an exhaustive study of the complexities of European commercial policies in relation to the principle of equitable treatment in the meaning of the Covenant. The committee "interpreted the mandate confided to them as having an essentially practical rather than a theoretic object." 3 Avoiding the pitfalls inevitable "in the barren academic labour of attempting to frame a definition of equitable treatment" the committee undertook "rather to advise the Council and the Assembly as to the more important practical duties imposed on members of the League by the above provision of the Covenant, and as to the measures which could appropriately be taken at the present time through the machinery of the League of Nations to provide for the better fulfillment of all or any of those duties by the member States."4 From this practical standpoint the committee determined "that the best method of achieving a useful result was to begin by enumerating various classes of practices which, in their judgment, clearly violated the principles of equitable treatment of commerce laid down in the Covenant." 6 The study of the committee, with this end in view, fell under the four general headings of (1) unfair competition (fraudulent trade practices, etc.); (2) excessive, useless, arbitrary or unjust customs formalities and procedure; ' L e a g u e of Nations, Official Journal (Dec., 1 9 2 1 ) , p. 1156. 'Ibid., Supplement No. 6, Oct., 1921, p. 19. * League of Nations, Report by the Economic Committee to the Council and the Assembly, (Document A.59.1922.II). 4 Ibid. « Ibid.

1922

202

A World Customs Conference

( 3 ) treatment of foreign nationals and enterprises; and (4) unjust discrimination (goods or ships). Although the committee denied the implication that this enumeration was "in any way exhaustive," the report shows the difficulties which had beset the considerations of even such a practical, nonpolitical, international investigation into trade policy. The measure of political sensibility to any sort of international interference with, or discussion of, national tariff policy is shown by the committee's cautious references to this closed national domain. Upon the subject of tariff stabilization, the committe guardedly appended an innocuous but prophetic observation to the effect that there remained one question to which the committee attached importance, but which, while closely connected with the subject matter of the articles on customs formalities, had nevertheless such a bearing on tariff policy as to be unsuitable, in their opinion, to be included in the program of a conference which was to be limited to the discussion of customs formalities and procedure. This was the question of giving increased confidence to trade by the stabilization of customs tariffs, i.e., by adopting the principle of keeping such tariffs unchanged over substantial periods of time, as regards both rates and classification. While it was, as the committee pointed out, evident that no uniform rule could, under the circumstances then obtaining, be prescribed, the committee reported the following recommendation on the subject, which they trusted that the Council would see its way to communicate to the members of the League: T h e Economic Committee are deeply impressed with the inconvenience and injury caused to international commerce which result from the uncertainty arising from frequent changes of customs tariffs, and associate themselves cordially with the resolution of the Genoa Conference on this subject. T h e Committee strongly recommend that all States should endeavor to insure that these customs tariffs should remain applicable over substantial periods of time and that changes in rates and classification should be effected as seldom as possible and only when they are necessitated by the essential economic needs of the country. 6

The final clause limiting tariff changes solely to "the essential economic needs of the country" implies the principle which must underlie any international regime of tariff control. T h e Genoa resolution confined itself in this respect to simple advocacy of stabilization and a 6

lhid.

A World Customs Conference

203

denunciation of "fighting tariffs" in the following words: "The practice of frequent modification for the purpose of economic warfare should be entirely abandoned."7 The carefully worded enunciation by the committee of this principle of a national responsibility in tariff policy was first communicated to the members of the League in the resolution of the Council of September, 1922, with the other proposals of the committee relative to the calling of a customs conference and the decision of the Council to formally convene such a conference. It was nearly a decade later that a dying tariff conference, in 1930, gave this principle its first legal form in the provision for notice and consultation before tariff change as embodied in the articles of the Customs Truce Convention. The virulence of that form of economic nationalism abroad in the world when the Economic Committee started its work under the principle of "equitable treatment" embodied in Article 23 of the Covenant found no more depressing expression than in the discriminatory practices common to the national treatment of foreign goods and ships. After "special consideration" of this abuse, and although realizing "the desirability of the earliest and most general application" of the essential principle of "the suppression of all unjust discrimination against the commerce of other Members of the League in respect to the treatment of goods or ships," the committee was compelled to register its total inability to make headway, due to "the wide divergencies of opinion between different States as to the fundamental principles of tariff and commercial policy, and the importance which many of the States attach to preserving their full autonomy in such matters."8 Confronted by these various phases of economic nationalism plus the "instability of economic conditions in the world and the disorganization of the exchange," the committee found it impossible "to arrive at any general acceptable body of detached doctrine on the subject" which could usefully be submitted to the Council "either to form the programme of an international economic conference or to be recommended with the authority of the League of Nations for adoption by its Members" at that time.9 The League, therefore, was forced to throw the entire 7

J. Saxon, The Genoa

Conference,

p. 4 1 8 .

^ League of Nations, Report by the Economic 1922 (Document A . 5 9 . 1 9 2 2 . II). »Ibid.

Committee

to the Council

and the

Assembly,

204

A World Customs Conference

weight of its authority into the hard and unspectacular business of clearing away the maze of stupid and especially vicious technical entanglements barricading commerce. This was the first step in the direction of the main operation of raising the national siege of world trade—the first step, as the committee itself intimated, in the direction of the then impossible international economic conference. Its immediate objective was the elimination of the senseless and the vicious from commercial policy; its ultimate goal, a realignment of commercial opinion, consequent upon the expansion of trading interests and the achievement of international financial stability. In making its first stand on the tariff fight upon the question of customs formalities, the Economic Committee was astutely maneuvering the League into a lead in the movement of business men as represented by the International Chamber of Commerce. The determination of the Economic Committee to take up, as its first major enterprise, the battle on customs formalities already joined by the International Chamber was not accidental. The close cooperation between the League Economic Committee and the I.C.C. initiated in 1921 under the special guidance of Pirelli, the I.C.C. vice president and member of the Economic Committee, alluded to above,10 made the League the natural spokesman of the collective opinion of world business as represented by the International Chamber. The axiom of League economic policy, as stated by Sir Arthur Salter, appears to have been: In the economic sphere, the League can do much to translate into action what the public wants; it can do little to initiate. The League can do little to secure the international agreements which the business world wants unless the business world itself, through its own organization, expresses its wishes and supplies its powerful motive force. 11

The League had no alternative to such an appeal. Under the leadership of the League, the business world itself through its own organization was led to supply its powerful motive force to the work of economic liberation. Excessive and unnecessary customs regulations had for decades severely hampered international trade. With the rapid expansion of " See Chapter X . 11 International Chamber of Commerce, Journal of the International Chamber of No. 3, Jan., 1925, p. 1 .

Commerce,

A World Customs Conference

205

industrialism, customs formalities had become more and more aggravating, due to the intensive specialization of tariff schedules, the pretext for which had been the feeling of general instability incident to intense international competition. T w o conferences had been held at Paris in 1900 and 1913 under the title of Congresses on Customs Regulations. These conferences, composed of customs officials and representative businessmen, although promoting greater understanding on the part of national administrations, had failed to produce any general international undertaking for the suppression of abuses. The International Congress of Chambers of Commerce had periodically discussed this question and made recommendations but had not secured any united international action on the part of the states. Customs administration remained inaccessible and enigmatical; its organization, its operation, its formalities, its procedure monopolized by the customs agents and the experts who had studied its complex machinery. Legislative texts remained hazy and incomprehensible. Customs agents often refused to furnish on request any explanation or information relative to the procedure imposed. Beyond the actual legal text of the legislative statute, there had crept into public law a kind of administrative jurisprudence of baffling variety and complexity, modifying, tempering, or strengthening provisions, the interpretation of which might have been vague or contradictory. After the war, this system became susceptible to the most vicious practices of economic discrimination and retaliation. Its abuses drew the fire of international business, represented in the I.C.C., from the start. The first president of the International Chamber, Clémentel, early recommended to the Council the formation of a permanent customs committee for the purpose of collaborating with the prewar Bureau and the Permanent Customs Regulations Congresses. On March 21, 1921, the Council decided that the Chamber should participate in the third Customs Regulations Congress which the Permanent Bureau proposed to summon. It was finally decided that the Permanent Bureau, following the prewar procedure, should request the French government to invite the governments of the different countries to send delegates from their customs administrations. The International Chamber, on its part, was to furnish business delegates

2o6

A World Customs Conference

through the action of its national committees.12 The parallel action of the League Economic Committee under the Covenant, described above, completed an interesting illustration of the advance in international organization in economic affairs. The proposed Customs Regulations Congress, like its impotent predecessors, would have opened upon no agreed platform of international policy and with no definite instrumentality available for carrying out its acts other than the talking representatives of the fifty-odd customs administrations of sovereign states assembled for conference. As stated in the introduction to the report of the Conference on Customs Formalities, the action of the statesmen in Paris in 1919 had completely altered this situation. "The position had been modified by the signature of the Covenant, and from that day forward, the view could be held that this special undertaking was implicitly contained in the general undertaking referred to in Article 2 3 " 1 S In its acceptance of the proposal of the Economic Committee, favoring the convocation of a conference, the Council of the League of Nations was again forced by national interests to exclude definitely from the range of the conference's activities any matters dealing with commercial policy, ". . . . it being understood that the programme of the Conference . . . . will not extend to the discussion of matters relating to the policy of members of the League in respect of tariffs or commercial agreements."14 Like the resolution of instruction to the Financial Committee, relative to the preparation of the first financial conference at Brussels in 1920, excluding questions which were at that time the subject of negotiations between the Allies and Germany, 15 this reservation was intended to throw a political deadline around the discussions of the conference. In particular, it eliminated the whole subject of postwar discriminatory commercial policy, the causes of which are seen reflected in the debates of the Economic Commission at Paris in 1919 16 and in the utterances of businessmen themselves at the conferences of Atlantic City and Paris.17 The Economic Committee, in the preparation of the agenda, first 12

International Chamber of Commerce, Proceedings No. 26, p. 1 1 .

of the Second

Congress

(Rome), Brochure

u League of Nations, International Conference on Customs and Other Similar Formalities, Proceedings, I, 4. 15 " International Financial Conference, Proceedings, I, 3. Ibid. M 17 See above, Chapter X V I . See above, Chapters II and IV.

A World Customs Conference

207

submitted to the Council a number of definite proposals, as a skeleton program for the conference, with the suggestion that the various governments should be given an opportunity of taking part in the preliminary work, the largest possible number of states, whether members of the League or not, being invited. This procedure was adopted by the Council and, in addition to the members of the League, Germany, Ecuador, Mexico, the United States, Egypt, and the French protectorates of Morocco and Tunis were invited. With the invitation to the conference, the Council enclosed the Economic Committee's proposal, asking the invited states to forward their observations to the Economic Committee. The Council also placed at the disposal of the committee the assistance of any experts with special knowledge of customs matters whose advice might be considered useful. 18 The Economic Committee then apparently upon its own initiative took steps to bring the I.C.C. actively into the negotiations. "Although it was obvious," reads the report, "that the various Governments invited would not fail to take into account the opinions and requirements of their manufacturers and traders," the Economic Committee considered that this was not enough, and in its anxiety to overlook no point and to benefit by all available experience, it examined the means by which international commerce, which had the most immediate interest in the problem of customs formalities, could state its views directly at the conference's discussions.19 By a fortunate coincidence, the report continued, the I.C.C. was engaged upon a similar task and was making preparations for a meeting of the representatives of industry and commerce; the object of this meeting was to continue the work of the two congresses on customs regulations held at Paris in 1906 and in 1913. What was required, therefore, was to combine and coordinate these two projects, which were intended to serve the same purpose. At the suggestion of the Economic Committee, the Council accordingly invited the I.C.C. to take part in the work of the conference in an advisory capacity. The I.C.C. in turn withdrew its plan but submitted the proposals already formulated by the Economic Committee to its congress (held in Rome in March, 1923). The latter adopted them in their entirety, supplement18 League of Nations, International Conference on Customs and Other Similar Proceedings, I, 4, 5. 10 Ibid.

Formalities,

2o8

A World Customs Conference

ing them by several interesting proposals which had appeared on its original program. 20 In this manner, the I.C.C. was actually made to function as a world economic parliament in the preparation of the League's first international economic conference. Side by side with the criticisms and observations of the various governments was placed "the opinion of the business world" as expressed in the Rome congress. From these documents, with the assistance of an international group of experts drawn from sixteen states, the Economic Committee was able to give final shape to the documents of the conference. "ibid.

CHAPTER

XVIII

Business and O f f i c i a l d o m at the L e a g u e Customs Conference

T

H E Conference for the Simplification of Customs and Other Similar Formalities which finally met at Geneva from October 15 to November 3,1923, had before it the program drawn up by the Economic Committee. The program consisted of twelve articles dealing with the subjects of customs simplifications; provision for notification of progress in simplification, publicity, equitable treatment, import and export prohibitions, arbitrary procedure, and redress; certificates of analysis; certificates of origin; commercial travelers; expedition of customs procedure; and, finally, the question of the form the conference's action should take in support of its decisions.1 The practical character of this preparatory work of the Economic Committee was demonstrated throughout the discussion of the conference, which accepted the committee's draft as the basis for the convention that was finally adopted. The various articles of the committee's draft were themselves the result of prolonged discussion, originating in the subcommittee on Equitable Treatment of Commerce from a draft submitted by Sir Hubert Llewellyn Smith, chairman of the subcommittee.2 The tradition of unanimity of action maintained by the Economic Committee had resulted in the production of a final draft which was the composite of respective national views. The validity of this work, as finally amended and elaborated by the criticism of the experts and the International Chamber of Commerce, was fully proved by the three weeks' test of actual negotiations provided by the conference.

The president of the conference, Lord Buxton, who had been selected by the Council of the League of Nations to preside over the technical 1

Leacue of Nations, International Conference on Customs and Other Similar Formalities, Proceedings, I, 1 4 1 . ' Stat.-mcnt of Brunei, president of the Economic Committee, ibid., I, 130.

210

Business and Officialdom

deliberations of the delegates, stood, as he remarked, perhaps alone in a conference of experts as representing the "Man in the Street." A l though "that difficult, many-sided individual," had he been present, could hardly have experienced quite the conversion in interest reported by Lord Buxton in his concluding speech, in which the "dry bones of formalities" appeared fully clothed "with living flesh" and the fatigued delegates were solemnly assured that the forthcoming list of formalities would read like a novel and that a sample, a manifest, or a certificate was "a thing of beauty and a joy forever," yet the conference managed to keep from foundering in the welter of technicality surrounding the subject matter of the tedious items on the agenda. A n d throughout the discussion, both in the committee and in the general session, the interests of the governments, of business men, and of the general public were argued with clarity and precision. A t the opening of the conference, the objective of negotiations was clearly defined on the motion of Sir Hubert Llewellyn Smith who, as economic adviser to the British government, represented the British Empire. Sir Hubert insisted upon the importance of a decision by the conference at the beginning upon the question raised in the twelfth article of the program: as to whether the conference should draw up a convention or merely confine itself to declarations and recommendations. "The commercial world," he stated, "expected the conference to arrive at a definite convention." 3 He fully realized that the task of attempting to draw up a convention was difficult and that the terms of the articles would have to allow for a number of qualifications and explanations, but he would rather have a definite convention, even if it only amounted to an undertaking that each state would do its best, than that the work of the conference should evaporate in a cloud of recommendations, which would constitute no advance whatever on the proceedings of previous conferences. This was the vital decision which faced the conference at the very opening, the question as to whether the conference was to resolve itself into an expert conference of the type of the previous League financial conference at Brussels or whether it should feel itself strong enough to assume the function of an executive conference and put its acts into a contractual form binding ratifying states. After a discussion in which delegates exhibited some ® Ibid., pp. 64, 65.

Business and Officialdom

211

trepidation as to the possible extent of a ratifiable convention and in which Clémentel, representing the International Chamber of Commerce, further "reminded the conference that the commercial and industrial world was expecting the conference to conclude a convention of as wide a nature as possible,"4 the conference decided in favor of attempting to draw up a convention. At the same session, Bolley, representing France, questioned the propriety of including Article I, enumerating the Economic Committee's interpretation of Article 23 of the Covenant in the body of the convention.6 The article pledged the contracting states to give practical application to Article 23 of the Covenant by undertaking "that their commercial relations shall not be hindered by excessive, unnecessary, or arbitrary customs or other similar formalities"; and by further undertaking to revise, by all appropriate legislative or administrative measures, the provisions affecting customs or other similar formalities which are prescribed by their laws or by rules, regulations or instructions issued by their administrative authorities, with a view to their simplification and adaptation, from time to time, to the needs of foreign trade and to the avoidance of all hindrance to such trade, except that which is absolutely necessary in order to safeguard the essential interests of the State. 6

The conference, however, finally unanimously decided to retain Article I in the body of the convention rather than to adopt the original French suggestion and relegate it to the position of a preamble. By this action, the conference gave legal precision for the first time to the general principles embodied in Article 23 of the Covenant. The signing and ratification of the first International Convention Relating to the Simplification of Customs Formalities was made the occasion for affirming a pledge to adapt any important form of national regulation "to the needs of foreign trade and to the avoidance of all hindrance to such trade, except that which is absolutely necessary in order to safeguard the essential interests of the State." This was an achievement. The first article of the convention in the words of Janssen (directorgeneral of Belgian customs), "stood like a lighthouse" at the head of the convention and "threw light upon all the subsequent provisions."7 ' Ibid. Ibid.

5

'Ibid., p. 7. Ibid., p. 60.

7

212

Business and Officialdom

A f t e r a general discussion of the draft proposals of the Economic Committee, the conference, in order to expedite the consideration of certain technical articles, resolved itself into two large working committees presided over by Heer (member of the Economic Committee) and by Clementel. These two committees included representatives of all the participating delegations, including those of the United States, the I.C.C., and the Economic Committee. A further special committee for the consideration of Article 1 2 of the program and for drafting the protocol clauses included, in addition to delegates from Uruguay, Great Britain, and Spain, Doleans, the secretary-general of the I.C.C.; Heer, Serruys, and Wieniawski of the Economic Committee; and van Hamel, director of the Legal Section of the League of Nations. The work of finally drafting the text of the convention as adopted by the conference was entrusted to a small drafting committee composed of Brunet (Belgian president), Malkin (legal adviser of the British delegation), Serruys, and van Hamel. 8 Speaking generally, as the president told the delegates, the aim of the conference was to provide that in customs formalities there should be "publicity, simplicity, expedition, equality, and redress." 9 In the application of these principles to the complex mechanism of customs formalities, the discussions brought to bear upon the intricacies of technical procedure the information and considered judgment of both customs officials and business men. This was only accomplished under the skillful guidance of the League secretariat. The use of the legislative hearing, in which interested groups are given an opportunity by the presentation of their views to assist in shaping law, is not an uncommon feature of national government. The all but complete participation of the I.C.C. in an executive international conference, however, carried this idea a step further. It provided for a more effective organization of opinion due to the fact that full equality in all but voting raised the importance of the unofficial representatives to a position commensurate with the weight of their opinion. T h e repeated reference in the speeches of the government delegates to the work of the International Chamber and the Rome congress, as well as the effect of the speeches of the Chamber's delegates in debate, indicated the impor*lbid„ p. 5. • Ibid., p. 135.

Business and Officialdom

213

tance of the Chamber's participation. T h e president, in alluding to the contribution of the Chamber's delegates to the success of the conference, said, Gentlemen, some thirty-five different countries are represented at the conference. W e have had besides, the representatives of the I.C.C., led by their distinguished president. Their presence at an international conference of this description is unique, and it has fully justified itself. The part they have taken in our deliberations has been of very real value, while the cordial cooperation between the representatives of the various countries and the I.C.C. has been very marked. It is a good augury for the future and for the effective working of the convention. 10 T h e influence of the International Chamber was particularly noteworthy in the formation of policy on the subjects of publicity, treatment of commercial travelers and samples, and redress. T h e question of publicity was among the questions dealt with in the general committee of the conference presided over by Clementel. T h e demand of the business world that publication be widespread and precede enforcement was acceded to in the final decision of the conference and is stated in Article 4 as follows: The Contracting States agree that no Customs regulations shall be enforced before such regulations have been published, either in the official journal of the country concerned or through some other suitable official or private channel of publicity. 11 This obligation, which was extended "to all matters affecting tariffs and import and export prohibitions or restrictions," was, however, qualified in cases "of an exceptional nature, when previous publication would be likely to injure the essential interests of the country." 1 2 A r ticle 5 further provided for clarity in publication by requiring the issuance of a complete statement, in an easily accessible f o r m , of all the duties levied as a result of all the measures in force, "thereby clarifying tariff schedules which had been modified by successive additions and alterations affecting a considerable number of articles." 13 Article 6 provided for means of publication through exchanges by diplomats or consular agents and through the forwarding of copies to the secretariat of the League of Nations. Provision was also made for the immediate communication of all new customs tariffs and tariff modifications to "Md..

P. 134.

11

Ibid., p. 9.

"Ibid.

"Ibid.

214

Business and Officialdom

the "International Office for the Publication of Customs T a r i f f s " at Brussels, which had been entrusted by the international convention of July 5, 1890, with the translation and publication of such tariffs. 14 In the final act of the conference, it was further recommended that the I.C.C. and other important international organizations receive from the League and the Brussels Bureau, subject to reciprocity, the documents communicated to them under the provisions of the convention. 15 In respect to the question of codification, a subject long agitated by business interests, the conference in the final act recommended as speedy a publication in codified form as possible by states and commended "the schemes which are under consideration by the I.C.C. for the diffusion of customs regulations." 16 Facilities were provided in Article 10 for the temporary admission, free of duty, of samples and specimens "imported by manufacturers or traders established in any of the contracting states, either in person or through the agency of commercial travelers, subject to the amount of the import duties being deposited or security being given if necessary." 17 T h e elaborate provisions required to meet the demands of states and traders included stipulations for uniform and easily obtainable identity cards for commercial travelers, together with provisions designed to abolish, or make inexpensive, consular visas on such identity cards. The intricacy of these technical articles of the convention dealing with the customary practices of state officials in receiving foreign traders and their goods affords an interesting and elaborate description of the quality of the hospitality shown foreign traders by state officials on the continent, where, four centuries ago, the slow-moving caravans of the Medici and the Fuggers enriched the courts of Europe with the luxuries of international trade. Current procedure in matters of certificates of origin, consular invoices, certificates of analyses, the passage of goods and travelers through the customs, and temporary importation (Articles n , 12, 13, 14 and Annex, and 16 and Annex) are shown in meticulous detail freshly drawn from a thousand controversies. A l l the innumerable formalities which have clogged the wheels of trade ever since the bearers of fine silk to the Medici were made subject to "the dishonest duties" levied by "the cursed rascals" at the customs " Ibid.

" Ibid., p. 45.

" Ibid.

17

Ibid., pp. 1 1 , 13.

Business and Officialdom

215

18

house at Raugia appear well epitomized in the dry technicalities of article upon article in which rights are deftly balanced against restrictions. The object of the conference, as stated by the president, had been "to remove the grit and to apply oil to the machinery" of international trade. A study of the convention shows much grit to have been removed and much oil applied. In this respect, the conference was "a real attempt to contribute towards an economic revival." 19 The fundamental problem of tariff reform lay untouched for future general world economic conferences. The conference's only approach to the problem of commercial policy per se was made in the adoption of the proposal of the draft article submitted by the Economic Committee in the form of Article 3 of the convention, which reads : In v i e w of the grave obstacles to international trade caused by import and export prohibitions and restrictions, the contracting states undertake to adopt and apply as soon as circumstances permit, all measures calculated to reduce such prohibitions and restrictions to the smallest number. . .

20

The objections and qualifications raised by delegates in the debate upon even so innocuous a declaration clearly indicated the impossibility of a direct assault upon the obstacles of tariff policy during the period of early European reconstruction. The forces of international business fought valiantly for the acceptance of the committee's article as a step towards freer trade. "The system of prohibition," said Clémentel, "resulted in crystallizing and finally arresting the course of trade." He therefore begged the conference to introduce the general principle of Article 6 into a convention. The system of prohibitions should be regarded as exceptional and as conditioned by the obligations contained in the second part of the article. He would himself have been very grateful for some general guiding principle of this character at the time when he was controlling the system in France. 21 But the interests of international traders were powerless to cope with circumstances arising from the struggle for national self-preservation. The I.C.C. could give no adequate answer to König of Hungary, who said "that the Hungarian Government might be obliged to maintain the system of prohibitions owing to economic and currency reasons." 22 18

G. R . B. Richards, Florentine Merchants in the Age of the Medici, p. 96. " L e a g u e of Nations, International Conference on Customs and Other Similar Formalities, Proceedings, I, 1 3 5 . 21 H Ibid., p. 7. Ibid., p. 82. ¡bid.

2I6

Business and Officialdom

The only answer to such arguments as these lay in the provision of a remedy. This answer was in the hands of the League Finance Committee. Further progress in the creation of an international tariff policy depended upon the League's financial reconstruction of Central Europe. One other important step in the direction of collective action on tariff policy was taken, however, in the provision of Article 22 for the setting up by the Council of the League of Nations of an international customs commission to which contracting states, in cases of dispute "as to the interpretation of application" of the provisions of the convention, might have recourse for an advisory opinion. Although such opinion was to be entirely advisory in character and parties retained full freedom for recourse later to any arbitral or judicial procedure which they might select, including reference to the Permanent Court of International Justice, this provision for an international customs commission opened the door to future possibilities. Basil Miles, the American administrative commissioner of the I.C.C., speaking on behalf of Clementel in the plenary session of the conference, supported the proposal. The International Chamber, he asserted, was prepared to go "one step further," and hope for some effective method of continuing the study of customs problems. The International Chamber believed that the essential feature of the conference, the collaboration of administrative officers and business men on common ground, should be developed in a continuous study of customs problems. T h e I.C.C., however, believed that this study might be further developed in the various countries by local committees, composed not only of representatives of business but also of customs officers. It trusted that the work of the conference would be translated into some continuing action. T h e I.C.C. was confident that through its national committees it could provide the necessary cooperation on the part of the business world. T h e execution of the terms of the convention could thus be facilitated. But there would be also accumulated a body of fact and evidence which would do much to advance the work of any succeeding conference which might be called upon to concern itself with practical measures to improve international trade and travel. 23 " Ibid., p. 119.

CHAPTER

XIX

Proposal for a W o r l d Economic Conference in 1 9 2 7

T

H R O U G H O U T the period of early postwar European reconstruction, terminating in the financial settlements embodied in the Austrian and Hungarian reconstruction plans and the Dawes plan, the need for some sort of a world conference, dealing with economic problems as distinct from purely financial problems, was recognized by leading authorities in Europe and America. Such a conference, however, was considered inopportune before financial reconstruction had been set in motion. The Brussels congress of the I.C.C., which met in June of 1925, showed a considerable trend in the business world towards a general attack upon trade barriers. The Committee on Economic Restoration, which was appointed by the Council of the Chamber in compliance with the Rome resolution, undertook an extensive study of the entire problem of world economic restoration in its broadest significance. The Rome resolution in its concluding paragraph looked towards an eventual "general economic conference of the nations" and, although recognizing that circumstances then rendered the proposal inopportune, the International Chamber agreed "to hold itself in readiness to render to the interested nations such assistance as may be desired."1 In making this proposal, the International Chamber had especially in mind, as has been pointed out above, a business settlement of reparations as a part of a general world economic settlement. The reparations question temporarily settled, the Council of the Chamber turned its attention to an intensive survey of economic conditions. The Committee on Economic Restoration presented to the Brussels congress a two-hundredpage survey of economic conditions in European countries, made under the direction of Count André de Chalendar. The report in Part I 1

See above, Chapter XIII.

2i8

Proposal of 1927 Conference

took up the subject of "Public Finance in the Principal European Countries since 1920." Part II dealt with the question of "Foreign Trade and Customs Policies," drawing particular attention to the increase of protection since the war and the progress of the League and the I.C.C. fight on prohibitions. The report called attention to the fact that the erection of customs barriers invariably leads to reprisals, thereby causing the rapid spread of protection, and surveyed this system in its various forms with frequent reference to the opinions expressed by the national committees. 2 T h e special problems raised by the relationship of reparations payments to international trade was taken up in a separate report to the Brussels congress made by a subcommittee on Economic Restoration. The committee was composed of Sir Josiah Stamp, Alberto Pirelli, and Count André de Chalendar. The report presented a careful analysis of the economic principles underlying the transfer problem and a program filled with illuminating suggestions as to possible methods of making reparations credits in German marks serve to stimulate international trade. In its consideration of the various forms of "the Assisted Scheme," the committee was forced to wrestle with the same vested industrial interests which blocked tariff reform. The whole problem of reconciling "the divergent interests of political finance and industrial finance in each country" raised basically the same issues as the tariff controversy, with the important difference that the advocates of foreign trade, in the case of reparations, had a powerful recruit in the inclination of governments, which in the matter of tariffs felt the budget pull in the opposite direction. T h e interests of both capital and labor in Allied countries were involved, but nevertheless the whole question could not be left to uncontrolled economic forces, without grave political consequences. It was the opinion of the committee that if every scheme which owed its genesis to the necessity for reparations outlet should at the same time create a demand for home labor and industry which would not otherwise be immediately called for, the sting of the opposition to it would be drawn. 3 This led the committee into international planning of an advanced and suggestive character 2

International Chamber of Commerce, Brochure No. 38. International Chamber of Commerce, Reparation Payments and Future International Trade (a report submitted to the Committee on Economic Restoration of the I.C.C.), May, 1925, p. 18. :1

Proposal of 1927 Conference

219

which proved to be impractical of realization. Its exhaustive consideration, however, of the means of circumventing vested tariff interests placed before the business world a lucid expose of the relation of industry to trade. T h e committee's adroit proposal that the two interests be "married" showed a technique similar to that which lay behind the advocacy of the industrial entente as a step towards freer trade. With this excellent preparatory work as a basis for discussion, the Brussels conference of the I.C.C. drew the attention of the business world to the problem of world restoration in its entirety. At the Rome congress, the I.C.C. was forced to turn its main attention to the problem of reparations and financial stability. In Brussels, interest turned to the problem of maintaining the progress which had been made. T h e conference provided a forum for the discussion of the various aspects of world economic recovery. Leaders of world opinion, including four members of the Reparation Commission, and the agent-general for reparations, Parker Gilbert, were present. Sir Josiah Stamp appeared before the conference in the discussion of the problem of transfers. His address pursued further a consideration of the material presented in the report of the subcommittee of which he was a member. Sir Arthur Salter reviewed the progress in economic restoration, pointing out that "a comparatively stable basis on which to rebuild" European economic life had been attained by the various achievements of financial reconstruction. There were, however, in Sir Arthur's opinion, unfavorable features in the situation: the French currency crisis, British unemployment, the scarcity of capital, the depression in the coal industry, "and among the most serious factors of the situation the increased impediment to international trade caused by the tendency of tariffs to rise." 4 The resolution, which the Chamber adopted at the Brussels congress, following the lead of the discussion, presents a more realistic treatment of the question of trade barriers than the Rome resolution on world restoration. T h e Rome resolution confined itself to the question of prohibitions. T h e Brussels congress showed considerable progress over this position in a fresh reorientation of business opinion on commercial policy. Under the heading of "Obstacles to Trade," Resolution 6 of the * International Chamber of Commerce, Brochure No. 42, p. 100.

220

Proposal of 1927 Conference

resolutions on economic restoration indicates a fresh approach to tariff policy as follows: T h e C h a m b e r has directed attention to interferences w i t h the return of n o r m a l trade conditions a n d e m p l o y m e n t caused b y artificial barriers, obstructive to intercourse between the nations, such as e x t r e m e tariffs, unreasonable customs regulations or transportation. A l l of these h a v e the effect of increasing the delivered cost of g o o d s a n d p r e v e n t i n g the w i d e s t

possible

distribution a n d use of the w o r l d ' s products, w h i c h are the basis of better l i v i n g standards a n d progress. T h e C h a m b e r appeals to the business m e n of all countries to study these questions a n d to exert their influence f o r the r e m o v a l , as p r o m p t l y as possible, of all unnatural a n d u n e c o n o m i c restrictions of this k i n d . 5

The study of tariffs as "unnatural and uneconomic restrictions," "increasing the delivered cost of goods and preventing the widest possible distribution and use of the world's products," afforded every opportunity for a consideration of the whole question of commercial policy. In the Brussels resolutions, the business world threw wide open the doors to a general discussion of the tariff question on an international platform. It was during the summer of 1925 that the opinion that the time for a general economic conference had arrived was apparently formulated among the economic officials of the League. Sir Arthur Salter, two months after his attendance at the I.C.C. congress in Brussels under the date of August 25, 1925, reviewed in his private papers the case for a conference. Hitherto League officials had opposed such a conference on the grounds of financial instability. With relative financial stability established, the prospects for a world economic conference had materially changed. On the basis of these considerations, Sir Arthur summarized the reasons for League action as follows: the attainment of comparative exchange stability; the at least tentative settlement of reparations and inter-Allied debts; the successful League restoration of Central Europe; the need for international action in the economic sphere to safeguard the financial position already attained, as demonstrated by the decision to conduct League economic inquiries in Austria and Hungary; the possibility of international action to protect individual efforts at economic recon' International Chamber of Commerce, Brochure No. 40, p. 7.

Proposal of 1927 Conference

221

struction from injurious governmental policies or from "tendencies of policy and practice outside their individual control, or by world developments which can only be corrected or countered by collective action and agreement." 8 T h e times demonstrated the need for international organization of a private business character to cope with those serious economic troubles of an international character w h i c h " d o not arise f r o m governmental action and can perhaps not be best dealt with by governmental or intergovernmental action, for instance, the excess production of coal." It was primarily to meet this latter need that Sir A r t h u r conceived the projected conference. I would emphasize [he wrote] the latter alternative . . . . Such an organization (whilst international and including some representatives of workers and consumers as well as owners) might be unofficial, not governmental, in character. A general economic conference would doubtless discuss the practicability and desirability of such associations. It would be better fitted for this purpose if it were itself not fully governmental. 7 This same logic r e c o m m e n d e d the possibility of lifting the discussion of even government officials and representatives above the level of the politically possible. There is reason to believe [wrote Sir Arthur Salter] that many even of those who, if meeting as officials or Government representatives, would feel bound to take a line which would make any useful agreement impossible, would welcome a discussion from a more general point of view and under freer conditions. A politician or an official, in working out his economic policy, is bound to assume, as given factors in his problem, the existing policies of all other countries. T h e result may well be collective action which is regretted by all those who have contributed to it. An individual concerned with tariff policy is often in a position analogous to that of a depositor in a bank threatened by a panic among its investors. H e may know that the bank is perfectly sound unless there is a run on it caused by panic, and that therefore, a decision by all the individual investors to withdraw is collective insanity. But he may equally realize that to abstain from withdrawing himself may merely mean losing his own chance of getting his money without averting the run. All the depositors may think, and act, accordingly. T h e result of acts of individual prudence is collective insanity. ' S i r Arthur Salter, " A Proposal for a World Economic Conference, August 25, 1925," United States oj Europe, pp. 34, 35. ••Ibid.

The

222

Proposal of 1927 Conference

Sir Arthur saw the projected conference as the only possible "beginning of a way out" of the collective insanity of high tariff policies.8 T h e distinction between this type of conference and the type of conference heretofore held by the League was very clearly defined in the thought of the League secretariat. Hitherto League activities in the sphere of economic policy had been limited to the meetings of official bodies like the Economic Committee, "followed when practicable by official conferences like the Customs Formalities Conference. T h e League, itself a governmental institution, finds itself of necessity restricted by the hard limits set by the policies of its members." T h e League's duties in regard to economic policies under Article 23 of the Covenant, though vaguely expressed, imposed definite obligations.9 T h e phrase "equitable treatment" connoted something "certainly much more ambitious" than the methods thus far adopted. Sir Arthur contemplated the extension into the economic sphere of the device of a general world forum of opinion, employed at Brussels in 1920. These observations, it will be noted, were in general line with the observations made by Sir Arthur, quoted above from the minutes of the Brussels conference of the International Chamber. T h e League secretariat had apparently determined, before the opening of the sixth assembly in September, upon a great international effort in furtherance of what Sir Arthur had described at the I.C.C. conference as "reconstruction in this widest and most general sense, as the combined work of all the official and individual activities of every country." 10 T h e question was first broached before the Second Committee of the assembly by Loucheur, representing the French government, in a discussion of Hungarian financial reconstruction. He told the committee that the French government intended to bring forward, either in the Second Committee or in the assembly, a proposal "for the immediate institution of an enquiry into the economic, monetary, and financial situation not merely of Hungary and the neigboring countries, but of every country and, indeed, of the whole world." The delegate from Czechoslovakia, Veverka, however, hastened in endorsing the proposal to repudiate any suggestion that the matter be in any way con" Ibid., pp. 38, 39. 10

'Ibid.

International Chamber of Commerce, Proceedings 1925), Brochure No. 42, p. 100.

of the Third

Congress (Brussels, June,

Proposal of 1927 Conference nected with the question immediately

223

under consideration. 11

The

French proposal was accordingly made in the plenary session of the assembly immediately following. However, the most encouraging report of Jeremiah Smith, the League's commissioner-general in Hungary, as pointed out by Loucheur in introducing the French proposal in the assembly on September 15, 12 argued eloquently for the necessity of a general conference for the purpose of examining those secret economic causes of war which are a part of that unrest coincident with the industrial revolution and the transformation of an agrarian society into industrial states. Loucheur, both in his address to the assembly and later during the debate in the Second Committee, commented on the paradoxical situation w h i c h then confronted the League, namely, on the one hand the encouraging progress in the direction of the reestablishment of a world monetary unit, and on the other hand the trend towards economic disintegration characterized by rising trade barriers and the development

of

self-sufficient industrial

units.

Loucheur

pointed out that the presence of these two opposite tendencies in the financial

and economic spheres was by no means accidental and re-

ferred to the inevitable effect of financial difficulties upon the growth of economic nationalism. T h i s was the road d o w n which states were being forced to proceed often unwillingly, his own country along with others. T h e alternative to this course of action, Loucheur plainly believed, lay in the promotion of greater international organization in the field of production. T h e conference, which Loucheur proposed, was not to result in real international conventions. . . . T h e Conference w o u l d enunciate a number of principles. It w o u l d seek some method of international cooperation to apply them, and as a result this, in my opinion, is the most important point—it should be possible, in respect of certain branches of production w h i c h are easier to examine and analyse than others, to d r a w u p a number of Conventions between nations, or rather between producers in those nations under the control of the Governments. Such conventions, apart f r o m the Conference itself, will lead, for a time to stability of production and consumption. 1 3

Loucheur's plea for international business ententes followed the line " League of Nations, Official Journal, Ibid., pp. 81-83. 1 3 League of Nations, Official Journal,

Supplement No. 35, pp. 8-10.

12

Supplement No. 33, p. 83.

224

Proposal of 1927 C o n f e r e n c e

of reasoning elaborated by Sir Arthur Salter in the memorandum quoted above. Sir Arthur, however, although emphasizing the importance of combating those "serious economic troubles which are international in character, but do not arise from governmental action and can perhaps not be best dealt with by governmental or intergovernmental action," set great importance upon the possible influence of a forum of world opinion in the formation of national economic policy. Sir Arthur wrote: T h e main conception, I think, should be that of a forum of responsible world opinion; and its object rather to pool, exchange, and publish opinion of this kind than to arrive at agreed resolutions and draw up a defined policy Neither the agenda, therefore, nor the conduct of the discussions should be cramped in order to make it easier to secure agreed resolutions. W h e n the two interests conflict—that of securing the widest and fullest expression of responsible world opinion and that of securing agreed resolutions —the former should prevail. This should be made clear from the first, so that the conference may not be regarded as ineffective because it does not result in agreement. 14

And the scope of the conference, in Sir Arthur's view, should include (a) "exposes of the actual economic situation in each country" after the manner of the Brussels Financial Conference; (b) a discussion of "the principles and tendencies of economic policy likely to assist the economic recovery of the world" and a consideration of the possible courses of action, "whether official or private, likely to help to the same end"; (c) a discussion of "the principles and tendencies of policy likely to conduce to international unity and to reduce the dangers of economic conflicts threatening war." 15 The French delegate's vigorous presentation of the case for the international organization of production threw into high relief, at the very beginning of the League's consideration of commercial policy, the divergence of opinion as to the methods of eliminating economic conflict in the international sphere. Loucheur, as indicated by his comments in the committee discussion, held that the economic crises which had followed financial stabilization might have been avoided had certain precautions, presumably in11

Sir Arthur Salter, The United States of Europe, pp. 40, 41.

albid.

DR. FRANZ VON MENDELSSOHN PRESIDENT OF THE INTERNATIONAL CHAMBER, 1931-1932

Proposal of 1927 Conference

225

volving stabilization in the field of production by the formation of international ententes, been taken. The French proposal looked towards the attainment of greater national economic security by the stabilization of production through the extension of international organization of a quasi-private character into the sphere of industrial conflict. The traditional free-trade position, on the other hand, contemplated the breaking down of trade barriers in order to facilitate the freer exchange of goods. To this general proposition certain industries in 1925, notably the coal industry, appear to have stood as exceptions even in the minds of survivors of the Manchester School. However, these industries would have merited such exceptional regulations for more exceptional reasons than indicated by the logic of the French delegate—that they were "easier to examine and analyze than others." The French thesis called for the attainment of economic disarmament in a regime of international industrial ententes embodied in "conventions between nations, or rather between producers in those nations under the control of the Governments."16 Lord Cecil, speaking for the British empire, stated the case against those excessive economic restrictions which had been imposed by certain states: These constituted a danger; certain states had a tendency to insist too strongly upon their economic rights and considered that the prosperity of other countries was a danger to themselves. This was an error, and if any country held this opinion, no effort should be neglected to change it, because it led to situations which paved the way for hostilities. 17

Definite arrangements for the conference were finally put off after some discussion in the Second Committee, and, at the suggestion of Lord Cecil, the Council of the League was given a free hand in working out the program of the conference. The resolution of the Assembly was accordingly so worded as not in any sense to limit the scope of the conference or prejudice the issues involved. Neither the question of international ententes, which formed so important a part of the French proposals, nor the subject of trade restriction, plainly uppermost in the minds of other delegates, was mentioned in the resolution of the Assembly inviting the Council 1,1 17

League of Nations, Official Journal, Supplement No. 33, p. 83. Ibid., Supplement No. 35, pp. 44, 45.

226

Proposal of 1927 Conference

to consider at the earliest possible moment the expediency of constituting on a wide basis a Preparatory Committee which with the assistance of the technical organizations of the League and of the International Labour Office, will prepare the work for an International Economic Conference. 18 "League of Nations, Official Journal, Supplement No. 32, Oct., 1925, p. 16.

CHAPTER

XX

T h e International C h a m b e r at the 1 9 2 7 Conference H E Council of the League of Nations in its regular December meeting in 1925 appointed a "Technical Preparatory Committee, consisting not of representatives of governments or of organizations but of persons chosen as experts and best fitted by their qualifications and personal experience for the task of preparing for the conference."1 This committee, composed of persons drawn from the technical organizations of the League and the International Labor Office, persons with experience in the field of industry, commerce, and agriculture, economists, and representatives of workers' and consumers' points of view, was asked to prepare and collect information and draw up the conference program for presentation to the Council. During the year of preparatory work, carried out officially under the auspices of the League Preparatory Committee, the International Chamber of Commerce was the center of a great effort to reform commercial policy from within the business world itself. On November 6, 1925, before the Council had adopted the recommendations of the assembly or the League's Preparatory Committee had been appointed, the Council of the International Chamber under the leadership of the distinguished British classical scholar and banker, Walter Leaf, put into action the campaign inaugurated at Brussels for concerted business action towards world economic restoration. In order to intensify and better coordinate the work undertaken by the Committee on World Restoration at Rome in 1923, the Council divided the Chamber's program among three committees: International Settlements, Assisted Schemes, and Trade Barriers.2 Of these committees, the Committee on "League of Nations, Official Journal, Feb., 1926, pp. 184-187. 'League of Nations, Economic and Financial Section, International Economic Conference, Final Report of the Trade Barriers Committee of the International Chamber of Commerce (Geneva, 1927), C.E. I. 5 ( 1 ) , p. 7.

228

The I.C.C. at the 1927 Conference

Trade Barriers immediately became the center of the great preparatory effort undertaken by the business world for the W o r l d Economic Conference. T h r o u g h the secretariat of the I.C.C., the Trade Barriers C o m mittee organized a system of consultation and advice among business men f r o m London to Tokyo. Representatives of all classes of the twenty-two national business communities were set to w o r k through the various national committees at the task of formulating business opinion "on the principal trade barriers affecting their countries." 3 In May, 1926, sixteen national committees of the I.C.C. submitted their considered opinions in documents which were placed before the central Trade Barriers Committee at its meetings on June 22 and 23, 1926, in the f o r m of a general report prepared by Hartley Withers, former editor of the Economist,

w h o was then acting as director of research of the

Trade Barriers Committee. After a discussion of Withers's report, the central committee adopted the following resolution: Whereas present economic conditions due principally to the war are rapidly becoming unbearable in most countries and especially in Europe, and prompt remedies are essential if the eventuality of economic disturbance which would affect all countries in succession is to be avoided; Whereas stabilization of currencies is absolutely necessary; excessive tariffs and prohibitions of importation and exportation are dangerous; transportation of persons and merchandise is obstructed; customs tariffs and classifications lack clearness and uniformity, and changes can be introduced into existing tariffs without notice; treatment of nations and foreigners is unequal; Whereas the situation is extremely critical and the Committee desires to make a practical effort to suppress the most dangerous barriers and those which it is possible most quickly to remove; and believes it necessary not only to analyze facts already known, but to seek remedies: The Committee resolves to create the following sub-committees: 1. Sub-Committee on the Treatment of Foreigners, and on Legal and Social Discriminations; 2. Sub-Committee on Obstructions to Transportation; 3. Sub-Committee on Financial Difficulties, Price and Credit Problems; 4. Sub-Committee on Prohibitions of Importation and Exportation (Free Movement of Raw Materials—Export Duties); 5. Sub-Committee on Customs (Technical Questions); 6. Sub-Committee on International Industrial Ententes; 7. Sub-Committee on Coordination and Propaganda.4 ' Ibid., p. 11.

4

ibid.

The I.C.C. at the 1927 Conference

229

Each subcommittee was directed to study such questions as came within its scope, and in particular those mentioned in the report of the Preparatory Committee of the International Economic Conference of the League of Nations, and to inquire into ways and means of aiding the competent authorities to suppress the barriers most injurious to international trade so that it might resume its normal channels. During August and September, reports from the national committees upon the subject matter before the subcommittees of the central committee were considered and incorporated in reports and resolutions adopted by each of the subcommittees. This material was then coordinated and presented to the central committee at its meeting on October 18; it received the approval of the Council of the Chamber on October 20 in time for presentation to the Preparatory Committee of the Economic Conference at its November meeting by the Chamber's observer, Sir Arthur Balfour, chairman of the British national committee. On December 7, the chairman and officers of the Trade Barriers Committee and the chairmen of the seven subcommittees met in Paris to prepare questionnaires in order to ascertain the opinion of the national committees on a certain number of fresh points raised by the Preparatory Committee of the Economic Conference. During February the subcommittees again met, examined the replies of the national committees, and amended and added to the provisional report submitted in November to the Preparatory Committee of the conference at Geneva. The final report thus amended was adopted by the Council of the International Chamber at its meetings on February 24 and 26 and authorized for presentation to the forthcoming Stockholm conference of the I.C.C. to be held in June and the League's World Economic Conference at Geneva in May.5 The document which finally emerged from the Chamber's protracted and intensive process of international discussion was at length placed before the World Economic Conference under the title of Final Report of the Trade Barriers Committee of the I.C.C. (C.E. I. 5). The work of the committee was remarkable both for the world-wide breadth of the opinion represented and for the definiteness of its recommendations. As Sir Arthur Salter explained in the Guide to the Documents of the 6

Ibid., p. 13.

230

The I.C.C. at the 1927 Conference

Conference, put out by the League secretariat for the assistance of the delegates to the conference, W i t h two exceptions, the conference documents gave information only and made no recommendations. T h e two exceptions were the Report of the Trade Barriers Committee of the International Chamber of

Commerce

( C . E . I.5), and the Draft Convention of the Economic Committee of the League for the suppression of prohibitions and restrictions on imports and exports ( C . E . T - 2 2 ) . 6

A m o n g the specific recommendations of the report were included two draft conventions, one drawn up by the subcommittee, on the treatment of foreigners and the other by the subcommittee on legal and social discriminations. These conventions dealt comprehensively with the subject of the treatment of foreigners and with the suppression of passport visas and the right of residence and establishment.7 Under the heading of "Obstructions to Transportation" the committee laid out an extensive program of action in the fields of rail, sea, waterway, and air transport, designed to free the lanes of commerce from the blight of confusing, onerous, and ineffective regulations and legislation, flag discrimination, and double taxation. A detailed memorandum containing suggestions for the solution of the special problem of the Danubian waterway was contained in an annex. 8 The work of the subcommittee on prohibitions of importation and exportation was compactly stated in concise recommendations for the conclusion "at the earliest possible moment of an international convention for the abolition of prohibitions of importation and exportation." 9 The importance of the free movement of raw materials was emphasized. The climax of the report was reached in the fourth section of the committee's recommendations, dealing with the subject of customs. Pointing out that "excessive customs duties, the instability and constant increase in customs tariffs" constituted "the most serious barriers to international trade," the committee insisted upon the immediate necessity for "a complete change in the tendencies of existing opinion" in a series of urgent recommendations calling for new commercial treaties and customs conventions and * League of Nations, International Economic Conference, Guide to the Documents of the Conference (May, 1927), C.E. I. 40 ( 1 ) , p. 6. ' League of Nations, International Economic Conference, Final Report of the Trade Barriers Committee, C.E. I. 5 ( 1 ) , pp. 16-23. * Ibid., pp. 24-29. ' Ibid., pp. 30, 3 1 .

The I.C.C. at the 1927 Conference

231

the application of the principle of the most-favored-nation clause. 10 In the fifth section of the report, the committee took up the question of international industrial ententes, so dear to the heart of a certain section of industrial opinion, and approved the program of Loucheur with qualifications designed to safeguard "the interests of labor, of commerce and of the public." Within these limitations, the committee endorsed "the utility of such ententes to insure security of employment, and continuity and regularity in the supply of goods." 1 1 Currency instability, the control of prices by governments in such a way as to hamper the free movement of raw materials, and the lack of capital and credit were dealt with from the viewpoint of commerce under the heading of financial difficulties, price, and credit problems. 12 T h e report concluded with an interesting proposal for the creation of an "international convention for the constitution of a tariff and trade commission." Adopting a proposal put forward by the Austrian national committee, the report proposed that "in view of the fact that the convention for the simplification of customs formalities contemplates the creation of a permanent technical organization under the aegis of the League of Nations," a permanent tariff and trade commission composed of government representatives should be set up. This commission, the report urged, would be able to provide for regular meetings, constant study of the conditions and needs of international trade, the drafting of treaties, the arbitration of disputes, and the arrangement of general or partial conferences such as provided for by the statutes of the communications and transit organizations of the League. " T h e statutes of this commission," the report concluded, "should also provide for permanent cooperation with the I.C.C." ; and the I.C.C., as the representative of the business world, in addition to presenting documents, proposals, suggestions, and resolutions to the commission "would at all times be prepared, with the assistance of its national committees should the commission so desire, to nominate experts to represent producers." 13 T h i s document, which ran all the way from trade policy and the treatment of foreigners to the proposal for a tariff and trade commission, was, as Sir Arthur Salter described it in the Guide to the ments

of the Conference,

Docu-

"in some respects the most important"

document which was before the conference. T h e "outcome of consulta10

Ibid., p. 32.

u

Ibid., p. 37.

» Ibid., p. 38.

u

¡bid., p. 40.

232

The I.C.C. at the 1927 Conference

tions and discussions by national committees in many parts of the world, followed by a close examination by the central authority of the Chamber," in addition to covering a "very wide range," it provided "a picture of trade barriers as seen by those who have daily experience of their consequences," and above all was "unlike almost all the rest of the documentation in that it includes (indeed consisted of) specific recommendations and proposals."14 The great importance attached by the League secretariat to the report of the Trade Barriers Committee, however, lay not only in the intrinsic merit of the document as embodying the work of business experts from many nations, but also in the significance of the great business movement against trade barriers which it represented. The report was the charter of one of the most interesting and inspiring international movements since the war. There had been numerous attempts before the war by various interested organizations to mitigate the evils of customs procedure, and the I.C.C. had given definite form and a considerable measure of success to these attempts in its cooperative effort with the League which produced the Convention on Customs Formalities in 1923. These attempts, however, failed to win the enthusiasm of the business world. Since the days of the free-trade leadership of Manchester, there had been no such stirring in the business world as that which centered in the new business international at Paris. Under the leadership of one of the City of London's most eminent financiers, Walter Leaf, world-wide discontent with the existing era of tariff strife was turned into a campaign for freer trade. The campaign was vigorously waged by the president, the council, and the secretariat from the international headquarters of the Chamber and by the various national committees. In address after address, Leaf gave a decisive lead to a direct attack on the whole tariff system. This was no mere effort to clarify or mitigate the evils of nomenclature or procedure. Leaf caustically remarked in his presidential address, I suppose that the politicians of every country in Europe have reason to be satisfied with their handiwork, and may regard the present economic situation as a great success. T h e y have been busily engaged in hampering international trade by every means in their power. W e have passed beyond the question of mere tariffs, and in various cases, we have found that recourse " League of Nations, International Economic Conference, Guide to the Documents of the Conference, p. 12.

The I.C.C. at the 1927 Conference

233

has been had to actual prohibition of imports. Each country—and I regret to think that even Great Britain must now be included—has set itself to exclude trade with its neighbor, to a greater or less extent. The policy has had a great success, with one considerable drawback, that each country in hurting its neighbor has, of course, hurt itself still more. The policy leads to a vicious circle, where every step leads on to another, and to put the matter plainly, it seems to me that Europe has deliberately set itself towards economic suicide. 15 Again, and with something of the eloquence of a Cobden, at the next meeting of the Council in March, 1926: . . . . The capacity for production is here, and is generally much larger than in pre-war times; but the products are stagnating because they are refused or at least hampered by foreign tariffs and trade barriers. Hence unemployment, stagnation of industry, and a lamentable waste of potential human energy. The whole standard of living is lowered by the artificial restrictions on human efficacy.16 The great advantage in economic progress to be obtained in the development of a great free-trade area was constantly held up to European business men in the phenomenal expansion of the United States. Leaf declared, A European Trade League would have open markets on at least the same scale as those of the United States, and would thus be able to compete in production on equal terms with that vast area of free-trade intercourse. National jealousies force us here to employ in suicidal trade struggles the efforts which should be concentrated on the general advancement of human well-being. It is for the International Chamber to do its best to educate the world to this wider outlook. 17 In the following month Leaf set out with Dolleans, the secretarygeneral of the Chamber, on the tragic speaking tour in behalf of this mission of economic reconciliation which cost him his life. His last address, delivered before the Essen Chamber of Commerce, "gave to Europe a message of reconciliation and hope, which by its honesty, idealism, and practicability made a deep and lasting impression upon his great audience." 18 After recounting the triumph of the I.C.C. in securing the Dawes plan "as an earnest step on the part of all concerned towards the general pacification of Europe," Leaf plunged into the 15

C. M. Leaf, Walter Leaf, p. 313. "Ibid., pp. 313, 314.

17 18

Ibid., p. 314. I b i d . , p. 280.

234

The I.C.C. at the 1927 Conference

Chamber's immediate campaign in a passage which was eloquent of the great effort which business leadership was making in behalf of tariff reform: . . . . W e need none of us look far beyond our own doors to see how vast is the task that lies before us. The disease called "malaise économique" is universal throughout Europe. There is not one country which is really content with its economic situation. Everywhere we hear of production outrunning the capacity for disposing of the product; everywhere we hear of unemployment on the one hand, of financial straits on the other, sometimes of both together. Jealousies between nations still exist . . . . The field of batde has been transferred to our economic life, and every nation's hand is against its neighbor One thing I hope is plain; and that is that there is all over the continent a general sense that something must be done. It is certain that, at least since our Brussels Congress, public opinion has moved. 19 The Brussels congress, Leaf pointed out, had featured the transfer problem as applied both to reparations and inter-Allied debts. "We made it our business at Brussels," he asserted, "to bring before the world the fact, familiar to all of us who have to conduct international business, that it is impossible to transfer large sums from one nation to another except by the interchange of goods." He continued, This involves another fact, that no nation can at once close its frontiers to the receipt of goods and at the same time obtain payments of debts due to it on a large scale. The lesson is necessary, but to the ordinary man, who has no knowledge of finance, it is extremely disagreeable, and I am inclined to find a measure of our success at Brussels in the chorus of disfavour which the assertion of it aroused in the irresponsible press of various countries. If I am not mistaken, the effect of that discussion was to contribute in no small measure to that ripening of opinion which made it possible to carry, only three months later, the proposal which was put before the League of Nations, through French initiative, for the appointment of an Economic Conference to discuss the present situation of Europe. 20 Leaf, like other business leaders, stressed the independence and nonpolitical character of the I.C.C., urging nonpartisan support for the Trade Barriers Committee of the sort which had given victory to the Dawes committee. He asserted : W e have always carefully kept ourselves independent of any government "Ibid.,

p. 282.

20

Ibid.

The I.C.C. at the 1927 Conference

235

support; we claim to represent the trading community of the world with no regard to politics, and it is this spirit of independence that we have to look to for our influence. W e speak for trade alone, and have no need to think of votes; we are experts, and claim that in that capacity we have a field of usefulness, which is peculiarly our own. In that spirit we shall continue our work. 2 1

In this spirit the Trade Barriers Committee had been set up under the presidency of Clémentel, assisted by two vice presidents, an American, Roland W . Boyden, and a German, Kotzenberg. Into the hands of this expert committee the Chamber had placed the whole problem of trade barriers. The Chamber had in each one of its congresses steadily upheld "the removal or at least a great abatement, of all the artificial obstacles to free intercourse between the traders of all countries." Leaf asserted, It is not for me to anticipate the results of their labours, or to say what practical remedies they may see fit to recommend to diminish the present distress. But of the general policy of the Chamber there can be no doubt. Whatever governments may do, our votes have always been given on the side of freer intercourse; and the task of the Committee is to seek out the means by which this end may best be gained. 22

The report of the Trade Barriers Committee, like the Dawes plan, carried behind it the overwhelming support of the business world. The essential features of the Chamber's economic campaign had been tried out in the realm of reparations. In the reparations controversy, the Chamber had successfully sought to win business men away from nationalism to the support of a business settlement made by a business committee of experts. This settlement the Chamber had then seen forced upon unwilling governments by the weight of organized business opinion. When the World Economic Conference opened its doors in Geneva on May 4, 1927, and the experts from many nations assembled, one delegation presented as determined a front for economic reconciliation as that put up by the Chamber's distinguished representatives in the previous financial negotiations of the Dawes and McKenna committees. "All the nations of the world are represented in the International Chamber of Commerce," said Walter Runciman in opening the debate 11 Ibid.,

p. 283.

"Ibid.

236

The I.C.C. at the 1927 Conference

for the I.C.C. on the floor of the conference. "Twenty-two national committees and forty-three of the trading countries of the world are represented in our membership. We are all bound together by one principal object, namely, to secure the greater mobility of persons and of things." The I.C.C., through its Committee on Trade Barriers, presented to the conference a report, he continued, which contained concrete and practical proposals upon those subjects which business men regard as fundamental: the treatment of foreigners, obstructions to transportation, prohibition of importation and exportation, international industrial ententes, the financial difficulties which impede trade, and, "finally but by no means the least simple, customs tariffs." "The report that we have laid before the conference has one considerable advantage," said Runciman, "which I venture to plead, namely, that it has received the unanimous approval of all our twenty-two national committees." In the war and postwar eras, business men in the appalling atmosphere of rapidly fluctuating exchanges and tariffs looked upon the financial disturbances and rising tariffs as "a kind of forked lightning flashing out of a thundercloud and hitting whom it would." Under these conditions the long contract, the contract made for large quantities of goods, the production and delivery of which extend over a long period, became almost impossible.23 Runciman continued, It is because we of the I.C.C. believe that that post-war period has now passed that we come to this conference with a full degree of hope that, if there is at least no other outcome from the conference, it will check the tendency to raise tariffs. On that we are agreed in every one of our national committees. May I be allowed to say that such a result fills one with an amount of hope which would have been scarcely within the possibility of the commercial world three or four years ago? 2 4

Pleading in particular for the lowering of European trade barriers, he quoted the American Committee of the Chamber to the effect that the absence of trade barriers throughout the whole area of the United States rendered unnecessary in the United States many of the steps desirable in Europe. "The American Committee feels," concluded the statement, "that substantially similar freedom of commerce and trade " L e a g u e of Nations, Report and Proceedings of the World Economic Conference, I, 62. " Ibid., pp. 69, 70.

The I.C.C. at the 1927 Conference

237

in Europe would inevitably result in great benefit to the European peoples."25 Referring to "the troubles of the heavy industries," Runciman advised a study of the "invaluable documents" before the conference. T h e Chamber, he asserted, however, offered "no judgment." The "one common barrier" in every one of those industries, coal, iron and steel, chemicals, shipbuilding, engineering, and textile trades, "to which we devoted great attention" was the tariff. T h e Chamber, it was true, had been unable "to go the whole way with the theorist who can see commercial policy quite clearly without any qualifications" because public opinion was not ripe for a change, and the total abolition of customs tariffs was "beyond the immediate hope of mankind." He urged, Surely, however, something can be done by this conference to bring home, not only to the trading communities themselves but to the governments, which in the long run must accept their orders from the democracy, the fact that, unless we can restore to Europe far more than its pre-war volume of trade, suffering will be brought not only to those w h o are directly engaged in business but on the great masses of the population whose very livelihood depends upon it. If we can not get rid of tariffs altogether, at least we can go as far as the report of the Chamber suggests, namely, that there should be limitation. 26

Runciman concluded with a lucid exposition of the Trade Barriers Committee proposals for an extension of customs conventions and the system of commercial treaties. " A return to an active drafting and conclusion of commercial treaties may do much," he contended, "to minimize the impediments to trade brought about by rising tariffs." A n d "if tariffs are to remain, let them be imposed," I suggest, "on a more stable basis." Reduction, limitation, and stability—these were the sine qua non of the international tariff policy, vigorously championed by the Chamber's delegates on the floor of the conference and in the committees.27 The clear-cut stand in the conference by the I.C.C. for a definite conference lead to world opinion demanding governmental action in the direction of a downward movement of tariffs was decisive in the struggle which the conference precipitated between the advocates of tariff reform and the proponents of the international control of producIbid., p. 70.

M

Ibid.

71

Ibid.

238

The I.C.C. at the 1927 Conference

tion. The Preparatory Committee, in the agenda which it placed before the conference, gave "special prominence first to 'problems of commercial and tariff policy' and secondly to the 'proposals for international industrial agreements.'" 28 Although the division of opinion on these subjects never attained the proportions of a clear-cut break in which the supporters of tariff reform denounced, root and branch, international cartels and the advocates of cartels denied the necessity for tariff reform, yet the lines of battle were clearly visible in the shadings of emphasis and ardor with which the delegates urged the rival points of view. The antithesis between these two points of view was thrown immediately into high relief in the speech of the Swedish delegate, Cassel, opening the debate in the plenary session with an attack of no uncertain character upon the whole school of monopolists. He asserted, A t this moment, when we have come together in this conference to bring about collaboration among all nations for the common welfare of the world, the fundamental question which we shall have to answer must necessarily be this: Shall collaboration be sought in agreements calculated to restrict output and reduce the world's real income, or shall we try to unite all nations in the aim of increasing the world's production, making the world richer and supplying its population more fully with all that it needs for raising its standards of living. T h e answer we give to this question will influence all our deliberations and will be of paramount importance for our decisions. 29

For the whole idea of controlled production, Cassel had nothing but irony and contempt. There existed "no such thing as a social purchasing power determined on its own grounds." The purchasing power of human society could "never be anything else than the total produce of society." If the conference believed that the total purchasing power of the present world was too small, there could be "no other remedy than an increase in the world's total production." Should the conference "choose deliberately to reduce the world's total production in order to bring it down to the level of an assumed purchasing power, the result could only be that real purchasing power would be reduced in the same proportion and the world would be so much poorer." Although this did not mean that the producer could necessarily find a buyer for 28 League of Nations, International Economic Conference, Guide to the Documents of the Conference, C.E.I. 40 ( 1 ) , p. 8. M League of Nations, Report and Proceedings of the World Economic Conference, I, 65.

The I.C.C. at the 1927 Conference

239

any product he fancied to produce or at any price he thought necessary to demand, it did mean that the responsibility rested upon the producer "to accommodate himself to the needs of the market." Failing to do this, the producer had no cause to accuse the social purchasing power of being too small. T w o remedies lay at the producer's hand: either a reduction in costs of production or the transfer of his productive activity to other products for which there was a better demand. "If artificial hindrances are placed in the way of either of these two collateral remedies," continued Cassel, "the result must be that the productive power of society cannot be fully employed." 30 This was precisely "the most characteristic feature" of the present European situation. It had resulted in the very incomplete use made of Europe's productive powers, and particularly the widespread and longcontinued unemployment of its labor. In a certain sense, all the conference's deliberations were "concerned ultimately with the question of how to get rid of European unemployment." European products were to a large extent too costly for the market. T h e conference must g o beneath the superficial aspects of economic dislocation and reveal the various "monopolistic forces prevailing in many countries" which prevented productive powers from moving to better occupations, with the resulting current unemployment. Monopolies might "take very different forms"—"the monopolies of great industrial concerns, striving to raise prices above the market level," "the monopolies of such trade unions as try to establish an artificially high level of wages which can only be attained by excluding other labor," were, like "all government efforts to prevent productive powers from being used in the most economic way," essentially hindrances to a natural division of labor. T h e conference would without doubt find in the postwar system of rising tariffs "a very considerable part of the special difficulties" which had "hindered the restoration of the world economy to normal health." A l t h o u g h complete freedom of trade was impossible immediately, the conference could "abolish the worse misuses of goods." "If this conference," asserted Cassel, "were to act on such lines, it could become a conference for economic disarmament. . . ." 31 A s opposed to the demand for a decisive step towards economic 30

Ibid., pp. 65, 66.

11

Ibid., p. 66.

240

The I.C.C. at the 1927 Conference

disarmament vigorously championed by Cassel and Runciman, Loucheur's subtle handling of this interpretation of the conference's mission made clear the gap between the logic of economic nationalists and that of international traders. The conference, according to the thesis of the French delegate, should beware of simply prescribing antipyrin to allay a fever without attacking the fever at its origin. A great many speakers seemed to be agreed that "the root cause of our troubles" lay in postwar trade barriers. "What they have in mind," asserted Loucheur, was "the growth of an ultra-nationalist sentiment," which in his view "was perhaps natural . . . . and . . . . unfortunately sometimes justifiable in the interests, the legitimate interests, of security

What can the conference do in the matter ? . . . . T h e

conference can hardly interfere in matters of national economy, but it can and, I think, ought to map out definitely and clearly the path to be followed in regard to a number of questions . . . ." 32 The practical task of the conference, in the view of Loucheur, lay in the realm of export and import prohibitions, exchange restrictions, customs nomenclature, tariff stability, uniformity, most-favored-nation treatment, in short, in a continuance of the international efforts already under way in the collaboration of business men with the League secretariat in the promotion of technical cooperation around the periphery of the central problem of trade barriers. As to "the question of tariffs, themselves. On this matter neither the conference nor any other body can override state sovereignty." T h e function of "this first conference," as far as the French delegate was concerned, was to be limited in tariff leadership to the provision of "the means whereby we can repeat the truth and proclaim it anew and thus advance towards economic disarmament, which is the object of all our aspirations." Towards all attempts to take the question of economic disarmament out of the chimera of "aspirations," Loucheur presented the classic French thesis of security so familiar to disarmament conferences. 33 In the usual adroit manner, Loucheur made short shrift of both Runciman and Cassel. It was necessary for the conference to come to a frank understanding in regard to customs barriers. The idea which was mooted by the American Committee of the I.C.C. and to which 52

/£«/., p. 130.

™llnd., p. 1 3 1 .

The I.C.C. at the 1927 Conference

241

Mr. Runciman referred . . . . cannot be put into practice, and that for a number of reasons.

The French delegate scoffed, " T h e United States of Europe," that is a free and generous idea, but from the political point of view it clashes with our traditions and our history and with differences of language and custom; while from the economic point of view, too, it is barred by considerations of security and on account of the political upheaval which would in many cases result from it.

Against his American critics Loucheur took up the cudgel for French protectionism. He often thought in this connection, he retorted, "of the old Scriptural reminder about the mote and the beam." 34 And as to Cassel's attack on monopolists: does the cause of unemployment "lie in those difficulties relating to the circulation of goods to which I referred a moment ago and which, of course, we all desire to remedy? or does it lie, as M. Cassel seemed to think, in the abuse of certain monopolies?" Such a solution the French delegate summarily dismissed as "too simple." Thus were the antimonopolists dialectically separated from the antiprotectionists. However, "interesting and important though these matters may be with which the conference has to deal," remarked the French delegate with some condescension, efforts in this direction will only lead "to the cure of certain symptoms of the disease. T o repeat my simile: we shall simply have prescribed antipyrin to allay the fever." 35 The real cause, according to the French delegate, lay in the change in the currents of trade, due very largely to the change in the American position from debtor to creditor nation. The American gold policy, the development of the power of consumption in the American market "with a remarkably shrewd anticipation of events," rising American exports to European markets "at Europe's expense," rising American exports to South America—these were the essential factors in the situation, according to the French view. "Remember," said Loucheur, "that I am not implying any criticism. I am simply stating facts." 36 This situation presented an industrial challenge to Europe. " H o w can this situation be remedied? By winning back foreign markets? Undoubtedly . . "Ibid..

p. 1 3 0 .

This was the answer of French industrialists. Not 33

Ibid., p. 1 3 1 .

"Ibid.,

pp. 1 3 1 , 1 3 2 .

"Ibid.,

p. 1 3 2 .

242

The I.C.C. at the 1927 Conference

by economic disarmament and the increase of European consumption at the expense, if necessary, of a reorganization of the system of European production as suggested by Cassel. Such a course would jeopardize national security and the industrial status quo. It would involve European planning rather than national planning, a procedure the revolutionary significance of which had frightened French industrialists ever since Versailles. In the French view, the logical consequence of such a regime of economic cooperation threatened not only the French industrial position but also the entire structure of the reparations settlement. French industry had rejected the German offer of actual industrial cooperation in rebuilding the devastated regions a long time ago. The entire financial reconstruction of European nationalism accomplished in the Dawes and League reconstruction schemes rested not upon economic cooperation but upon economic nationalism. The time had again arrived for economic nationalists to cry "security" to the demands of world opinion for international cooperation in economic affairs. The answer of Loucheur to the demand of international business interests for economic disarmament and freer competition was the ambitious program for the organization of European industry into cartels, syndicates, or trusts designed to stabilize the industrial status quo, "introduce rationalization, and reduce cost prices." If European industry were to win back foreign markets, Loucheur told the conference, it would be necessary "to compete with the prices obtaining in countries which possess enormous home markets." This required that "rationalization of industries must not be limited to any one country, but must be capable of extension so as to cover the whole of Europe." "The primary need," "to increase the purchasing power of the populations of old Europe—since as a result of the stoppage or slackening of currents of immigration they are to be forced to live in their own countries," must be met "by endeavoring to build up that purchasing power on lines similar to, though I do not say identical with, those of the United States."38 Loucheur hastened to repudiate American methods as expounded by the American Committee: People over there are readier to take risks. In our older countries we are always afraid of and often dislike those who take risks. On the other side of

•Ibid.

The I.C.C. at the 1927 Conference

243

the Atlantic they are helped, and even when they fail people feel for them an indulgence akin to affection.

This thought of opening up European national markets to freer industrial competition awakened in the mind of Loucheur considerable sentiment. T h e possible opening up of freer currents of trade in Europe were identical, apparently to his satisfaction, with proposals "to lay out wide new streets" in "an old city," at the same time ruthlessly sacrificing the old church, a treasure-house of art and a sanctuary of old memories, and destroying the charm of the old familiar nooks and corners. Everything would have to be pulled down and a great deal of money spent before any result could be obtained. This is not how we should act. W e must go forward slowly and warily, step by step.

European peoples no longer had "the ardour of youth which glows in the eyes of our American friends." Europe had attained "the caution of maturity." " O n what lines then," Loucheur asked the conference, "shall we proceed?" It seems true that our only course is to organize European industry on the so-called horizontal method, that is—organize it by industries. This method alone will enable us to make the radical changes that are necessary; and so we are brought back again to agreements and cartels. 39

For the fears expressed by delegates from nonproducing countries, "of being bullied," for the objections of workers and consumers, Loucheur had a ready answer. "In actual fact" those fears would "often be groundless." Everything would depend "on the spirit in which the heads of these organizations act; at the same time, precautions must be taken to make it possible to deal with those who abuse their powers." Geneva, according to this French plan for economic security, must become "the place where the world's alarm signals ring," and Loucheur told the conference "we must install what I might call an economic alarm-bell here." 40 This French industrial proposal was countered by another French proposal with quite a different emphasis, offered by the French spokesman for labor, Jouhaux. Jouhaux, after advocating a policy of concerted action to raise European purchasing power by wage increases, put the cause of tariff reduction foremost in the program of labor. "Ibid.

"Ibid., pp. 132, 133.

244

The I.C.C. at the 1927 Conference

"First and foremost among these problems," he asserted, in direct contravention of the position of Loucheur, "is the question of inter-state commercial relations and the need for vigorous action with a view to the removal of trade barriers." Jouhaux further observed that labor considered that "it would have been possible . . . . for this conference to frame a convention putting an end to the raising of customs tariffs." 41 This was not the first time that a proposal of Jouhaux's for direct international cooperation in economic affairs had been offset by French industrial interests. It will be recalled that early in 1921 Jouhaux, representing the Confédération general du travail, urged upon the French government complete economic cooperation with German industry and labor in the rebuilding of the devastated regions by German contractors with German materials and German labor. This magnanimous stand by the French labor unions was blocked by the more powerful influences set to work by the French building trade. And the proposal for a solution of the reparations problem by direct economic cooperation "was slowly killed in the long-drawn-out conversations of M. Loucheur and Herr Rathenau."42 The World Economic Conference of 1927 saw some of the spokesmen for international labor and world business opinion united in a demand for economic disarmament. The division between the two schools of industrial security and economic disarmament, which the spirited debate in the plenary session revealed, precipitated a series of clashes between the opposing camps in the more protracted struggle of the committees and threatened the success of the conference. In the Committee on Commerce, the French position on trade barriers was embodied in a proposal offered by Serruys in opposition to the draft proposal of the Trade Barriers Committee of the I.C.C. Serruys's proposal put forward in precise form Loucheur's allusions to the minimum of defense necessary for national economic security. The proposal read: ( 1 ) That states, subject only to the requirements of their national security or the vital interests of their economic life, should as far as possible give their industry protection limited to counter-balancing more favorable conditions of production or a more advantageous régime of prices in the principal competing country. 43 11

42 Ibid., p. 86. Sir Arthur Salter, Recovery, pp. 161, 162. " L e a g u e of Nations, Report and Proceedings of the World Economic Conference, 1927, II, 15.

The I.C.C. at the 1927 Conference

245

As to limitation, the proposal read: (2) That states, recognising the inter-dependence between customs protection in the various competing countries, should refrain from unduly increasing such protection, with a view both to restoring European production and maintaining a profitable trade. 44

The proposal concluded with two clauses pledging sanctions consisting of "concerted legislative action" against dumping and calling for an investigation by the League Council "with a view to the eventual conclusion of an international agreement for its suppression."45 This French proposal drew the concerted attack of advocates of some form of immediate economic disarmament. "The committee could not be content," asserted Cassel, "with drawing up schemes for an international trade policy to be applied ten or fifteen years hence." The millions now unemployed would feel very little comfort in such recommendations. "Practical results could most easily be attained if the committee started with the series of recommendations drawn up by the Trade Barriers Committee of the International Chamber of Commerce."46 Norman Davis, speaking for the American delegation, stated that he was in substantial accord with most of Serruys's proposals, but asked why it was necessary to put off till some years hence the application of the principles adopted, and although he agreed with M . Serruys in the main, he thought that the text of the International Chamber of Commerce represented the crystallization of international thought on this subject. 47

Sir Walter Layton (British empire), whose speech in the plenary session had been one of the most brilliant economic exposes of the conference, although supporting Loucheur's proposals for general European rationalization, maintained his contention, stated in the plenary session, that this program of "closer economic collaboration in many spheres" could "not be attained by comparatively minor changes in tariff procedure" but required "such substantial reductions in the level of existing tariffs" that the tide of international exchange might flow in "greatly increased volume."48 Layton objected to the French counter11

Ibid. Ibid.

13

"Ibid., p. 18. «Ibid., p. 48.

"Ibid.,

Vol. I, p. 108.

246

The I.C.C. at the 1927 Conference

balancing provision as an endorsement of protectionist doctrine. Its provisions, he contended, were, moreover, impracticable "owing to the difficulty of arriving at the true cost of production abroad, and were undesirable because they struck at the foundation of foreign trade, viz. differences in cost of production."49 After considerable discussion, the committee rejected the French proposal and adopted in substantially its original form the "Alternative Draft Recommendation" offered by Layton, particularly in the wording of the last clause, which marked the climax of the report as finally accepted by the conference, reading: "The conference declares that the time has come to put an end to the increase in tariffs and to move in the opposite direction."50 The unanimous adoption by the conference of this proposal for immediate government action in the direction of economic disarmament was a great triumph for the world business movement represented by the Trade Barriers report of the I.C.C. The World Economic Conference thereby gave force and direction to the campaign of world business for "a complete change," to quote the words of the Trade Barriers report, in the tendencies of existing tariff opinion. The conference recommended that immediate action be taken along three lines, viz.: 1. Individual action by states with regard to their own tariffs. 2. Collective action through the conclusion of suitable commercial treaties. 3. Bilateral action, by means of an inquiry with a view to encouraging the expansion of international trade on an equitable basis by removing or lowering the barriers to international trade which are set up by excessive customs tariffs. 5 1

The conference further endorsed "the unconditional most-favourednation clause in its broadest and most liberal form" and recommended that the League of Nations "consider the possibility of establishing clear and uniform principles in regard to that clause and introducing common rules relating to commercial treaties."52 Upon the proposal for international ententes put forward so vigorously by Loucheur as a necessary prelude to economic disarmament, the conference took no decisive action, due to "a certain conflict in views," but confined itself to an endorsement of rationalization and a "Ibid.,

Vol. II, p. 59.

Ibid., p. 64.

n

I b i d . , Vol. I, p. 39.

** Ibid., Vol. II, p. 64.

The I.C.C. at the 1927 Conference

247

statement setting forth the dangers and advantages to be considered in forming a judgment upon the subject.53 The conference, in the discussion of the plenary sessions and the committees and in the full documentation of the experts, contributed much, however, to the clarification of thinking upon the whole problem of international industrial agreements. The conference successfully uncovered the fallacy of the idea, so widely mooted in certain industrial circles, that industrial ententes might be considered an alternative to tariff reform. As the report pointed out: "the field of operation" for such agreements was in all events of necessity "limited" to branches of production which are already centralized and to products supplied in bulk or in recognized grades. Consequendy, the report asserted, such agreements "cannot be regarded as a form of organization which could by itself alone remove the causes of the troubles from which the economic life of the world and particularly of Europe is suffering." 54 In addition, the conference discussions effectively clarified the attitudes of nonproducing countries towards price control, particularly of raw materials, on an international scale. For example, British allusions to the control of the rubber industry drew the following tart response from the American delegate, H. M. Robinson, American member of the Dawes committee and of the Council of the I.C.C.: I cannot clearly see how restriction in output could assure continuity of supply at a high level and prove of ultimate benefit to the world. I am also wondering whether the fact that over seventy-five per cent of the commodity in question is consumed in a non-producing country, while the country controlling the restrictions consumes but seven per cent of the total supply, might be looked upon as discrimination.55 Likewise, in the sphere of agriculture the conference failed to do more than bring the subject prominently to the attention of public opinion by placing it on a level with industry and trade in the discussions and in the final report. The report laid particular stress upon the problem of agricultural credit and recommended that such facilities be provided farmers on favorable terms.56 Thus, the entire emphasis of the World Economic Conference of 1927 was placed upon the necessity of a major offensive against all a M

Ibid., Vol. I, p. 49. Ibid.

K

Ibid., p. 97. "Ibid., pp. 5 1 , 52, 53, 54.

248

The I.C.C. at the 1927 Conference

barriers to international trade. The program of the Trade Barriers Committee of the I.C.C. upon the extensive subject matter dealing with obstructions to commerce and trade was fully realized in all its essential features in the final report of the conference. Again and again the work of the I.C.C. was cited in the final report of the conference dealing with the multitudinous aspects of technical cooperation in promoting a freer trade policy. In the report of the conference under Section 3, which was concerned with the legal provisions on regulations relating to international trade, the conference recognized that it was important that the work of the Economic Committee of the League of Nations and the I.C.C. in connection with the simplifications of customs formalities, the assimilation of laws on bills of exchange, the international development of commercial arbitration, and the suppression of unfair commercial practices should be continued with a view to obtaining rapid and general solution.57 Under Section 4, the economic and fiscal treatment of nationals and companies of one country admitted to settle in the territory of another, the conference took note of the important work already devoted to this subject by the Economic Committee of the League of Nations and by the I.C.C. and considered it advisable that their conclusions should be considered and coordinated by the appropriate organs of the League of Nations with a view to their submission to a diplomatic conference for the purpose of determining the best methods of defining the status of foreigners, of abolishing unjust distinctions between them and nationals, and of preventing taxation. T h e purpose of this conference would be to draw up an international convention. 58

Accordingly, the conference recommended: 1. That, pending the conclusion of an international convention, bilateral agreements should be arrived at on the basis of the work already accomplished by the Economic Committee of the League of Nations and by the I.C.C., defining the status of foreigners, not only from the economic but from the legal and fiscal points of view. 2. That, in the same spirit and with the same end in view, the Council of the League of Nations should prepare for the meeting of a diplomatic conference for the purpose of drawing up an international convention. 59 "•ibid., p. 35.

18

Ibid.

"ibid.

The I.C.C. at the 1927 Conference

249

The proposal of the I.C.C. Trade Barriers Committee for a permanent tariff commission, together with the various proposals for a reorganization of the Economic Section of the League, was lost in the divergence of opinion relative to the future organization of the League's economic work. Runciman, in behalf of the I.C.C., made a last gallant effort before the Coordination Committee of the conference to obtain immediate government action on the conference report by providing for a League meeting of commerce ministers. The proposal read: T h e conference, recognising that full effect can be given to its recommendations only if they are followed by administrative action in the several countries, requests that the necessary steps be taken by the League of N a tions to call together at the earliest possible moment the commerce ministers of the member states to discuss methods of cooperating to give practical effect to those principles and recommendations. 80

The committee did not forward the proposal to the conference in view of the practical obstacles to its realization.61 It was these "practical obstacles," however, which the unanimous report of the conference was designed to sweep away in a world-wide movement of greater economic cooperation. Although the international trade forces which had scored so clear-cut a victory in the conference did not expect, to quote the words of Sir Alan G. Anderson, acting president of the I.C.C., "that the walls of trade barriers" would "fall down suddenly at the trumpet blast of the League of Nations or the I.C.C. . . . ,62 the results of the first World Economic Conference appeared to the business world in 1927 as a good omen that Slowly but steadily and with increasing speed men of all nations begin to realize how much they need to trade with their neighbors and h o w much they lose in the wealth and happiness of their people by unnecessary barriers against their neighbors' trade. 63 m "Ibid., p. 1 7 3 . Ibid. "Ibid. 83 League of Nations, Economic and Financial Scction, International Economic Conference, Final Report of the Trade Barriers Committee of the International Chamber of Commerce, p. 1 4 .

C H A P T E R

XXI

" T h e Y e a r of C o m m e r c i a l

Treaties"

I

F T H E World Economic Conference had placed the weight of the League of Nations behind the movement for economic disarmament, it had also clearly revealed the obstacles which lay in the path of progress. International leaders now turned to the I.C.C. meeting at Stockholm for the world-wide business support necessary to carry the Geneva program through governments. Stresemann, the rapporteur on economic questions, asserted in his address to the Council of the League on June 26, the day before the Stockholm conference opened: I am glad to know, for example, that the I.C.C. is about to have its biennial congress at Stockholm at which the problem of the best methods for carrying out the recommendations of the conference will receive its closest attention . . . . W e

have

also

a

debt

of

gratitude

towards

the

industrial

organizations which have largely contributed to the preparatory work of the conference, in particular, the International Labour Office, the I.C.C. and the International Institute of Agriculture. 1

The Stockholm congress itself marked a considerable advance in the organization of world business opinion. The infant organization formed in Paris in 1920 had grown to world-wide proportions. The gathering at Stockholm in 1927 was the largest and most representative business conference which history had seen. In addition to the representatives of the various national chambers of commerce, it included the representatives of 829 of the most important economic associations in the world and of 2,130 great firms and corporations. The influence of this world economic parliament was considered by League economic leaders a decisive factor in the struggle for economic disarmament. Sir Arthur Salter, in the appeal which he made at the Stockholm congress, asserted, 1 Journal of the International Chamber of Commerce, No. 1 5 (Proceedings of the Stockholm Congress), p. 4.

The Year of Commercial Treaties

251

In this tremendous and still doubtful issue, may I express my conviction that this I.C.C., its members acting individually and collectively, the great institutions which they represent and the powerful forces which they influence can play an immense and perhaps a decisive part. With your wholehearted aid, but scarcely, I think, without, we may hope for the realization of what the members of the conference declared to be their unanimous desire, that we shall now see "the beginning of a new era, during which international commerce will successively overcome all obstacles in its path that unduly hamper it, and resume that general upward movement which is at once a sign of the world's economic health and the necessary condition for the development of civilization. 2 T o this appeal the Stockholm congress gave an enthusiastic response in the unanimous adoption of the report of the W o r l d E c o n o m i c Conference and in an appeal to all the members of the I.C.C. and to all its national committees t o do everything in their power to hasten the application of the reforms called for in the Geneva resolutions. T h e economic gospel which the Stockholm congress pledged itself to spread to the ends of the earth was eloquently defined at the conclusion of the congress by O w e n D . Y o u n g , w h o headed the A m e r i c a n delegation: T h e most significant pronouncement of the Congress was its declaration that the object to be sought was the largest and most economical production and distribution of goods and services to all peoples—that trade was not an end in itself but only a means to enable people to produce more and buy more, and thereby raise their standards of living. All barriers to trade are to be examined in the light of this principle. T h e thought is not whether they are a bar to the trader, but whether they restrict unnecessarily economic development. International business at least places itself squarely on the foundation that in the long run its own best interest is served through improved economic conditions rather than by an attempt to obtain, here and there, temporary advantages for the trader himself. 3 T h e appeal of the I.C.C. failed to strike a responsive chord in many government circles. E v e n in the June meeting of the Council of the L e a g u e of Nations the resolution of support moved by Stresemann for the report of the W o r l d E c o n o m i c Conference met a chilly response f r o m the president of the Council in the person of the British representative,

Sir Austin

Chamberlain.

Stresemann's

motion

that

the

Council "invites, therefore, all countries and governments to give to 'Ibid., pp. 5, 6.

'Ibid., p. 6.

252

The Year of Commercial Treaties

these principles and recommendations their close attention and the active support necessary to facilitate their adoption and application,"4 drew from Sir Austin a cautious rejoinder to the effect that some of the recommendations made were "of a general character and of great importance"; others were concerned with matters of comparative detail but requiring, in the opinion of his government at least, careful study before it would be safe for a country, which did not wish to pledge its word and afterwards to qualify it, to give an unqualified assent to everything which a further examination might show to be embodied in the report. Therefore, without detracting in any way from the tributes paid to the work of the conference, and without in any way diminishing the hope which many had expressed as to the fruitful results that might be drawn from the conference, he ventured to ask the rapporteur whether he would not reconsider, not the general trend of his conclusions, but the wording of one particular paragraph. He did not think that the third paragraph of the conclusion as now expressed could be accepted by any representative at that table who was not already authorized to pledge his government to the acceptance, without qualification, of every recommendation great or small whatever its character might be, to be found in any part of the report. That seemed to him to be going too far at too early a stage, and at any rate it was further than he was entitled to pledge his government. He, therefore, ventured respectfully to submit to the rapporteur that he might perhaps be willing to substitute the following conclusions: "Commends this valuable Report and these important recommendations to the favorable consideration of all governments."5 Loucheur thereupon observed that he felt that if by "freedom of exchanges" were meant "free trade" that would immediately give rise to certain immense questions. If, however, "a greater liberty of trade" were meant, "he was in full agreement." "He was not authorized to make any definite declaration at that meeting on behalf of the French Government. He was in the same position as the President." Stresemann, in replying, said that he was a little disappointed that the President could not accept the whole text which he had submitted that morning. H e did not think that the Presi4 6

League of Nations, Report and Proceedings of the World Economic Conference, I, 2 1 . Ibid., pp. 25, 26.

The Year of Commercial Treaties

253

dent's text was better than his, but he was prepared to accept it, as he clearly realized the different position in which the countries represented on the council found themselves in regard to this question. There were countries whose governments had already discussed and fixed their attitude regarding the resolutions submitted by the Economic Conference, namely, Belgium, Czechoslovakia, and his own country, which declared their full and unqualified acceptance of those resolutions.6

With this colorless substitute resolution offered by the British president of the Council, seconded by the French representative, the Council of the League gave its rather hesitant and lukewarm blessing to the World Economic Conference's campaign for tariff reform. Although, to quote the words of Sir Arthur Salter, "the one great country which had given such a lead in the past was for various political and other reasons not in a position to do so,"7 the movement for tariff reform generated at Geneva and at Stockholm continued during 1927. Along all three of the possible lines of economic disarmament—autonomous, bilateral, and multilateral—recommended by the World Economic Conference certain progress was made. The effect of the conference policy and the unanimity with which the policy had been approved "was immediately felt." 8 No conference of national ministers of commerce such as that recommended by the I.C.C. was called. National economic pressure groups barred government action by the United States and France. All governments, however, were persuaded by the strength of the liberal international business and labor movement to cooperate through the League in an international campaign to arouse and organize public opinion in support of the World Economic Conference program. This was the philosophy back of the Brussels Financial Conference of 1920 and, in fact, of all League efforts to promote international economic cooperation. The leaders of the 1927 reform movement, however, went farther in this direction than the leaders of the 1920 movement. In 1927 economic crusaders secured the sanction of the governments in both the Council and the Assembly for an international drive against trade barriers. This drive was to be carried out under the supervision of a new type of committee. The League economic committee, composed largely of "Ibid., p. 27. ' S i r Arthur Salter, The United States of Europe, p. 87. s League of Nations. Report of the Economic Consultative Committee on First Session, May 1 4 19, 1928, C . 2 1 7 . M. 73, p. 7.

254

The Year of Commercial Treaties

experts drawn from the various national commerce ministries, was set aside and a special committee was created, more nearly representative of the liberal reform groups which made up the World Economic Conference. In addition to representatives from the League governments and the United States, full membership was accorded to five representatives of the League Economic Committee, one representative of the League Financial Committee, one representative of the International Institute of Agriculture, and three representatives of the I.C.C. Others invited to be present by the president of the committee included experts from the International Co-operative Alliance, International Labor Organization, and the International Institute of Agriculture; the president of the Governing Body of the I.L.O., representatives from the League of Nations Associations and the Joint Standing Committee of Women's International Organizations. This committee, known as the Economic Consultative Committee, was established under Council and Assembly resolutions. Its terms of reference were "to follow the application of the recommendations of the Economic Conference."9 Theunis, president of the World Economic Conference, was made chairman of the committee. Despite the fact that concrete results in legislation were not to have been expected until after an appreciable lapse of time, as demonstrated by the history of the recommendations of the Brussels conference of 1920, the Economic Consultative Committee, in its first session a year later, was able hopefully to record that the conference had "already checked the upward movement of tariffs, which was in full swing in May 1927." 10 Although preparations for tariff increase, already in progress at the opening of the economic conference, had been in part carried out with the result that some tariffs were in effect higher than before the conference, the actual rates of duty which were finally put in force were, in general, much less than those originally proposed.11 In the second possible field of action recommended by the conference, the field of bilateral tariff agreements, the year 1927 saw great activity. The committee declared, T h e year 1927 is markedly distinct from preceding years in the fact that the nations of the world and of Europe in particular have acted in accordance with the maxim laid down by the conference that tariffs, though within • ibid., p. 5.

10

Ibid., p. 8.

11

ibid.

DR. ABRAHAM FROWEIN PRESIDENT OF THE INTERNATIONAL CHAMBER, 1932-193}

The Year of Commercial Treaties

255

the sovereign jurisdiction o£ the separate states, are not a matter of purely domestic interest, but greatly influence the trade of the world.

The great number of commercial treaties concluded during this year following the conference, not only reducing the rates of duty between the contracting parties, but extending these reductions to third parties under the operation of "the most-favored-nation clause," made it "no exaggeration" to term 1927 "the year of commercial treaties."12 The Franco-German Treaty of August 17, 1927, was hailed by the committee as "the most practical example of the principle of international cooperation recommended by the conference of 1927." Although this treaty provided French protectionists with an opportunity to make that upward revision of French tariffs long contemplated, the committee "recognized, however, that this increase was much less than that which the country in question was planning prior to the 1927 conference." 13 In addition, through the operation of "the mostfavored-nation clause," even this increase was subsequendy modified by tariff reductions in commercial treaties concluded by France with Belgium, Switzerland, Italy, and Austria. These benefits were by virtue of the same clause extended to nearly every state. Commercial treaties were also concluded between Central European states, including treaties between Germany and Yugoslavia, Germany and Greece, Austria and Hungary, and Hungary and Czechoslovakia. 1 * In the case of collective action, the difficulties in the way of general collective agreements were considered such that the Economic Consultative Committee concurred in the suggestion of the Economic Committee "that, as a practical method of approaching the problem and as a means of obtaining the necessary experience for dealing with it as a whole, efforts should be made in the first instance to reach agreement with regard to particular groups of commodities." 18 The following year saw the failure of efforts to extend the system of commercial treaties which had been thrown over Europe on the momentum of the World Economic Conference. The Economic Consultative Committee, in its second session, noted the checking of the initial movement of 1927 and indicated that the critical stage of the struggle had been reached. The hope of the Loucheur school which had advocated the formation of industrial ententes as an effective 12Ibid.

''Ibid.,

p. 1 1 .

11

Ibid.

™Ibid„

p. 12.

256

The Year of Commercial Treaties

means of influencing commercial policy was in 1928 definitely proved groundless. The committee pointed out that the year had seen no cartels formed of "fundamental importance in regard to certain raw materials of necessaries of general consumption." Moreover the efforts which had been "directed towards improving existing treaties, consolidating the position of cartelised industries, and finding means to settle difficulties due to a number of internal obstacles . . . . inherent in the nature of most cartels" had "tended to stabilise rather than to modify the tariff position." 16 The conference's hope that a common recognition of the interdependence of industry and agriculture might lead to a reduction of industrial protection had been rewarded in the case of Sweden, where the influence of agricultural interests had blocked a proposal to increase protection for the Swedish iron and steel industry.17 In some other countries a grant of additional protection to agriculture had resulted in a reduction of antitariff pressure by agricultural interests.18 On the other hand, the committee noted signs in certain countries that a reversal in the trend towards freer trade policy was about to take place in the direction of protection. Much depended on the outcome of tariff-making then in progress in Brazil, Egypt, Finland, Mexico, Portugal, Rumania, Spain, Turkey, and the United States. The prospects for a reduction in tariffs seemed good in Rumania, where a tariff commission had recommended "an almost general reduction of duties." However, as the committee pointed out, any prospect of possible downward movements in smaller countries must be offset by "the prospect of still higher duties in the United States."19 The fact that the proposals for the most sweeping increase of tariffs came from those countries whose tariff indices were already the highest in the world appeared significant in the minds of the committee. The effect of this protectionist pressure had not as yet been sufficient to upset the temporary condition of equilibrium which appeared to have been established elsewhere. The protectionist pressure among other countries was as yet limited to demands for changes here and there rather than for general upward revision. The situation, however, was " L e a g u e of Nations, Report of the Economic 6-11, 1929, C . 1 9 2 . M . 7 3 . 1 9 2 9 . I I . , p. 6 18 " Ibid. Ibid.

Consultative

Committee

on Second

"Ibid.

Session,

May

The Year of Commercial Treaties

257

rapidly approaching the danger point, and the committee uttered the following warning: But if pressure continues, these converging movements may have a cumulative effect and make the position of low tariff countries difficult. Indeed, if the tendency is not checked, it must sooner or later lead to the position which prevailed before the conference of 1927; the world would then be faced with another period of tariff competition instead of a steady reduction towards a state of equilibrium at a lower level.20

The committee, plainly alluding to the United States, noted the proportionately greater influence of "measures adopted by the big producing states" upon the average level of world tariffs. As the committee evidently intended to point out, even the uncertainty accompanying the making of the Hawley-Smoot tariff in the United States was in all likelihood having the effect of retarding the tariff reduction hitherto contemplated by other states.21 Furthermore, the retrograde influence of such powerful high-tariff countries upon low-tariff countries was greatly increased through the operation of the unconditional mostfavored-nation clause. The committee, in this connection, significantly observed, regarding the influences of this category of states, of which the United States was the most notable member: T h e high tariffs of countries which, while not prepared to effect any reduction in their own duties, claim the unconditional application of the mostfavored-nation clause, tend to make other countries hesitate to include important reductions in bilateral treaties concluded by them. 22

Despite these dangerous tendencies, however, the year 1928 saw the first successful application of the principle of collective action elaborated by the conference and the Economic Committee. The convention on export and import prohibitions, which had been drawn up and initialed at the Geneva conference three months after the close of the World Economic Conference, was finally made effective by a supplementary agreement, concluded in July of 1928, in which all but a few of the minor reservations which had blocked the success of the convention were removed. The committee in its report of 1929 urged upon states the necessity of immediate ratification in order "to put an end to a series of abnormal practices which developed particm

¡bid.

21

Ibid.

"¡bid.,

p. 8.

258

The Year of Commercial Treaties

ularly after the war and constitute a serious obstacle to international trade." 23 In addition to the convention itself, supplementary draft protocols were drawn up at a special conference convened at Geneva in March, 1928. T h e protocols, designed to abolish import and export prohibitions on hides, skins, and bones, to abolish export duties on hides and skins, and to fix maximum rates for export duties on bones, had been converted into two agreements at the second conference on prohibitions and signed by sixteen countries. The Consultative Committee urged upon the governments the necessity of speedy ratification of all these agreements as "representing the first attempt at collective action in the matter of commerce." 24 T h e causes for the slowing up and checking of the tariff reform movement and the fateful return to economic nationalism are clearly sketched by Sir Arthur Salter in a memorandum privately circulated among interested League circles on September 2, 1929, the eve of Briand's appeal in the Assembly for a "United States of Europe." The conference's tariff offensive, in the view of Sir Arthur, was being defeated by "those private interests" which had developed business under the shelter of trade barriers. Sir Arthur wrote: These private interests are better organized, more vocal, and more politically effective, than the general public interests on the other side; and are much more conscious of what they would stand to lose than the other business interests (such as exporting industries) of what they would gain. Exporters and industries which would certainly gain by a reduction in tariffs, even those of their own country, have been disappointingly indifferent when their support might have been decisive. 25

With this failure of business support Sir Arthur associated the deteriorating influence of American tariff policy, at that time in its final stages of formation. The influence of American tariff policy was particularly noteworthy, as was pointed out in the second report of the Economic Consultative Committee, through the implicit American threat to low-tariff countries by the operation of the most-favorednation clause.28 The ultimate extent of the disastrous influence of the Hawley-Smoot tariff act, finally adopted by the United States in 1930, "ibid. "ibid. * Sir Arthur Salter, The United States of Europe, p. 87. "Ibid., pp. 87, 88, 89.

The Year of Commercial Treaties

259

is clearly indicated in any study of the subsequent era of tariff retaliation.27 The failure of American and European business leadership to carry through successfully the combined League and I.C.C. tariff offensive points to the inadequacy of national political machinery. The voices of a reasonable national policy were lost in the clamor of the chaotic legislative lobby of which the American Hawley-Smoot tariff lobby was the most notorious. This same glaring defect in national political organization was also to prove largely responsible for the failure of governments—the American government in particular—to work out a series of progressive solutions in the financial field of reparations and war debts. The early financial reconstruction of Europe was not a definitive settlement but rather the first step in a progressive liquidation of outstanding war costs. The eventual financial collapse was the result of the inability of the national state to formulate successfully a reasonable policy of change. The I.C.C. was incapable of following out these problems through the details of a final settlement, but the organization of business opinion was effective in providing the impetus which aided in placing these problems at crucial moments in the hands of experts largely drawn from the ranks of its own leadership. Five years later the United States embarked upon a program of reform in tariff making which represented a belated attempt to apply to the formation of national economic policy the technique of economic cooperation evolved in the international field. The methods adopted by the American Department of State in the formation of the Hull tariff policy mark the substitution of orderly planning for the functioning of the notorious tariff lobby. Those export interests, whose lack of influence in tariff making Sir Arthur Salter regretted in 1929, were in 1934 at last granted the right of a full hearing in Washington. "Joseph M. Jones, Jr., Tariff Retaliation: Repercussions of the Hawley-Smoot of Pennsylvania Press.

Bill, University

P a r t IV THE DIPLOMACY OF TECHNICS

CHAPTER

XXII

The Business of the International Chamber of Commerce

W

E HAVE dealt at some length with the story of the organization and expression of business opinion upon two great political issues in international affairs which have their roots in common economic soil: war obligations and trade barriers. Both these issues have arisen out of "the tragic bookkeeping of the war." Both have served to rally the cooperative efforts of business men in the movement toward European reconstruction and world restoration. In these efforts the problems of international finance and international trade have been laid bare and their complexities revealed in a manner heretofore undreamed. The mobilization of world opinion in the campaign for a reparations settlement and for economic disarmament has given zeal and direction to the entire business movement centered in the I.C.C. But the story of these two major efforts by no means covers the history of the activities of the I.C.C. The main load of the I.C.C.'s administration has been concerned with business itself, with those affairs which require the self-regulation of the business world. In this capacity the I.C.C. has become a part of a thousand private business administrations, the international partner of the national capitalist. The I.C.C. is above all else essentially itself a business organization. It operates like other business concerns, primarily as a wheel in the modern capitalist mechanism for the production and distribution of the world's wealth. It is not itself a profit-making concern, but it is designed to serve profit-making concerns. It is the International Bureau of every business man, set up and made to function for the purpose of supplementing the efforts of the individual trader and industrialist with the collective assistance of his particular functional group and,

264

The Business of the I.C.C.

in so far as possible, of the vast organization of business represented in the I.C.C. As stated in its constitution: The International Chamber is organized T o represent all the economic factors of international business, including finance, industry, transportation, and commerce; T o ascertain and to express the considered judgment of those interested in international business; T o secure effective and consistent action both in improving the conditions of business between nations, and in applying solutions for international economic problems; T o encourage intercourse and better understanding between business men and business organizations of the various countries; And thereby to promote peace and cordial relations among nations.

T h e performance of these services in the world economy of business has necessitated the development of technical cooperation to a very high degree of efficiency. The place of the technical services in the orbit of international organization is shown by the achievements of the I.C.C. in smoothing the operation of the machinery of international business. This unspectacular but constructive everyday work of experts has, as we have observed, often given a decisive impetus to workers in the field of general policy. It has been in the sphere of technical cooperation that the trends of scientific progress, when permitted to work, have induced a new and more dynamic motivation for constructive change opposite to the inertia of provincial politics. In this sense, the tedious routine activities of the international headquarters of the I.C.C. deserve to be considered along with the activities of the technical sections of the League of Nations, the International Labor Office, and the International Institute of Agriculture, as one of the forces affecting the evolution of international relations. By eliminating the causes for friction at the source, the architects of technical cooperation in many instances have contributed the foundation for the structure of international agreement. On the other hand, technical cooperation is often achieved only under the pressure of events operating in the sphere of general policy. T h e two spheres are constantly interacting in such a way as to make apparent the unity of the whole process. Viewed from this standpoint the I.C.C. is an international research bureau of a peculiar type, for the international staff at the headquar-

The Business of the I.C.C.

265

ters of the I.C.C. is in reality merely the secretariat of the research bureau. The bureau is the I.C.C. itself, the international organization of business. The research is carried on by or under the direct supervision of technical committees of business men. The I.C.C. is therefore in its own right an extensive international organization of technical research. The I.C.C., like the League of Nations and I.L.O., is but the machinery for the cooperative action of its members. It provides a permanent international secretariat which is ready at all times to furnish expert assistance in the formation and execution of policy. But the actual formation and execution of policy must await the decision of the great body of one and a half million business men, representing private business management in forty-six countries. The members are of two classes, organization members and associate members. The organization members are made up of various national and local financial, industrial, and commercial organizations. These organizations are not conducted for profit or political purposes. This is the voting membership of the Chamber. The list of associate members, on the other hand, includes individuals, firms, and corporations engaged in business activity. Associate members, although officially represented only through their respective national organizations, are kept intimately in touch with the activities of the organization, and may be consulted on matters of policy. They are entitled to the full privileges of a nonvoting delegate at all congresses, including the privileges of discussion on the floor of the congress. The executive body of the I.C.C., the Council, which meets four times a year, is composed of representatives from the various affiliated countries. Eligibility for membership in the I.C.C. and representation on the Council require the creation of a comprehensive national organization, or national committee, truly representative of the principal economic forces of the country concerned. However, individual firms or associations have been included in the list of associate members from many countries not eligible for organization membership. Representation on the Council, which varies from one to three delegates, is fixed in accordance with the importance of the external commerce of the respective countries. The provision for the inclusion within the organization of the I.C.C. of a large body of unattached private concerns and individuals

266

The Business of the I.C.C.

as associate members has operated as a device for establishing direct relations outside and above national committees between the business international and the individual business man. Associate membership assures the minority in respective national groups a voice in the international business forum. The appeal of the individual business man, as far as the constitution of the I.C.C. is concerned, may not be stifled by the national group but is entided to an international hearing. This provision has proved a useful extension of the important principle of unofficial representation within the framework of official internationalism. This principle, as noted above, is illustrated by the participation of the I.C.C. itself at official League conferences. The Council of the I.C.C. carries on its work through an executive committee selected annually and meeting as occasion demands during the interim between Council sessions; a president of the I.C.C. elected biennially by the Council together with not more than ten vice presidents; a treasurer; a deputy treasurer; and a permanent administrative organization under the secretary-general located at International Headquarters in Paris. The permanent administrative organization is divided into eight departments: economic; financial; distribution; legal; communications and transport; congress, council, liaison work; press, information, World Trade (journal); budget committee—financial control and interior services. Under the direction of the president, the secretary general, the directors, and the heads of departments, the International Headquarters staff carries out the decisions of the Council, organizes the general congresses, prepares the meetings of the standing and special technical committees, and coordinates the various activities of the I.C.C. The supervisory function of the members of the Council is to a certain extent made continuous by the advice and assistance of an administrative commission composed of representatives of member countries resident at International Headquarters. These administrative commissioners are the permanent ambassadors of their respective national business organizations and act as continuous liaison officials between national committees and the everyday administration of International Headquarters. In order that these officials may be kept in close touch with their national committees, an exchange of residence for several months between the administration commissioner and his

The Business of the I.C.C.

267

own natural opposite in the home office, the secretary of the national committee, is sometimes arranged. This has been a frequent procedure in the American section. With this administrative machinery at its command the I.C.C. usually functions upon the respective questions before the Council in the following manner: ( 1 ) A general consultation between the secretariat and administrative commissioners or those commissioners especially concerned. (2) The appointment by the Council of a central international committee at International Headquarters, charged with outlining the scope of the work, and preparing a report or questionnaire for circulation among national committees. (3) Special subcommittees of the respective national committees composed of representative men of affairs with special competence on the subject under discussion act upon the report in the form of recommendations to the national committee. (4) These subcommittee reports, when and as approved by the national committees, are sent back to the central international committee as the basis of a final report. (5) This final report is then submitted to the various national committees for final action. (6) A full report of the results of this wide international discussion is then submitted by the rapporteur of the central committee to the Council. (7) Action may then be taken by the Council or recommendations may be made for the action of a general congress or both procedures may be adopted. The large congresses, meeting regularly once every two years, provide a forum for the open discussion of policy. The general congress, with its world-wide press and radio facilities, is the most powerful organ of I.C.C. opinion. The action of the Council or the congresses may take one or all of several forms, according to the character of the question and the circumstances governing the execution of the decision. The publication of resolutions is usually accompanied by a full report by experts of recognized authority, recommendations to national committees for appropriate political or legal action if the question be governmental, liaison activity with national or international private functional groups immediately concerned (such as the Bank for International Settlements, bankers' associations, national lawyers' associations, the International Law Association, the various shipping groups, merchants' associations, etc.), the organization of special international conferences of the interests con-

268

The Business of the I.C.C.

ccrned for the purpose of promoting concerted action, and the representation of I.C.C. opinion by a delegation of business leaders and experts at international governmental conferences and meetings held at the League of Nations and elsewhere. In the formulation and promotion of policy the I.C.C. has available for use the columns of its own monthly journal, World Trade, published in German, French, and English editions, together with the annual output of various technical reports available for general distribution among national business groups. Throughout the policy-forming and executive processes carried out within the organization of the I.C.C., liaison is continuously maintained with other private and public, national and international, organizations concerned. This procedure, as has been observed, has led to close cooperation between the organization of the I.C.C. and the various sections and committees of the League of Nations. It is in the handling of the normal business problems the solution of which is within the competence of business management itself that this interesting regime of international business cooperation has taken form. Technical cooperation in the maintenance and improvement of the existing machinery of international trade has steadily developed throughout the twenty years of the I.C.C. history despite the recurrent shocks and tremors of political disturbances. In this field, government action is necessary, if at all, only to supply final legal sanction to reforms and agreements worked out and agreed upon directly by the business interests concerned. The day-by-day technical work of the I.C.C. has in general been directed toward the maintenance or improvement of the instruments of international commerce in the broadest sense. The extensive network of technical committees which constitute the I.C.C. in action fall into four interrelated groups: industry and trade, finance, transportation and communication, and legal. Inasmuch as the questions handled by these groups are closely interwoven with the main threads of economic policy, perhaps the most valuable feature of the I.C.C. organization is the work of unification and coordination of all departments of international business under the single roof of International Headquarters. It was, as we have seen, the two groups of committees dealing with industry and trade and with finance which have handled the major

The Business of the I.C.C.

269

political questions of trade barriers, debts, the gold standard, and taxation. It has been within the organized discussion of the subjects of industry, trade, and finance that the process of assimilating these controversial questions to the main body of business practice has gone forward. The association on the same agenda of items such as the protection of industrial property, industrial statistics, bills of exchange, and double taxation with the controversial issues of reparations, tariffs, and war debts has been good for the mind of world business. THE DIPLOMACY OF TECHNICS AND THE TRENDS OF I.C.C. POLICY

T h e trend of commercial and financial policy within the I.C.C. during the past twenty years is indicated by the changing structure of the network of committees dealing with this subject matter. In the early years of the organization, the subject of tariffs was considered only by the committee dealing with customs formalities and nomenclature, and the subject of war debts was dealt with by the finance committee from the standpoint of the international exchange problem. In 1923 at the Rome congress the question of war debts, as we have observed, was lifted out of the category of technical finance and made a part of the problem of economic restoration in the hands of the committee on economic restoration. After the achievement of the immediate objective of this committee in the adoption of the Dawes plan, the work of the section on economic restoration expanded in an effort to assist in the carrying out of the Dawes plan and promote general economic restoration. In 1925 the Brussels congress opened the drive on trade barriers. T o the two financial committees of the section on economic restoration, the special committee on international settlements, and the standing committee on assisted schemes, was accordingly added the general committee on trade barriers. A t the Stockholm congress in 1927 the trade barriers issue had risen to the position of paramount importance, and by itself occupied an entire section, including such subjects as Danubian navigation restrictions and international cartels. The final report of the trade barriers committee, as presented to the World Economic Conference of 1927, was no mere general recommendation for tariff reform but a thoroughly digested document from the seven technical subcommittees, containing clear-cut, detailed recommendations on the minutiae of

TJO

The Business of the I.C.C.

technical interference with trade. These recommendations included conventions on the subjects at issue, ready for the signature of diplomats. The draft conventions concerning the treatment of foreigners and legal and social discriminations, which embraced the first section of the trade barriers report, represented the final effort in a long series of technical approaches to the subject of unfair discrimination dating from the organization meeting in Paris in 1920 and covering the fields of inequality of treatment, passport visas, the right of residence and establishment, the right to engage in business or industry or to exercise any other profession or occupation abroad, the civil status of foreigners, the civil status of legal entities abroad, and the fiscal treatment of foreigners. Section II of the report contained detailed recommendations which had been lifted bodily from the accumulated documentation of the transport group of the I.C.C. This work represented years of thorough study by the secretariat and committees on the various subjects of rail transport, sea and waterway transport, and air transport. Expertly revised and refashioned by the subcommittee on obstructions to transportation, the product of these technical committees was raised by the trade barriers committee to the position of a major issue in the sphere of commercial policy. Sections III, IV, and VII, embodying the heart of the report (prohibitions of importation and exportation and the free movement of raw materials; tariffs; and the proposal for the constitution of an international tariff and trade commission), were the result of discussions upon the subject of raw materials dating as far back as the Paris congress of 1920 and the painstaking study of the whole subject of customs and tariffs in the technical work of the I.C.C. secretariat and committees in preparation for the League Customs Conference of 1923. Section VI, containing the recommendations of the subcommittee dealing with the problem of currency instability, control of prices, and lack of capital and credit, represented the finished product of a long line of technical committees, including the Stamp committee, the Pirelli committee, the Calendar committee of the Brussels conference, and the committees on international settlements and assisted schemes. In 1927 the committee on international settlements had slipped back into the finance group from its leading position in the section on economic restoration set up by the Rome congress. Assisted schemes

The Business of the I.C.C.

271

had dropped from view. This reorientation of technical activities signified a change in viewpoint, a new departure in the evolution of technical opinion. The emphasis of the I.C.C. had shifted from international finance to international trade. This approach to the fundamental problem of world restoration has been since maintained. At Amsterdam (1929), Washington (1931), Vienna (1933), Paris (1935), and Berlin (1937) world finance was considered as a part of the basic problem of international commerce. Thus in Washington the delicate question of a revision of the war debts was approached under the guise of "an impartial examination of the effects of these obligations on international trade." At Vienna after the financial crisis the congress, in its report to the World Monetary and Economic Conference, maintained the same emphasis. And in Paris (1935) the resolutions of the congress opened with the subject of international trade. Under this heading the congress dealt with the subjects of exchange stability, debts, budgets, settlement of international obligations by the movement of goods and services, trade barriers, etc. Despite the tremendous force of the revival of economic nationalism the I.C.C. has steadily maintained its attack on tariffs and trade barriers. The technical case against tariffs as built up by the expert committees of the I.C.C. is irrefutable, as irrefutable as the technical case for a reparations settlement which emerged from the experts of the I.C.C.'s finance committee at Rome in 1923. Both of the major positions taken by the I.C.C. in the field of general economic policy have proved to be impregnable—the position on war debts and the position on tariffs. Both these political campaigns waged by the I.C.C. have been distinguished by the objectivity and thoroughness of the approach. This is high tribute to the thoroughness and scientific skill of the technical work of the I.C.C. out of which these great postwar movements of organized business opinion have grown. In 1931 at the Washington congress technical activity within the industry and trade group went through another reorientation in study from which grew an extensive international research bureau: the International Bureau of Distribution. The Washington conference, under the heading of industry and trade, took up not only the problems of trade barriers and industrial ententes but also gave wide consideration to the varied problems of international economic relationships. The

272

The Business of the I.C.C.

work on the first two problems was taken up as a part of this broader problem and the preparatory documents of the conference were assembled in the form of a wide inquiry by a committee on international economic relations which coordinated the work of six subcommittees: commercial policy and trade barriers, industrial ententes and rationalization, inter-European relations, relations between Europe and the United States, the Far East, and South America. Major interest at the conference fell upon the Europe-United States inquiry; seven volumes of monographs were prepared by technical subcommittees and experts, dealing with the development and direction of trade, industrial problems (cost of production, mass production, economic aspects of the wage question), agricultural problems, distribution problems, economic crisis, and psychological elements. Out of this study by the Europe-United States committee grew the new technical bureau, the International Bureau of Distribution, the Washington congress recommending "that the Council appoint a special committee of the Chamber to enlist national committees, interested public and private agencies, and individual experts in the field of distribution to cooperate in an organized national and international effort to provide accurate and basic data upon the entire problem of distribution."1 During the history of the activity of the I.C.C., the technical committees of the industry and trade and finance groups have scientifically prepared the ground for every advance in the sphere of general trade policy. 'I.C.C., Resolution Adopted by the Washington Congress, Brochure No. 77, p. 17.

CHAPTER

XXIII

Industrial Property

O

N E of the oldest technical activities of the I.C.C. is that dealing with the protection of industrial property, dating from the work of the prewar international congress of chambers of commerce. The importance of extending the protection of law to that class of property rights which came into prominence in the industrial revolution, namely, patents and trademarks, was early recognized within states and became the subject of a considerable body of treaty law before the formation in 1883 of the Union for the Protection of Industrial Property. The growth and development of the international exhibition, beginning in the middle of the nineteenth century—London ( 1 8 5 1 ) , Paris (1855), London (1862), Paris (1867), Vienna (1873), Philadelphia (1876), Paris (1878)—emphasized the utility of an international convention protecting patents and trademarks. On the occasion of the Vienna exhibition in 1873 an unofficial congress on patent reform met, adopted resolutions, and created a permanent executive committee. T h e Paris exposition of 1878 was the scene of a semiofficial international congress on industrial property, held under the auspices of the French minister of commerce, which resulted in the creation of a permanent international commission. The union was finally organized under a draft convention signed by eleven countries at an official conference held in Paris in 1883. A n international bureau for the union was established at Berne. This prewar international regime for the protection of industrial property was further revised and was completed at subsequent official international conferences in Brussels on December 14, 1900, and in Washington on June 2, 1 9 1 1 . In 1891 at a conference at Madrid, the system was extended by certain members of the union to cover the international registration of trademarks at the Berne bureau. N o provision, however, was made for the international registration of patents and the efïec-

274

Industrial Property

tivencss of the whole regime was dependent upon the development and extension of a body of common provisions at the expense of various domestic laws. The conflict between the national and international systems was especially acute on the subject of registration procedure involving the question of priority, working of patents, and trademark piracy and the whole question of unfair competition raised thereby. The Paris convention for the protection of industrial property and the supplementary Madrid convention laid the foundation for an expanding order of international regulation. At the close of the World War the principles of fair competition found their way into the peace treaties. The Treaty of Versailles imposed upon Germany the obligation of adopting legislative and administrative measures to protect from all forms of unfair competition articles produced or manufactured in the territory of the Allied and associated powers. The unfair competition clause of the Treaty of Versailles further stipulated the suppression of distribution in German territory of all types of false labels, marks of origin, etc.1 The Covenant of the League of Nations lays down the same principle in the commerce clause of Article 23. The opening clause of the article reads, "Subject to and in accordance with the provisions of international conventions existing or hereafter to be agreed upon, the members of the League," and clause (e) follows with a provision for "equitable treatment for the commerce of all members of the League." Thus Article 23 in effect appropriates the Washington and Madrid conventions as instruments for the implementation of the Covenant. While the Covenant may in this way be said to have placed a new international impetus behind the prewar union, the unfair competition clauses of the peace treaties pointed the way for future international legislation. To the activities of the international organization of business men and the Berne bureau, the Covenant added the technical agencies of the League of Nations secretariat. As a result of the combined efforts of these agencies a new convention was finally signed at The Hague in 1925. The formation of policy represented by this new Hague pact on patents, trademarks, and unfair competition is an interesting example of cooperative effort by a prewar international union, the I.C.C., and the League of Nations. In this 1

Treaty of Versailles, Articles 274, 2 7 5 .

Industrial Property

275

enterprise the I.C.C. cooperated energetically with both official organizations in the technical studies and in the formulation of a business opinion. Studies commenced early in 1921 at the I.C.C. were carried on with great thoroughness by a special committee set up by the organization congress in 1920. The committee first considered those claims which were submitted by manufacturers and merchants from countries as yet unheard at official conferences. Confronted by the vastness of the subject, it was decided to limit the field of inquiry to the subjects of unfair competition and the protection of trademarks and designs. Under this program of study the following problems were examined: the protection of patents, exhibits at exhibitions, international numbering, patents taken out by wage earners and employees, chemical and pharmaceutical products excluded from letters patent, rights of third parties, priority rights, entry on the Patent Register of acts affecting the ownership of a patent, renewal of patents lapsed in default of working or nonpayment of renewal fees, unfair competition, regional appellations, proceedings commenced by the representatives of foreign states, list of acts of unfair competition, recourse against commercial defamation, and other subjects. The investigation of the commission upon these subjects began with the compilation of precise information concerning the laws and principles prevailing in each country. This information was based upon detailed reports from the national committees. The study then moved from fact-finding to a critical examination of the existing conventions and to actual proposals for change. Through this prolonged enquête, covering seven meetings of the commission from January, 1922, to April, 1925, the secretariat of the I.C.C. coordinated studies of the national committees, the I.C.C. commission, the Economic Committee of the League of Nations, and the Berne bureau. The Economic Committee of the League was officially represented at the meetings of the I.C.C. commission and Ernest Rothlisberger, director of the Berne bureau, gave his continuous support to the work. The proposals for reform which resulted were adopted at the Rome congress in 1923, and resubmitted to the commission and to the national committees for further investigation.2 ' I.C.C., Industrial Property, Brochure No. 36, pp. 7, 8, 9.

2y6

Industrial Property

T h e draft convention formulated as a result of this study was submitted to a government conference of experts called in May, 1924, by the League to consider a draft convention drawn up by the League Economic Committee. The recommendations of this conference as adopted by the League Council in its meeting of September 9, 1924, included a large part of the I.C.C. proposals. A t the final diplomatic conference which met at T h e Hague in October, 1925, for the purpose of formally revising the existing international legislation on the protection of industrial property, a distinguished delegation headed by Walter Leaf, president of the I.C.C., was accorded official nonvoting representation. This delegation carried with it the final I.C.C. draft proposals adopted by the Brussels congress of June, 1925. In addition to the I.C.C. delegation, the I.C.C. had prominent advocates among the official delegates who had contributed to the drafting of the I.C.C. proposals, notably: Belgium: Albert Capitaine, vice chairman of the I.C.C. committee; chairman of the third subcommittee of the conference (trademarks). France: Drouets, member of the I.C.C. committee, chairman of the second subcommittee (patents, priority rights, exhibitions); G . Maillard, chairman of the drafting committee. Great Britain: Sir Arthur Balfour, member of the Council of the I.C.C., chairman of the British government committee on trade and industry; Sir William Clare Lees, member of the Board of Trade advisory council. Italy: Mario Ghiron, secretary of the third subcommittee.3 A comparison of the texts of the convention (amended texts of the Paris convention and the Madrid arrangement for the registration of trademarks) adopted by the conference with the I.C.C. draft proposals indicates the influence of the I.C.C. This influence is shown in the following clauses of the general convention of Paris as amended at the Hague conference (definition clauses, terms of priority, priority application): formalities; multiple priorities and complex applications; working of patents; inventions used on aircraft, locomotive engines, etc.; payment of fees; designs; trademark piracy; hallmarks; government emblems; cancellation for nonuse; action by associations; 'Journal

of the International Chamber of Commerce, No. 7, pp. 9, 10.

Industrial Property

277

4

and unfair competition. The amendments to the Madrid arrangement for the abolition of false indications of origin and the new Hague arrangement concerning the international deposit of industrial designs and models also show the influence of I.C.C. policy. In the case of the act providing for the international deposit of designs and models the decision followed the lines of the majority proposal of the I.C.C. In the sphere of unfair competition the long study and campaign of the I.C.C. to universalize the regime of fair commerce embodied in Article 274 of the Treaty of Versailles was rewarded by the adoption of Amendment 10 at the conference. Although the I.C.C. text, which was based largely upon Article 274 of the Treaty of Versailles and was designed to give precision to the definition of acts of unfair competition and to indicate the general principles governing their suppression, was not adopted in its entirety, the conference eventually accepted the proposal to insert a general clause and to impose an obligation on all countries to prohibit ( 1 ) all acts likely to create confusion between the products of one trader and those of another, and (2) all false allegations in commerce likely to discredit the products of a competitor. The work of coordinated study on the subjects falling within the regime of the Hague convention on industrial property has since been carried forward by the I.C.C. standing committee in conjunction with the League and the Berne bureau. The World Economic Conference of 1927 in the section of the report of the conference dealing with all manner of legal provisions or regulations relating to international trade recognized "that it is important that the work of the Economic Committee of the League of Nations and the International Chamber of Commerce in connection with . . . . the suppression of unfair commercial practices should be continued with a view to obtaining rapid and general solutions" and recommended that "the Economic Committee should pursue the investigations undertaken . . . . and that all necessary measures should be taken by the League of Nations and by governments to increase the number of accessions to conventions already or which may hereafter be concluded on these matters."5 'Ibid., pp. 12, 1 3 , 14. For texts of Convention see League of Nations, "Treaty Series," LXXIV, 289. e League of Nations, Report and Proceedings of the World Economic Conference, 1927, I, 35.

278

Industrial Property

In 1934 the results of the second period of study and investigation were once more brought before a diplomatic conference held in London for the purpose of further revising the Paris convention. The I.C.C. again officially represented international business opinion at the conference. And as a result of the effective cooperation of these agencies of treaty change, the Economic Committee, the I.C.C., and the Berne bureau, both before and at the conference, the governments were enabled further to extend the regime for the protection of industrial property in the direction of securing more effective protection and of bringing the terms of the convention more into consonance with the requirements of modern commerce. The amendments adopted included, among many of considerable value to traders: ( 1 ) the suppression of the reserve of the rights of third parties and the grant to persons who have applied for patent protection in the country of origin of an absolute right of priority of twelve months within which to apply for protection in the other countries of the union; (2) the mitigation of the onerous conditions requiring patents and designs, internationally protected, to be worked in all countries of the union; and (3) the removal of certain of the obstacles which have hitherto hindered the assignment of trademarks registered by traders in the various countries of the union.6 • World Trade, Vol. VI, No. 9.

CHAPTER

XXIV

Double Taxation

T

HE power to tax is the power to destroy—the most absolute of the attributes of the sovereign state. There is no more positive evidence of the evolution of a world economic society than the steady encroachment upon this domain of national politics by the rapidly spreading network of international treaties curbing the power of the national state to tax various forms of international commerce. In the development of this most significant regime of international control, the I.C.C., through its committee on double taxation headed by the prominent Swiss banker and international authority on taxation, Robert Juilliard, has played a dominant role in cooperation with the League of Nations. In no enterprise have the League and the I.C.C. cooperated more closely than in the slow and tedious work of erecting a system of bilateral treaties on double taxation looking toward eventual international control through a multilateral treaty. The League, in attempting to coordinate governmental policy, has made full use of the I.C.C. machinery of unofficial business consultation and policy-forming on an international scale. The League of Nations has always been represented at the meetings of the I.C.C. committee on double taxation, and an official I.C.C. representative has participated in the work of the League experts. And League investigations have, in certain important instances, been conducted through the organization of the I.C.C.

The development of an international economic society has been greatly accelerated since the war by the spread of foreign investments and the extension of industrial enterprises through international organization across national frontiers. At the same time there has been a universal shift in emphasis in the method of taxation from real property to income with consequent tightening of national surveillance

Double Taxation

28O

of the books of private business. T h e increase in the international character of taxable property on the one hand, and the increase in the stringency of national taxation on the other, have combined to make taxation an international problem of the greatest moment. T h e national income tax has made liable for taxation the total income of persons within the jurisdiction of the taxing power, whether that income be derived from property situated outside that jurisdiction or not. O n the other hand, income derivable from productive enterprises has commonly been taxable at the source, no matter whether its destination be outside the jurisdiction of the taxing power or not. T h e general extension of the national taxing power has made conflict between jurisdictions inevitable. T h e business man w h o

ventured

across frontiers on distant enterprise has found his ways hunted down by a multitude of tax collectors whose exactions were not confined to customs examinations. T h e organization meeting of the I.C.C. at Paris in 1920,1 and the Brussels Financial Conference, 1920, both called for international consideration of the problem of double taxation. T h e first congress of the I.C.C. (London, 1921) gave the question a leading position on its agenda and headed its resolutions with a program for international action designed to relieve international commerce of some of the most flagrant

exactions incident upon the practice of double taxation. 2

D u r i n g 1922 and 1923 the I.C.C. continued its investigation and discussion. In 1922 the financial committee of the League initiated a series of League investigations by the appointment of a special committee of economists whose report, issued on April 5, 1923, although largely theoretical, proved to be the basis of the more practical work to follow. A theoretical basis having been established, the financial committee of the League turned to government experts drawn from the ranks of treasury officials whose actual experience in the administration of tax legislation made them competent to examine the possibilities for devising an international scheme of unification. A report, in the preparation of which the I.C.C. had collaborated, was issued by this committee of experts in 1925. T h e third congress of the I.C.C. I.C.C., Proceedings of the Organization Meeting, p. 181. ' I.C.C., Proceedings of the First Congress, Brochure No. 18, p. 9. 1

Double Taxation 3

(Brussels, 1925) dealt with this report, section by section, in a most comprehensive set of resolutions adopted. When the fourth congress of the I.C.C. met in Stockholm in 1927 the I.C.C. committee on double taxation and the League experts were in a position to submit four draft conventions for the critical examination of the business world. The subjects covered included income and capital taxes, death duties, administrative assistance, assistance in matters of taxation, and judicial assistance in the collection of taxes (fiscal evasion). The Stockholm congress endorsed, with minor amendments designed for clarification, the first two draft conventions dealing respectively with income and capital and with death duties. In respect to the last two drafts on tax evasion, the congress met halfway the proposals as to methods of administration, representing the point of view of tax officials.4 The I.C.C. also adopted recommendations sponsored by the International Shipping Conference, embodying the principle that shipping concerns should be taxed only at their real center of management. On motion of Imperial Airways, Ltd., the I.C.C. added a recommendation that air navigation concerns should be treated on the same footing as maritime shipping. In October, 1928, I.C.C. representatives met with the government experts at a League of Nations conference on double taxation and defended the resolutions adopted at Stockholm. The conference gave the I.C.C. satisfaction on almost all the points raised in the resolutions.8 It therefore resulted that the principles finally agreed upon as equitable by the League Committee of Experts in collaboration with the I.C.C. committee on double taxation were embodied in a series of model bilateral conventions and issued by the conference. These conventions were designed to meet the varying problems presented by miscellaneous tax systems and international economic relationships, problems which' made a multilateral convention impractical as a first step toward unification. The I.C.C., throughout the entire discussion, has stoutly advocated full acceptance of the principle of domicile, on the theory that upon this basis alone could a multilateral system be most easily constructed. Although accepting the view that double taxation could be most easily avoided by giving the right of taxation either exclusively ' I.C.C., Resolutions of the Third Congress (Brussels, June, 1.925), Brochure No. 40, pp. 9-21. 4 I.C.C., Resolutions of the Stockholm Congress (June, 1927). "I.C.C., Proceedings of the Amsterdam Congress (1929), p. 18.

282

Double Taxation

to the state of domicile of the taxpayer or exclusively to the state of origin of income, the I.C.C. has always stressed the long-range view that in general the best method of eliminating double taxation is to adopt the principle of taxation by the state of domicile.8 The resolution passed by the Amsterdam congress (1929) reiterated the endorsement by the I.C.C. of the principle of action through a multilateral treaty and urged the League to make an attempt along these lines. The fiscal committee of the League in its autumn meeting of 1929 officially took note of this motion of the Amsterdam congress and accepted the I.C.C. resolution as a mandate from the business world to go to work on the project of a multilateral treaty. As a result of the collaboration of the League and I.C.C. committees a draft multilateral convention covering the position of residents and nonresidents was promulgated.7

Some 228 bilateral treaties or national legislative measures designed to eliminate various instances of double taxation have been actually put into force since 1920.8 This accumulation of bilateral treaties and legislative acts forms the basis of the ultimate objective of both the League and the I.C.C.—an international regime or code in the form of multilateral conventions unifying national tax legislation on the subject of double taxation. A very complete documentation for the project was published in 1934 by the League of Nations under the title Taxation of Foreign and National Enterprises. This five-volume work on the tax systems of the world is the result of the world-wide survey of tax law directed by Mitchel B. Carroll, of the League secretariat. The first three volumes, written by high government tax officials, cover in detail the tax systems in twenty-six countries in the Americas, Europe, Asia, and Africa; they include sections dealing with the apportionment for tax purposes of the income of business enterprises of all kinds—banks, insurance companies, transport enterprises, gas, power and light, telephone and telegraph companies, etc.,—which maintain head offices or branches abroad. The fourth volume, by Carroll, is a summation and analysis of the great mass of tax data presented in the survey. Carroll's searching analysis of comparative data over a wide range of legal systems and administrative practice concentrates upon the basic problem * I.C.C., Resolutions of the Amsterdam Congress (1929), p. 1. 7 League of Nations, Official Journal, Dec., 1 9 3 1 , pp. 2250, 2385-2399, 2401. " "Fighting Double Taxation," World Trade, March, 1936.

Double Taxation

283

of unification—the allocation of apportionment of profits for the purposes of taxation. On the basis of this analysis, Carroll elaborates a system of rules which he recommends as the most equitable and practical regulation for the avoidance of the double taxation of business income. The fifth volume takes up the accounting aspects of the problem of allocation of profits. The Carroll tax survey is remarkable not only for the wealth of information but also for the breadth of view represented in the compilation of this information. The business taxpayer as well as the tax collector is represented throughout these volumes. This is the result of the close collaboration of the I.C.C. in the carrying out of the survey. To quote the chairman of the fiscal committee of the League of Nations, Carroll not only had "the valuable cooperation of M. Juilliard, Chairman of the Permanent Committee on Double Taxation of the I.C.C. and of Mr. V. Del Rio, Director of its Economic and Finance Department," but he was also "given by the national committees of the I.C.C. suggestions and information drawn from the practical experience of their members. In particular the national committees of Austria, Belgium, France, Germany, Greece, Italy, Japan, the Netherlands, Spain, the United Kingdom, and the United States of America rendered him the greatest assistance."9 With the foundation for general action along the lines of multilateral conventions so well laid, the League and the I.C.C. are now working steadily forward toward the erection of a unified international regime oudawing double taxation. ' " T a x Systems of the World," World Trade, Jan., 1934, p. 16.

CHAPTER

XXV

Communications and Transit

S

I N C E the days of Columbus the wealth of nations has rested in the holds of merchant ships. T h e transport of persons, of goods, and of ideas has become an ever-increasing function of business. A n d the expansion of the carrying trade, step by step with scientific invention, has set the pace for commercial advance. T h e transportation and communications industries have provided the index of business activity. Expansion in this field has been the result not only of technology and organization within the industries themselves, but also of adjustments necessitated by changes in business of every conceivable type. The relation of this industry to the progress of world business as a whole is obvious. The machinery of communications and transit furnishes the master controls for the entire mechanism of international commerce. And the struggle for its monopoly by national interests has always been a spectacular feature of trade rivalries. Fleets of smart merchantmen proudly carrying their national flags over the seven seas have added a romantic glamour to the death struggle by national states for commercial mastery. Here business has been readily assimilated, on the one hand, to customs and tariff policy and, on the other, to naval and military affairs. Navigation laws have always provided a peculiarly susceptible subject matter for discriminatory and monopolistic controls established often ostensibly in the interests of navigation. The history of trade is written in chapter upon chapter of measures of technical retaliation. T h e vast industry which comprises the various sections of the carrying trade has always been a house divided against itself by conflicting national interests. The middle of the 19th century, which witnessed the development of an international point of view in matters of trade policy under the leadership of the Manchester school of economists, saw the relaxation and abolition of national navigation laws. T h e whole subject of transit

Communications and Transit

285

and communications came to be recognized in varying degrees by national states as affected with a larger international interest. The necessity for common action to meet the exigencies of these expanding industries resulted in fresh expressions of internationalism both in law and in organization. Maritime law became fertile ground for the development of international law. International transport, inland waterways, and the railroads early provided suitable subject matter for the creation of those special regimes of internationalism known as the international unions. At the close of the World War the Covenant of the League of Nations was made the instrument for the unification of the various activities of prewar internationalism. Article 23—the omnibus article of the Covenant on economic and social matters into which was written the lump sum of the League's competence in the sphere of public welfare—contains the blanket provision that "subject to and in accordance with the provisions of international conventions existing or hereafter to be agreed upon, the members of the League: (e) will make provision to secure and maintain freedom of communications and of transit and equitable treatment for the commerce of all members of the League." The communications and transit section of the League was the first of the auxiliary organizations to be established. The organization was put into definite form by a resolution of the First Assembly calling a general conference at Barcelona for the purpose of organizing an advisory and technical committee with headquarters at Geneva, "a consultative and technical body, to consider and propose measures calculated to insure freedom of communications and transit at all times, and to assist the Council and Assembly of the League in discharging the functions entrusted to the League." 1 The subject of transit and communications, since it provided the basic industries of world trade, was at this time made a primary concern of the I.C.C. Accordingly the representatives of the carrying industries have always assumed a leading part in the development of I.C.C. policy, both within the organization of the Chamber and as members of I.C.C. delegations at official League of Nations conferences. And the I.C.C. has provided a central coordinating organization for the general 'League of Nations, Official Journal, Supplement, Jan., 1921, pp. 14, 15.

286

Communications and Transit

supervision of this group of industries in the interests of carriers, shippers, bankers, underwriters, and the general public represented by the user. In the performance of this service for the carriers and the various industrial and commercial interests which make up the complex of world trade, the I.C.C. has constantly directed its policy toward the securing of efficient operation and the development of this industry in the direction indicated by the requirements of world business as a whole. The first general conference on communications and transit, held in accordance with the resolution of the first assembly, at Barcelona (March io-April 20, 1921) initiated the supervisory functions of the League under Article 23 (e) by the adoption of a charter for the communications and transit organization of the League; by the adoption of conventions dealing with freedom of transit and with navigable inland waterways of international concern; and by the adoption of a declaration regarding the right of inland states to a maritime flag.2 Both the conventions and the declaration dealt with problems made of international concern by the peace treaties. Prior to the World War the question of transit had been a part of that wide subject matter of economic policy which figured so prominently in prewar rivalries. Customs tariffs, railway rates, and ship rates had been the invariable weapons of economic nationalism. The control of traffic in transit over the great continental trade routes had, since the earliest times, been of the greatest economic importance. In the 19th century the era of railway building, which carried to the four corners of the earth the noisy strife of private and public empires, brought to the chancelleries of Europe new maps, new stocks, new bonds, new and more glamorous stakes for the diplomacy of power politics. National interest drove relentlessly the spikes of European railway expansion up to the eve of those fateful months of 1914 which cut short the tangled negotiations of the powers looking toward the internationalization and expansion of railways in the Balkans. The explosion, when it finally occurred at Sarajevo, failed to present the historian with that graphic circumstantial evidence surrounding the international crime known as "the railway incident." Fate placed the Serbian outbreak elsewhere than on the tracks of the Oriental Railways Company against which so much na' League of Nations, "Treaty Series," VII, n , 35, 65, 73.

DR. F. H. FENTENER VAN VLISSINGEN PRESIDENT OF THE INTERNATIONAL CHAMBER, 1933-1937

Communications and Transit

287

tional passion had been spent in the early months of 1914, yet nothing "contributed more" than railway disputes "to produce the final nervous exhaustion and hostility which finally found vent in war." 3 With the creation of new national states and the multiplication of European frontiers by the peace treaties, the right of free access to the sea was raised to a position of international concern comparable to the ancient right of freedom of the seas. At the conference of Paris, British proposals embodied in the resolution of February 10, 1919, presented by the committee on ports, waterways, and railways, stating that "the high contracting parties declare themselves in favor of the principle of freedom of transit for persons, goods, ships (and aircraft) by land, water (or air) across territories belonging to or controlled by them," were defeated due to French opposition and a negative attitude on the part of the United States.4 The treaties of peace, accordingly, while imposing a unilaterally binding obligation upon the defeated powers, failed to provide the general conventions guaranteeing the rights of freedom of transit so vital to inland states. The conventions adopted at Barcelona marked the extension inland of the principle enshrined in the freedom of the seas. The creation of international regimes guaranteeing complete freedom and equality to inland-born traffic in transit was significantly accompanied by the recognition of the right of inland states to send out upon the high seas ships under their own maritime flags. The Barcelona convention on the regime of navigable waterways of international concern carried the principles of freedom and equality to their farthest extent, inasmuch as the convention was made applicable not only to traffic in transit but also to internal traffic. And the term "navigable waterways of international concern" was broadly defined as those waterways which are accessible to ordinary commercial navigation and which provide more than one state with access to the sea.5 The collaboration between the I.C.C. and the communications and transport section of the League was inaugurated at Barcelona by the participation of Frederick P. Keppel, American administrative commissioner, in the work of the conference as the representative of 'Herbert Feis, Europe the World's Banker, p. 3 1 2 . • H. W. V. Temperley, A History of the Peace Conference Woodrow Wilson and World Settlement, II, 409-446. " League of Nations, "Treaty Series," VII, 35, 65, 73.

of Paris, II, 9 2 - 1 1 2 ; R. S. Baker,

288

Communications and Transit

the I.C.C. The newly organized I.C.C. committee on transportation and communications was put under the able leadership of Walker D. Hines, wartime director of American railways. Hines was later to contribute with great distinction to the solution of problems of European transportation as special investigator for the League of Nations. The committee led by Hines came strongly to the support of the work of the conference and launched a determined drive by world business for ratification of the Barcelona conventions. The statement on the Barcelona conference prepared by Hines,6 explaining the significance of the conventions and advocating an I.C.C. campaign through national committees to secure ratification, was presented to the London congress of the I.C.C. in June of 1921 and the action which it recommended was endorsed by the congress.7 It was only, however, after similar endorsement by the Porto-Rosa conference8 and the Genoa conference and a strenuous two-year period of agitation by the League and I.C.C. that enough governments were at length moved to ratify these conventions to bring them into force on October 31, 1922.9 This was a costly period of delay for constructive action which should have been undertaken with the making of the peace treaties. These fundamental provisions for economic cooperation between the new states of Europe were not put into force until a large section of Europe had been starved into bankruptcy and desperation. And the belated adoption of the basic principles was followed only with tedious slowness by national administrative reforms necessary to the effective implementation of the conventions. The simplification of customs and transit regulations and the question of port facilities were only to receive grudging attention by national states under pressure of the League and the I.C.C. during years of often seemingly fruitless effort. After a preparatory period of study and agitation by the transport sections of the League, the various technical organizations concerned, and the I.C.C., culminating in the second League conference on communications and transit (Geneva, November 15, 1923) two more fundamental international statutes were added to the international law of transit: the "Geneva Convention on the International Regime "I.C.C., First Congress (London, 1 9 2 1 ) , Brochure No. 56, "Barcelona Conference." * I.C.C., Proceedings 0} the First Congress. * James T. Shotwell, Porto Rosa Conference. ' League of Nations, "Treaty Series," VII, 35, 65, 73.

Communications and Transit

289

of Maritime Ports" and the "Geneva Convention on the International Régime of Railways." 10 The I.C.C. contributed all its influence to the promotion of the reforms represented by these statutes. The Rome conference of the I.C.C. gave a wide hearing to the question of barriers to sea and land transit. As a result of the discussions of the Rome congress and the prolonged study of national committees, the Rome congress incorporated in its general program a resolution strongly attacking economic nationalism as manifest in current governmental railway and shipping policies. "No nation is entitled to claim exclusive rights in connection with its international commerce, or the transport of immigrants to or from other countries," declared the congress. "Discrimination in any form should be strongly opposed," the resolution continued, pledging the I.C.C. to the unqualified acceptance of the principle of "equal opportunity to all ships under all flags in all parts of the world." 11 The congress made provision for the organization of a permanent committee on maritime transportation, consisting of one representative for each national committee.12 This committee, prompdy set up by the Council under the chairmanship of the British shipping authority, Sir Alan G. Anderson, initiated, in conjunction with the League transit committee, a world-wide study looking toward an international convention on maritime ports designed to eliminate flag discrimination from the ports of the world. The committee prepared a concise historical survey of acts of flag discrimination and their effects, for presentation at the second League general conference on communications and transit (Geneva, November 15, 1923). 13 Similar preparatory work in the field of railway policy, contemplating an international convention abolishing the intricate and dangerous restrictions affecting the free operation of railway traffic, was carried out by the rail transport committee of the I.C.C. under the chairmanship of the French banker and railway executive, Charles Laurent.14 In November of 1923 while I.C.C. representatives were still fighting for the cause of international trade in the League conference on cus10

League of Nations, Second General Conference on Communications and Transit, p. 55. " I . C . C . , Resolutions of the Second Congress (Rome, 1923), Brochure No. 3 1 , Resolution X , p. 81. "Ibid. " I.C.C., Historical Survey of Flag Discrimination. " Journal of the International Chamber of Commerce, July, 1924, No. 1 , pp. 2, 6; I.C.C., Second Congress (Rome, 1923), Brochure No. 30, "Improvement in Railway Communications."

290

Communications and Transit

toms formalities, another I.C.C. delegation under the leadership of Sir Alan Anderson, Laurent, and the newly elected American president of the I.C.C., Willis H . Booth, took up the fight against trade barriers in the second general conference on communications and transit. Booth, at the opening meeting of the conference, placed before the official government representatives the Rome congress program of maritime and railway reforms. T h e document prepared by the transport committee dealing with flag discrimination was distributed to the conference and the full weight of world business opinion was thrown behind Sir Alan Anderson's dictum at the Rome congress, "freedom of the seas depends absolutely on freedom of the ports." During the early stages of the conference Booth sent a circular telegram to national committees requesting them to urge their governments to support strongly the policy laid down in the Rome resolutions and to refuse their signature to any convention which left any opening whatever for flag discrimination. 15 T h e conventions on maritime ports and railway administration which resulted from the conference lifted out of the miasma of economic discrimination and retaliation two subjects of bitter national strife. T h e general convention on the international regime of maritime ports provided for complete equality of treatment among all the contracting states on all subjects of national regulation affecting ships in maritime ports, including those customs tariffs imposed on shipping and railway tariffs on traffic to or from the port, free use of the port, and the full enjoyment of all the benefits of navigation. Coastwise traffic and fishing vessels were exempted from the provisions of the convention. And a general reservation, as narrow as it proved possible to make it, provided an additional exception for emigration traffic. 16 The complementary convention on rail traffic known as the convention on the international regime of railways was designed to set up a general regime providing for the maximum of equality, efficiency, and flexibility in "a concise and systematic" code "of recognized international obligations" in respect of international railway traffic. Its provisions embody the complex and wide subject matter of technical cooperation: the codification of all the facilities necessary for the better utilization of railways for international traffic as regards the frontier, "Ibid.

" L e a g u e of Nations, "Treaty Series," LVIII, 285, 305.

Communications and Transit

291

operating arrangements for international traffic, the prevention of traffic suspension, reciprocity in the use of rolling stock, through tickets, continuity of freight services, easy calculation of charges, etc. Its scope, however, was not limited to technical cooperation but included a general prohibition pledging the signatory states to eliminate all unfair discrimination against foreign states, their nations, or their vessels in the matter of railway tariffs. The convention was designed to codify the permanent obligations of states to international railway transport and to set up a regime of equality and fairness for the railways and the public, including within its scope that hitherto notoriously privileged subject matter of economic nationalism, railway rates.17 These two conventions, resulting from the intensive study and negotiation of the second general conference, which were finally signed on December 9, 1923, were subjected to a prolonged period of national discussion before the requisite number of ratifications could be secured to put the decisions of the conference into force. During this final stage of ratification the I.C.C. provided a continuous hearing to the conference legislation. The Council, the Brussels congress (1925), the secretariat, the standing committees on transport, and the national committees multiplied the discussions of the League conference a hundredfold. Out of this three-year parliament on transit legislation there finally emerged the fundamental law of nations on maritime ports (in force July 26, 1926) 18 and on international regime of railways (March 23, 1926). 19 The conventions of the first and second League conferences on transit and communications were intended to serve as an equitably conceived international basis for a far-flung and ever-expanding system of world transport and communications. Upon this foundation it was the task of the future to raise the structure of world economic cooperation in the form of progressive bilateral and multilateral conventions and acts of administrative and technical cooperation. Although the conventions set up a procedure for the settlement of disputes arising from their application, in the provision for conciliation before the advisory and technical committee and in default of a settlement by arbitration or judicial settlement by the Permanent Court of International Jus17

¡bid., p. 55.

"Ibid., LVIII, 285.

a

Ibid.,XLVII,

55.

292

Communications and Transit

tice, the terms of the provisions of the conventions did not include the vital subject of the unification of diverse administrative regulations. Neither the advisory and technical committee, nor the council, nor the court, nor any arbitral body was made competent to enjoin national states from administrative acts nullifying the intent of these general charters of transit law. The conventions set up no international commerce commission so to administer the international law of transit and communications as to prevent national interference and thereby build up with quasi-judicial decisions the international regimes set up by the conventions, as, for example, the Interstate Commerce Commission has developed the Federal regime in the United States. National states have never seen fit sufficiently to qualify their sovereign control over those economic empires bounded by national frontiers to put in the hands of an international commission the adjustment of expanding national interests. The intricate machinery of international action, unchanged to the present day—international conference, ratifying parliaments, and national administrations—remained the cumbersome vehicle of world progress. The communications and transit organization of the League of Nations, although, unlike other League technical organizations, endowed with a written and semiautonomous constitution, was born without a shadow of executive authority. Its multiple organs, from the head advisory and technical committee designed after the pattern of the League Council through the list of permanent committees and subcommittees to the quadrennial general conferences, are empowered to commit no decisive act for sovereign states. The all-important task of administering the international law of communications embodied in the conventions of the first two conferences remained in the hands of diverse parliaments and executives. The history of federal systems and confederations makes plain the importance of executive leadership in straightening out the tangle of provincial interests and in unifying the activity of local autonomies. The decisions of an executive or an administrative commission, even when flaunted by recalcitrant interests, serve to keep the issues before the public and thereby promote a wider hearing than would be obtainable within provincial limits. Parties and issues of their own motion assume the proportions of the larger community interests. Such direction and leadership organized

Communications and Transit

293

business opinion attempted to supply through the transport and communications group of the I.C.C. The scope of the study and discussion of the transport and communications section of the I.C.C. widened steadily throughout the postwar decade. The two standing committees on rail transport and sea transport, and the bill of lading committee set up at the London congress of 1921 were augmented at the Brussels congress in 1925 by the creation of committees on air transport, highway transport, and international telephone service. The Stockholm congress of 1927 saw erected committees on inland waterways, through traffic, international postal service, and international telegraph service. The Council in 1928 added a joint committee on collaboration between railways and motor transport and integrated the entire network of committees20 around the hub of a newly created coordination committee on transport and communications under the chairmanship of Sir John Sandeman Allen, head of the I.C.C. transport section.21 These committees kept continually before national business groups the paramount objective of the International Chamber as set forth in the trade barriers report to the World Economic Conference of 1927: the actual removal of the manifold barriers of every type from the trade routes of the world. In this continuous effort the I.C.C. has collaborated with the League and the various existing technical organizations, both public and private, toward the promulgation of new conventions and understandings, and the ratification and effective application of the conventions in existence. The varied activities of the I.C.C. in the promotion of technical cooperation have included the following subjects: air mail, leading to a conference (Air Mail, The Hague, 1927), an arrangement, and a convention (the Hague Arrangement, 1927, made a convention, Postal Congress, 1929); road traffic questions, resulting in the conference of 1931 and three conventions dealing with the taxation of motor touring vehicles, the unification of road signals, and triptych formalities; 22 transport statistics; air transport; and calendar reform. The work in the sphere of trade terminology has " F o r diagram see World Trade, July, 1929, p. 416. See Sir John Sandeman Allen, chairman of the committee, in I.C.C., "General Report of the Co-ordination Committee of the Transport and Communications Group," Amsterdam Congress (1929). " I . C . C . , Washington Congress ( 1 9 3 1 ) , "Transport and Communications: Report of the Coordination Committee," pp. 27, 28, 29. n

294

Communications and Transit

resulted in an exhaustive volume on trade terms which has become the indispensable servant of all international traders. T h e study of the various problems of road traffic has culminated in the publication of a similarly indispensable and authoritative survey of highway conditions throughout the world. T h e work of the committee on bills of lading has been intimately concerned with the drafting of the Hague Rules ( 1 9 2 3 ) and with their subsequent adoption by most of the trading nations of the world. N o detail in the wide miscellany of transport and communications economics appears to have escaped the committees of the transport section of the I.C.C. One of the most significant functions performed by the transport organization of the I.C.C., however, lay in the sphere of the implementation and enforcement of the international law of transit written at Barcelona and at Geneva. A s stated by the Stockholm congress of the I.C.C., barriers, as far as transport itself is concerned, are to be found more in the failure to interpret the spirit if not the letter of the various general and special conventions on this subject already in existence than in the lack of such conventions and agreements. In pursuance of its policy of law enforcement, the I.C.C. coordination committee of the transport section played with a large degree of success the role of an unofficial international commerce commission, hearing cases of flag discrimination, customs, and consular formalities and excessive customs fines. In the majority of these cases the committee, through its procedure of investigation and fair hearing, was successful in effecting an adjustment between the carrying interests and the national administrations concerned, leading eventually to the relaxation or suppression of vexatious regulations or practices. When confronted by recalcitrant state administrations, however, this unofficial international commerce commission did not hesitate to invoke under certain circumstances what sanctions were available for the enforcement of the law. On these occasions the I.C.C. has organized parallel action on the part of its national committees with a view to inducing their respective governments to intervene officially. Such action has always been regarded as a last recourse, and is never undertaken without the assent of the National Committee, or, in default of a National Committee, of the organization members of the country where

Communications and Transit

295

measures repugnant to the general policy of the I.C.C. are alleged to have been taken. In the cases where the I.C.C. has been led to take such steps, the collective demands of transport, shipping, and banking organizations grouped around the National Committees have not failed of effect; laws have been suspended, bills withdrawn, regulations amended. It should be noted that such action has never been undertaken without thorough consideration and only after consultation with the international economic organizations concerned.23

The action of the same committee in dealing with the complicated problem of the effective application of the international law of inland waterways as embodied in the Barcelona convention offers one of the most significant examples of business statesmanship since the war. The intent of the law of Barcelona had been defeated from the start by a vicious complex of national administrative regulations known as river law. The extent and character of national river law and its effect upon international trade were clearly elaborated in the authoritative League report on the Rhine and Danube inquiries made in 1924 by the first chairman of the I.C.C. transport section, Walker D. Hines, as a special investigator for the League of Nations. In the face of the appalling incapacity of existing international machinery to deal effectively with this problem, the I.C.C., under the leadership of the chairman of the I.C.C. transport section, Sir John Sandeman Allen, resolved to attempt to break the political deadlock by a fresh and well-prepared nonpolitical démarche. In 1927 at the third general League transport conference, Sir John announced to the conference his decision to visit the Danubian states personally and to study the difficulties of the Danube traffic on the spot. At the same time he asked the representatives of the governments to do all possible to make his visit fruitful. To this request the governments concerned responded cordially and the national committees of the states visited took every step to insure a complete and impartial study of the problems. The Danube from Vienna to Sulina was traversed and in each state full and frank discussions with the ministers and heads of government departments and leaders of commerce and navigation were held, with the result that many misunderstandings were cleared up and the road prepared for the I.C.C., through its national committees to take up this delia

See Sir John Sandeman Allen, "General Report of the Co-ordination Committee of the Transport and Communications Group," World Trade, No. 3 (July, 1929), p. 420.

296

Communications and Transit

cate and difficult matter in a spirit of harmony, with a mutual determination to remove as far as possible for the benefit of all, every existing impediment to the development of international trade.

At this time, national pride and rivalry in the Danube Valley was so intense that open discussions on all matters were only possible for a representative of the I.C.C. which acts impartially in the commercial interests of all nations, and without in any way touching upon questions of state rights or the interpretation of treaties and other matters properly belonging to the sphere of the respective governments. 24

With the report of Sir John's investigation before it, the I.C.C. committee on coordination undertook a thorough investigation of the following subjects: ( 1 ) customs difficulties as regards hours, detention, guards, through documents, change of destination, customs dues on bunkered coal, etc.; (2) port facilities; (3) competition between rail and river transport; (4) agricultural production as affecting volume of traffic; and (5) hindrance to commerce by restriction of navigation in territorial waters and by restriction of cabotage to vessels owned by the respective states.25 This action finally terminated in the conference on Danubian navigation of the I.C.C. held at Cracow, September 20-27, 1930, during which state officials and business leaders frankly explored the possibilities of the reform of river law in the interests of freer trade. These possibilities were largely realized two months later in the convention adopted at the conference on the unification of river law held at Geneva in November, 1930. The fact that this new international regime of unified river law, implementing the Barcelona convention, failed of ratification was a result of the economic blizzard of those years rather than of any default on the part of the I.C.C. COMMUNICATIONS

The Stockholm congress provided for the enlargement of the transport section under the title of transport and communications to include the special committee on telephone service created by the Brussels conference as a new standing committee, and two additional standing "Ibid., p. 450.

*ibid.

Communications and Transit

297

committees dealing with telegraph service and postal services. In the resolutions creating the new communications committees of the enlarged transport section, provision was made for the representation of users on a world scale through the organization of special subcommittees of all national committees, including a majority representation of users of the respective services. The following general principles were enunciated by the congress in the terms of reference setting up the communications section: regular investigations of the general requirements of the users in each country; of specific requirements of the principal industrial, commercial, and agricultural activities, and of requirements as to the different classes of communications and as to the scope of the service; close collaboration with telephone, telegraph, and postal administrations of the different countries and with international bodies interested. Technical questions as to the methods by which the requirements of users were to be met were excluded from the consideration of the committees.28 INTERNATIONAL TELEPHONE AND TELEGRAPH

The I.C.C. standing committees on international telegraph and telephone service have continuously and effectively represented the great majority of users of these services before the authoritative international agencies, the International Telegraph Union and the International Consultative Telephone Committee, the two international bodies operating under the international telegraph convention concluded at St. Petersburg in 1875 and subsequently revised from time to time by various conferences, lastly in Madrid in 1928. The work of the standing committee on international telegraph service, organized in 1927 under the chairmanship of General Harbord, then president of the Radio Corporation of America, has included investigations upon a wide variety of subjects affecting the interests of users, such as: application of new inventions, cooperation between cable and radio, code regulations, rule of pronounceability, deferred telegrams, number of letters in address words, liability of administration,27 introduction of night-letter-telegrams into European service, letter telegrams, urgent " I.C.C., Report Presented to the International Telegraph Union at Brussels in 1928, Brochure No. 66. "Ibid., pp. 3-7.

298

Communications and Transit

telegrams, duration of transmission, and the broadcasting of epidemiological news. 28 A t the Madrid conference in 1932 the I.C.C. delegation made a valiant but unsuccessful fight to hold down telegraph rates in the face of the overwhelming pressure of the world-wide depression. T h e delegation took its stand in particular upon the desirability of maintaining category " A , " comprising the ten-letter code word system. In this fight, despite the support of important telegraph administrations and companies, the I.C.C. was defeated. The Madrid conference, however, accorded full recognition to the right of users to representation at the conferences of the International Telegraph Union, the delegates of the I.C.C. being granted the right to participate on committees in a nonvoting capacity. A n d the international telegraph regulations were for the most part amended to meet the modifications specified by the I.C.C. in such matters as the withdrawal of the restriction which had been placed in 1925 on the proportion of numbers written in letters admitted in deferred telegrams, the introduction of a European lettertelegram service, and the reduction of the urgent rate from triple to double the full rate. Since the Madrid conference the I.C.C. committee has undertaken a comprehensive inquiry into the effect of the Madrid regulations on the cost of extra-European cables to the business user. T h e results of this extensive inquiry as adopted by the council of the I.C.C. on June 29, 1934, included data from all the various classes of users from twenty-eight countries. For example, in the Netherlands, the ninetyfive firms selected comprised eight banks and insurance companies, six agricultural concerns, thirty-nine trading concerns, eight cotton brokers, thirteen forwarding agencies, and seven miscellaneous users. T h e survey appeared to show conclusively that "the great majority of cable users have to bear increased charges as a result of the new regulations." 29 The International Telegraph Committee of the I.C.C. is continuing a vigorous campaign for rate reform, based upon a thorough biannual world survey of business cable costs. Further reports " I . C . C . , Report to the International Telegraph Union (Madrid Telegraph and Radio TeJegraph Conferences, 1932), Brochure No. 80, pp. 3-7. " World Trade, July-Aug., 1934, pp. 9-15 (International Cable Costs Report concerning the inquiry conducted by the I.C.C. into the effect of the Madrid International Telegraph Regulation on the cost of extra-European cables to the business user, and adopted by the council of the I.C.C. on June 29, 1934).

Communications and Transit

299

were submitted to the International Telegraph Union on June, 1935, and on June, 1936, in preparation for the 1938 conference of the union. Its most recent report on international telegraph service warns the administration "not to go on with the scheme for unification, unless it should form part of some more general plan for the all-round reduction of rates."30 The I.C.C. standing committee on international telephone service, under the leadership of its chairman, J. S. Edstróm, chairman of the Board of Directors of the Swedish Employers Association and former president of the Federation of Swedish Industries, has, during the ten years of its activity, cooperated closely with the international consultative committee for long-distance telephone communications (now known as the international consultative telephone committee) and with various telephone administrations in promoting the development in international telephone communications achieved during the past decade. The spectacular advances have involved the organization of the national fragments of a great industry into a continental and an intercontinental system which should be adequate to provide facilities for the use of rapidly developing technical improvements. Intercontinental service was unknown in 1924. Operating methods and technical equipment were so dissimilar that telephonic communications were practically limited to bordering or near-by countries. The advances attained over this position in the developments of the next ten years are indicated by reference to the telephone statistics of 1924 and 1933. Between thirty-five selected European towns, 595 telephone relations were possible in 1933, whereas, in 1924-25 only 127 (21 percent of the 1933 figures) had been established. In intercontinental communication the progress has been even more startling, the intercontinental network developing from zero in 1924 to include, with the creation of the Japanese hook-up in 1933, all five continents. By the completion of this world telephone circuit 92 percent of the world's 33,000 telephones were placed in communication. In the establishment of these world telephone routes, the I.C.C. has taken an active part by collaboration with the national telephone administrations and with the international consultative telephone committee. ""International Telegraph Rates," World Trade, Dec., 1936, p. 3. I.C.C., Brochure No. 90, June, 1936.

30O

Communications and Transit

The reports of the I.C.C. committee on international telephone service are in themselves a history of the advances attained in world telephone service during these years. Operating through the machinery of national committees and technical experts and according to the methods outlined by the Stockholm resolutions for the communications section, the committee moved steadily forward from inquiry to inquiry, carefully preparing the ground for the successive advances which have marked the progress in international telephone service in recent years.81 In 1930 and 1931, at the request of the international consultative telephone committee, the I.C.C. conducted a world inquiry with a view to ascertaining with which towns telephone communication was most urgently needed from the commercial standpoint. The administrations were thus provided with a chart indicating the importance, in terms of actual demand, of contemplated routes. Practically without exception, the I.C.C. findings were followed by the establishment of connections by the administrations. No aspect of telephone service has been overlooked. Efficiency of service has kept pace with the extension of the routes. Waiting time on international calls has been cut to such an extent that today it is a commonplace to say that international calls can be put through faster than local calls. New and ingenious facilities have been introduced very largely at the instances of business demand as expressed by the I.C.C. The user can now ask for his call at a fixed time, provided his demand is made at least half an hour in advance; he can pay a fixed subscription if he wishes to talk to a given number every day at the same time; he can have nonsubscribers called to a public telephone. Perhaps the most noteworthy advance in development of facilities has been the extension of a close approximation of the American "person-to-person" call to international service. Its first introduction to universal international service in 1929 followed a period of thorough study and inquiry by the I.C.C. and the International Consultative Telephone Committee. The further adjustments which have since improved this service have " See Sir John Sandeman Allen, in I.C.C., "General Report of the Co-ordination Committee of the Transport and Communications Group," Amsterdam Congress (1929), pp. 44-52. See also reports of the same committee to the Washington, Vienna, and Paris congresses.

Communications and Transit

301

been made with the close collaboration of the I.C.C. and the International Consultative Telephone Committee.32 AIR TRANSPORT COMMITTEE

The work of the I.C.C. on air transport began in 1923 with the creation by the Rome congress of a standing advisory committee of financial, industrial, legal, and aviation experts, to "promote the international development of civil aviation for commercial purposes," to "maintain touch with any national or international organization concerned with air navigation," and to "exert every means at its disposal to increase the interest of financiers and business men . . . with a view of arriving at an international regulation."33 At the Brussels congress (1925), under the leadership of Pierre ¿tienne Flandin, it was decided to concentrate the activities of the committee upon two fundamental subjects: the development of air transport for air mail service and the development of civil air law. The committee began with air mail transport, said Flandin, because it concluded that air mail transport would be one of the most powerful stimulants to international trade. The air postal service must be truly international. Having read the report distributed to you, you are all familiar with the existing air lines throughout the world. N o w it cannot be denied that there is a wide disparity between the development of air lines throughout the world, and the use made of them for the purpose of conveying air mail. 34

It was to this "regrettable state of affairs," caused in large part by disastrous international competition between overzealous states which "could not come to some agreement whereby each state would finance a section of a big international air line, rather than have several lines financed over the same sector,"35 that the I.C.C. committee, under the aggressive leadership of Flandin, addressed itself. The special air mail conference at The Hague and subsequent air mail legislation passed at London and Cairo at the instance of the I.C.C. proved to be an important factor in the committee's successful campaign to speed up the development of international organization of air transport. "I.C.C., Resolutions of the Second Congress (Rome, 1923), Brochure No. 3 1 , p. 91. "Ibid. "I.C.C., Third Congress (Brussels, 1925), Group Sessions Brochure No. 43, p. 81. M ¡bid.

302

Communications and Transit

In pursuance of this same objective the I.C.C. committee cooperated with the International Commission on Air Navigation (C.I.N.A.), the international agency set up to supervise the application of the 1919 convention of Paris on the regulation of aerial navigation. The function of the C.I.N.A., under the convention on aerial navigation, although including some especially delicate matters in international public law, is comparable to the function of the Berne Central Office under the Berne railway conventions. The I.C.C. subcommittee on air law has in this sphere sought to amend national procedure with a view to eliminating discrimination and to securing the maximum of freedom and equality upon such subjects as: obligation to carry air mail, restrictions as to nationality, legal barriers to air-taxi traffic, the acquisition and operation of aircraft by foreigners, and the complex and infinite subject of customs regulations.38 In the sphere of private air law the I.C.C. has represented air transport through its relations with the official government agencies, the international conference on private air law and its organization of experts, the Comité international technique d'experts juridiques aériens (C.I.T.E.J.A.). The creation of these two official agencies in 1925 on the direct initiative of the French government followed an urgent appeal by the I.C.C. for the appointment of such a conference. When the conference started its work the I.C.C. air transport committee was already in a position to supply the committee of experts with definite material prepared from its earlier investigations and research. From the list of questions prepared by the I.C.C. in order of urgency the committee selected subjects considered ripe for international unification and prepared draft conventions designed to secure the maximum of uniformity, simplicity, and equality in regulation and of freedom for air commerce. These drafts were placed in the hands of the newly formed government committee of experts, thereby providing a basis available for discussion and study. In this way the I.C.C. air transport committee has been influential from the beginning in giving direction and actual form to international civil air legislation.37 " I . C . C . , Washington Congress ( 1 9 3 1 ) , No. n , "Transport and Communications," pp. 35-38; League of Nations, Economic and Financial Section, International Economic Conference, Final Report of the Trade Barriers Committee of the International Chamber of Commerce (Geneva, 1927), C.E.I.5.(I), pp. 28-29. " P i e r r e Comoz, "International Air Organizations," World Trade, April, 1929; idem, "International Air L a w , " World Trade, Jan., 1930.

Communications and Transit

303

The work of the committee has covered the following subjects, replete with hampering national regulation: transfer of ownership and mortgage, joint liability of aircraft owners,38 liabilities of aircraft operators, nationality of aircraft, seizure of aircraft, and compulsory insurance.39 The committee's collaboration with the C.I.T.E.J.A. has consisted both in the preparation of draft conventions and in the critical study of the C.I.T.E.J.A. conventions in preparation. In 1926-27 a draft convention on the liabilities of aircraft operators for damage caused on foreign territory to third parties and to goods not on board as well as for damages caused in landing was drafted and presented by the committee's German expert, Schreiber. T w o other draft conventions dealing with the insurance of pilots and crews in international air traffic and uniform air consignment notes for international transport of goods by air were prepared and presented for the committee during this period by H. Fabry, counsel to the Cour d'appel, Paris, and K . M. Beaumont, counsel to Imperial Airways, Ltd., respectively. In 1928, Schreiber prepared and presented a draft convention on nationality of aircraft, Beaumont a convention dealing with the seizure of aircraft, and Fabry two standard insurance policies for aircraft and air cargoes. In the same year the subcommittee, at the request of the C.I.T.E.J.A., made a critical study of a draft convention prepared by that organization on the liabilities of air carriers and on air transport documents.40 At the World Economic Conference of 1927 the trade barriers report of the I.C.C. gave prominent place to the necessity for the unification of private air law. 41 Two years later, the second meeting of the international conference on private air law, held at Warsaw October 4-12, 1929, finally achieved one of the main objectives for which the I.C.C. air transport committee had actively campaigned since its organization—a general convention unifying the national regulation of international air transport. The Warsaw convention, including within its forty-one articles provision for the unification of those complex sub" I.C.C., Washington Conference ( 1 9 3 1 ) , No. 15, "Transport and Communications," p. 37. " I . C . C . , Amsterdam Congress (1929), No. I, "General Report of Coordination Committee," pp. 29-30. " I . C . C . , Amsterdam Congress (1929), No. 1 , "General Report of Coordination Committee," pp. 29-30; League of Nations, Economic and Financial Section, international Economic Conference, Final Report of the Trade Barriers Committee of the International Chamber of Commerce (Geneva, 1927), C . E . I , 5 . ( I ) , pp. 28-29. " Ibid.

304

Communications and Transit

jects of national regulation, liability, and court jurisdiction, forms the basis of international private air law. Like the convention of 1919 dealing with public air law, the Warsaw convention may be compared to the Berne railway conventions. The Paris convention of 1919 on aerial navigation and the Warsaw convention of 1929 for the unification of certain rules relating to international air transport together make up the fundamental public and private law of international air traffic. Upon this foundation the I.C.C. air transport section has sought to build a carefully integrated international regime of uniform air law designed to free air transport from the miscellaneous hindrances lurking at national frontiers. On May 29, 1933, two conventions embodying much from the work of the I.C.C. were signed at Rome by forty-two countries. The main provisions of these conventions deal with subject matter in which the I.C.C. transport committee had collaborated closely with the committee of government experts for a number of years. The conventions restrict the responsibility of air transport companies in accidents to third parties, limit the power of creditors regarding the seizure of aircraft, and define certain questions involved in damage caused by aircraft to third parties on the ground. The provisions of the conventions dealing with the last two subjects follow the principles laid down in draft conventions submitted by the I.C.C.42 The work of the I.C.C. upon the subject of private air law has continued with a view to the amendment of the Warsaw convention of 1929, especially upon the subject of the existing liabilities of the air navigation companies for traffic delays. Beaumont has acted as rapporteur on this question.43 The committee has also given considerable attention to the subject of insurance and air transport. At its meeting of December, 1936, the subcommittee on air law adopted a recommendation that air transportation should, as far as insurance is concerned, be placed on the same footing as other means of transportation: that accident and life insurance policies should include air " World Trade, Oct. 1933, p. 2. a World Trade, Dec., 1934, p. 2 (account of meeting, held at the I.C.C. on Nov. 20, 1934, of the Air Transport Committee under the chairmanship of Dr. Kurt Weigelt); ibid., July-Aug., 1935, p. 1 5 (minutes of the committee at the Paris congress, 1935); ibid., Dec., 1936, p. 9 (minutes of Nov. 17, 1936, committee meeting); ibid., Dec., 1936, pp. 9-10; ibid., May, 1936, p. 10 (meeting Feb. 17, 1936).

Communications and Transit

305

risks of passengers on regular air lines over continental routes without additional premiums and that this principle should progressively be applied also to intercontinental flights. The recommendation was based upon a report by Wimmer and an inquiry among national committees.44 The rapid strides made in the technical improvements of aviation have rendered more and more oppressive the clutter of government red tape halting and impeding swift commercial air service at national frontiers. At the Vienna congress (1933) the air transport committee took up with new vigor this I.C.C. campaign for freedom of the air. On the basis of the report of Pierre Cozmoz (France) on air barriers, the committee undertook to renew the offensive on the various forms of customs red tape hampering air service. The I.C.C. trade barriers report to the World Economic Conference of 1927, as noted above, emphasized the necessity of air customs reform. Nevertheless, despite the pressure of international commercial interests, the airways, in 1933, as Sir Harry Brittain (Great Britain), the chairman of the air transport committee, told the Vienna congress, were still dominated by "war legislation" and "war mentality." In particular this committee decided to press for an amendment of the air navigation convention which would oblige every country that refused free passage to an aircraft to give reasonable grounds for so doing.45 The committee forwarded through the various national committees a comprehensive report upon the entire subject of air barriers to the governments represented at the World Monetary and Economic Conference meeting in the summer of 1933; and the subject of air regulation reform was urged in the I.C.C. report to the London conference from the Paris I.C.C. congress (1935). 49 In 1935 the committee again formed for another drive on air barriers and the current I.C.C. campaign for customs reform was continued. The simplifications of customs declarations, passport formalities, and the customs drawback shipping bill are subjects upon which the I.C.C. transport committee is apparently determined to wear down government bureaucracy. u

lbid.,

May, 1936, p. 10 (meeting Feb. 17, 1936); ibid., Dec., 1936, pp. 9-10 (meeting Nov.

17. 1936)" World Trade, July, 1933, pp. 24-25 (Vienna congress: minutes—Air Transport). " I.C.C., Report to Monetary and Economic Conference (June, 1 9 3 3 ) , pp. 1 1 - 1 2 .

3o6

Communications and Transit POSTAL SERVICE

A f t e r its reorganization in 1925 under the chairmanship of Pierre £tienne Flandin, the I.C.C. committee on air transport began the postal activities of the I.C.C. by instituting an investigation of air mail service with a view to improving the air mail provisions of the Postal Union congress of 1924 (Stockholm). The results of this committee's investigations were, in 1926, presented to the Postal Union and to the various governments with a request for a special Postal Union conference to revise the Stockholm regulations to meet the needs of rapidly expanding air traffic disclosed by the I.C.C. investigations. The Postal Union accepted the petition of the I.C.C. and called together a special conference, at The Hague in 1927, in which the I.C.C. participated officially. T h e resulting "Hague Arrangement," although an optional agreement, was instrumental in effecting immediate improvement in air mail service. In 1929 the Hague Arrangement was incorporated in the body of postal law by the Postal Union congress. 47 T h e 1927 Stockholm congress of the I.C.C. created the standing committee on international postal service which, in cooperation with the air mail subcommittee of the air transport committee, has since represented business interests before the Postal Union and the air transport companies. A t its preparatory commission meeting and at the 1929 London Postal Union congress itself, the I.C.C. presented full reports covering its investigations on a wide variety of subjects including: transmission of mail by the most rapid route; rapid and direct transmission of air mail; through transmission of mail by air and rail; rapid transmission of mail before it is sent by air; increase in aerodrome post offices and rapid transmission from city to aerodrome; publicity for air mail facilities; priority for telephone and telegraph communications in case of forced landing; simplification and unification of extra mail rates; collective agreements for the transmission of parcel post; constant study of the development of air transport in order to provide both administrations and carriers with indispensable factors for mutual " I . C . C . , Third Congress (Brussels, 1925), Group Sessions Brochure No. 43, "Air Transport," pp. 80-81 (see report by Flandin); Sir John Sandeman Allen, "General Report of the Co-ordination Committee," in I.C.C., Amsterdam Congress, p. 3 1 .

Communications and Transit

307

agreements; night flying; closer cooperation between air navigation companies and postal administrations; postal prohibitions; samples; enclosure, in a single envelope, of letters, invoices, etc., addressed to third parties; postal money orders and C.O.D. packets; technical facilities; rate uniformity; payment of claims for lost parcels; and general acceptance of the C.O.D. system.48 The recommendations of the I.C.C. were first presented to the preparatory committee of the Postal Union. The bureau of the Postal Union circulated the I.C.C. report to all the government administrations belonging to the union, which were then engaged in preparing the respective government recommendations for the forthcoming congress of 1929.49 The influence of the I.C.C. report in this way became an important factor both in the preparation of the congress program by the bureau and in the preparation of respective government proposals. The final conventions and agreements turned out by the congress embodied important provisions proposed by the I.C.C. The most important of these was the principle, now fully accepted by the Postal Union, that the section dealing with air mail regulations, although compulsory, should be outside the convention itself and therefore subject to frequent revision to meet the changing circumstances of rapid technical advances in air transportation. Improved facilities for newspapers, periodicals, books, brochures, and music; a letter-post package rate of one kilogram; and reduction of the rate for mailing invoices are all valuable features of the convention of 1929, granted at the instance of the I.C.C.60 In 1933, the I.C.C. again presented a full report to the preparatory commission of the Postal Union congress which finally met in Cairo in 1934. The report covered the needs of users upon a wide variety of subjects dealing with air mail and general postal services. The section of the report devoted to air mail questions made detailed recommendations for the reform of the rating system, prepaid mail, express delivery, and insurance fees. The Cairo convention upon all these " I . C . C . , London Congress (1929), Brochure No. 67, "Report Presented to the Universal Postal Union," pp. I - 1 8 . • Sir John Sandeman Allen, "General Report of the Transport and Communications Group," in I.C.C., Amsterdam Congress (1929), pp. 62-69. "The chairman of the Standing Committee on International Postal Service was V. V. Yovanovitch, vice president of the Belgrade Prometna Bank. " I . C . C . , Washington Congress ( 1 9 3 1 ) , No. 15, "Transport and Communications," pp. 68-69.

3 O8

Communications and Transit

questions moved in the direction advocated by the I.C.C. with the exception of insurance fees, the maximum limit of which was increased against the well-substantiated claims of the users.61 The farreaching recommendations of the I.C.C. report on general postal service,52 raising the questions of rating reform; a special European postal agreement with uniform rates at a low level; the extension of the liability of the administrations for loss, damage, and delay; the simplification and unification by separate international agreements on postal prohibitions and packing rules; and other recommendations, were all passed over in favor of detailed modifications by the congress, which, while important in themselves to the user, appear a meager result from an international conference designed to provide for the growing needs of the basic system of international communications. Useful improvements, such as the unification and increase in maximum dimensions for letters, commercial papers, printed matter, samples of merchandise, and small packets are scant compensation for the complete incapacity of this important international conference of government postal authorities to move forward on questions of major policy in response to the overwhelming demand of organized business opinion as represented by the I.C.C. In the development of facilities for the adjustment of postal policy to the needs of the expanding business community, the universal Postal Union appears to have made little progress beyond prewar methods. Repeated pleas by the I.C.C. for the formation of a user's advisory committee or for the representation of the I.C.C. in an advisory capacity at Postal Union congresses have been ineffectual in securing that direct representation for the general business public which has proven such an important factor in progressive developments in other international fields.63 " I . C . C . , Cairo Congress (1934), "Report to the Universal Postal Union"; Martin Wronsky, managing director of the Deutscha Lufthansa, chairman of the subcommittee on airmail, "Airmail Progress and Problems," World Trade, July-Aug., 1934, pp. 3-5. " I . C . C . , Cairo Congress (1934), "Report to the Universal Postal Union." " V . V. Yovanovitch, chairman of the I.C.C. committee, "The Decisions of the 1934 Cairo Postal Congress and Their Effect on Business," World Trade, July-Aug., 1934; "The Universal Postal Congress," World Trade, Feb., 1934; I.C.C., Washington Conference ( 1 9 3 1 ) , No. 15, "Report of the Co-ordination Committee on Transport and Communications," p. 69; "Amsterdam Congress—-Resolutions Supplement No. 1 , " World Trade, Oct., 1929, p. 5 1 .

CHAPTER

XXVI

T h e Hague Rules: Bills of Lading

N

O S I N G L E advance in the interminable struggle to remove the barriers to international trade has carried greater immediate benefit to international commerce than the adoption of a uniform law governing ocean transportation. The story of the twenty-year span covering this vital piece of international law-making is very largely written in the history of the bill of lading committee of the I.C.C. With the International Law Association, the International Shipping Conference, and the Comité maritime international, the I.C.C. bill of lading committee has served as an important part of an organic process of international legislation. In fact, the work was centered in the long-suffering I.C.C. committee under the leadership of the American chairman, Charles S. Haight of New York. It would be hard to exaggerate the confusion under which goods were carried by sea before this reform was enacted. The five parties to every export shipment (the shipper, carrier, discounting banker, cargo underwriter, and consignee), in most cases embracing at least three or four nationalities with as many consequent legal interpretations affecting the rights of cargo owners and the obligations of carriers, were joined together in a relationship of distrust which produced continuous international friction and litigation. The old bill of lading was the subject of perpetual international warfare among traders of the sea. In 1920 the organization congress of the I.C.C., which met in Paris, put the I.C.C. in the forefront of a reform movement in a resolution recommending "that the work of the international maritime committee for the unification of laws governing maritime commerce, interrupted by the European War, be resumed as soon as possible" and calling upon the council of the I.C.C. to communicate with the Inter-

310

The Hague Rules

national Maritime Committee. 1 The Brussels Financial Conference which met the following autumn gave further endorsement to the movement in a resolution suggesting as a subject ripe for League action the unification of the laws relating to bills of exchange and bills of lading. 2 A t the first congress of the I.C.C. which met in London in June, 1921, the movement was given definite form by decisions taken in the meeting of the transport group under the chairmanship of Walker D. Hines. Charles S. Haight, who had been active in the American movement for securing a uniform bill of lading for interstate commerce within the United States, opened the discussion with a proposal asking that the I.C.C. should undertake to work out a uniform bill of lading which would be acceptable to the interested parties. T h e adoption of the selected form, in Haight's view, could only be accomplished, however, by securing the agreement, not of governments, but of the carriers themselves "to use only the said uniform bill of lading and uniform clauses and to make no change therein without timely notice being given." Haight's proposal for an I.C.C. campaign for "friendly agreement" within industry as opposed to legislation ran true to the philosophy of American business statesmanship as repeatedly manifest, most notably perhaps in Owen D. Young's emphasis upon moral sanctions in international commercial arbitration. "It had taken thirteen years," said Haight, "to get a bill passed in the United States." 3 However, as in the case of commercial arbitration, American opinion was merged with European opinion and the I.C.C. policy that was formulated commanded the support of both European and American business men. The London barrister, W . R. Bisschop, stated the case very clearly for the necessity of international legislation and presented a resolution asking for the cooperation of the I.C.C. with the International Law Association in a project then under consideration by the Association's Maritime L a w Committee. Bisschop proposed that the I.C.C. study the Maritime L a w Committee's report, making use of the machinery of its national committees to obtain an expression of world-wide opinion from the various 1

I.C.C., Organization Meeting, p. 188. 'League of Nations, Proceedings of the International Financial Conference (Brussels, 1920), I, 26. 'I.C.C., London Congress, Brochure No. 18, "Minutes of the Transportation Section," pp. 117-118.

The Hague Rules

311

interests concerned, all of which were to be found represented in the I.C.C. The resolution proposed that both the I.C.C. and the national committees secure representation at the forthcoming conference of the International Law Association to be held at The Hague on the thirty-first of July, 1921. The move for international legislation was further endorsed by James P. Rudolf, chairman of the Liverpool Chamber of Commerce, and by Sir Felix Schuster of the British Bankers Association. French opinion also strongly favored a concrete international drive for legislation. Hubert Girard, president of the Association industrielle, commerciale et agricole de la région de Lyon, urged the adoption of such a program and the maintenance of close liaison with the Comité maritime international.4 The resolution finally adopted by the London congress which furnished the terms of reference for the I.C.C. bill of lading committee was a synthesis of the Haight and Bisschop resolutions providing both for cooperation with the International Law Association and the Comité maritime international in behalf of uniform legislation and for a report on the possibilities of obtaining a general agreement with carriers for voluntary acceptance of uniform obligations.® On the basis of this resolution the committee of business men of the I.C.C. initiated, under the leadership of Haight, their long campaign for the reform of ocean transportation. At the London congress close cooperation was established between the I.C.C., Sir Norman Hill, and the Maritime Law Committee of the International Law Association. Haight was completely won over to the support of the draft of a code already made by Sir Norman Hill and the committee. At the International Law Association conference which met at The Hague (August 30-September 3, 1921) business interests—shippers, carriers, bankers, and cargo underwriters—were fully and ably represented. Although handicapped by the absence of an authorized American delegation, the conference succeeded in drafting a code of rules governing bills of lading to be known as the "Hague Rules" which proved to be generally acceptable and, with some changes, was finally embodied in an international convention by the two diplomatic conferences which met at Brussels in 1922 and 1923. ' ibid.

'•Ibid., p. 22.

312

The Hague Rules

The rules adopted at The Hague represented a well-balanced scheme of compromises between rival interests, entirely pleasing to no single interest but barely acceptable to all. During the years of study and international legislation proper, the I.C.C., the International Shipping Conference, and the Comite maritime international provided forums for discussion and criticism. In the autumn of 1921 the first of the international shipping conferences, which included steamship owners representing practically the entire tonnage of the world, gave the Hague rules a thorough hearing. From the standpoint of the owners, the proposed regulations imposed liabilities considered by them excessive and unreasonable. The limit per package had been raised. Shippers were given twelve months within which to bring suit for cargo damage, without any technicalities whatever as to filing a proof of claim. Where cargo was received sound and delivered damaged, the carrier was required to prove that the damage had not been due to his negligence. Nevertheless, the advantages of international uniformity won out over the disadvantages of specific regulations deemed unfair to the carrier, and the International Shipping Conference agreed to accept the new rules drafted by the Hague conference. During the closing months of 1921 the I.C.C. conducted two inquiries, one of the leading shipping companies of the world and the other of organization members of the I.C.C. The results of these inquiries, which were published in considerable detail in Digest ix, were with certain exceptions distinctly favorable to the Hague rules. As a result of the I.C.C. campaign for voluntary acceptance of the Hague rules, fifteen British steamship companies, following the lead of the White Star, Armand, Leyland, and Atlantic Transport lines, put the Hague rules into force for west-bound traffic early in 1922. Indications were that German lines would follow. In other countries, however, voluntary acceptance was held up. United States ship owners were compelled to await the action of the United States Shipping Board. Acceptance by the Dutch and Scandinavian lines appeared in large measure contingent upon American action. Belgian opinion was divided and French and Italian opinion, although favorable, considered voluntary action impracticable.8 "I.C.C., Digests No. n and No. 1 5 .

The Hague Rules

313

Trade organizations followed with a critical consideration of the code from the viewpoint of specific trades. During the summer of 1922 opposition to certain provisions of the proposed rules developed particularly in Great Britain, where the bulk cargo trades—coal, corn and timber (the American Institute of Meat Packers opposed the rules for similar reasons in the United States)—through the British Federation of Traders Associations put pressure upon the British government to fulfill its pledge to enact a bill previously recommended by the Imperial Shipping Committee. Under these circumstances it became imperative that the I.C.C. should take immediate action to head oil British legislation which might prejudice international action. The British Board of Trade invited Andrew Marvel Jackson, representing the British Federation of Traders Associations, and Sir Norman Hill, as secretary to the Liverpool Steamship Owners Association, to come to an agreement on the Hague rules. Failing such an agreement, it was announced that the British government would be compelled to proceed with its plans for an act of Parliament. Under these circumstances a compromise draft embodying substantial modifications of the original draft was finally agreed upon by Hill and Jackson. The I.C.C. committee and the International Maritime Committee followed with pressure for immediate action through a diplomatic conference. During these negotiations leading to the submission of the Hill-Jackson version of the Hague rules to the meeting of the Comité international maritime, Haight made two trips across the Atlantic to coordinate efforts and appeared before the experts of the British Board of Trade. Finally, the Comité maritime international met in London, October 91 1 , 1922, immediately prior to the diplomatic conferences at Brussels, and under the skillful leadership of Sir Henry Duke, now Lord Merrivale, succeeded in ironing out the considerable divergencies of opinion on details which had materialized during the period of international consideration. At the diplomatic conference itself the code was put into the final form of an international convention for the unification of certain rules for the carriage of goods by sea by a special committee under the chairmanship of the American delegate, Charles M. Hughes, formerly judge of the United States Circuit Court of Appeals.7 'I.C.C., Digest No. 34, Oct. 21, 1922, pp. 1-8; Charles S. Haight, "The Hague Rules," World Trade, July-Aug., 1936, pp. 3-6.

314

T h e H a g u e Rules

T h e convention was signed by the representatives of twenty-four nations, including all the important commercial countries of the world. German and French representatives participated on terms of full equality in the conference and signed the convention while French troops were occupying the Ruhr. Thus ended the stage of international legislation proper—not quite two years after the start of the I.C.C. drive for reform. T h e thirteen-year period of national ratification which followed was a period of waiting on the part of European and Asiatic countries for favorable action by the United States Senate, where ratification was held up due to the opposition of important American shippers. For thirty years American shippers had been demanding the very reforms incorporated in the Hague rules. Nevertheless, in defiance of practically the entire business world, these powerful interests placed their lobbies behind a campaign for legislation by the United States Congress under which an ocean carrier would have been made liable, like a rail carrier, for the invoice value of the goods, with no exemption whatever either for errors in navigation or errors in the management of the ship.8 These provisions were all in flagrant violation of the principles embodied in the compromise between all parties to the bill of lading worked out at T h e Hague and in subsequent negotiations, and finally adopted as an international convention at Brussels under the leadership of the representatives of the United States government. In as much as the nature of the subject prevented the acceptance of any senatorial reservations or any alterations whatever in the text of this business treaty, the campaign settled down to a prolonged siege of the United States Senate by world business as represented by the I.C.C. under the direction of the American chairman of the bill of lading committee, Haight. Haight was, fortunately, a veteran, having survived successfully a thirteen-year congressional campaign for the "Federal Bill of Lading Act" enacted in 1916. American isolationism upon this subject immediately strengthened similar tendencies in other countries. T h e Scandinavian tramp owners needed no encouragement from rugged individualists in the United States to rally to the defense of absolute freedom of contract. German tramp owners followed on the ground that Scandinavian refusal made it impossible for them to 'Charles S. Haight, "The Hague Rules," World Trade, July-Aug., 1936, pp. 3-6.

The Hague Rules

315

accept greater responsibilities than their competitors. In France, opposition developed from both carriers and shippers for contrary reasons, thus threatening to split the whole compromise wide open. And common arguments heard in all the opposing nationalist camps stressed the alleged absurdity of attempting "to secure uniform law the world over" on any subject. It was contended that the views of the various interests in the different countries were and always would remain so divergent that it was a waste of time to seek to bring them together.® Amid all the confusion, however, Haight and the I.C.C. committee stood by the terms of reference under which the committee was set up by the London congress. The committee refused to be diverted from its single purpose: to obtain a uniform international ocean bill of lading. Great Britain led the procession of ratifications, honoring the signatures of her diplomatic representatives with the passage of the "Carriage of Goods by Sea Act" in 1924, putting the Hague rules into law. Australia acted simultaneously. India followed in 1925, Belgium in 1928, and New Zealand in 1930. Action was completed by 1930 also for British colonies, protectorates, and mandated territories. Further advance now depended entirely upon the outcome of the long struggle in the United States. The I.C.C., under the circumstances, urged ratification by those countries dependent upon American action with a conditional provision postponing effect until after ratification by the United States. The Italian and Canadian governments took action to this effect, and Scandinavian interests made clear their readiness to support action by their governments if the United States would do the same. Finally Senator Elbert D. Thomas of Utah, member of the Senate Committee on Foreign Relations, at the critical point when the whole movement might have collapsed, took up the fight and successfully put the convention through the Senate.10 Ratification by the United States Senate was thus accomplished on April 1, 1935, thirteen years after the convention was signed by American diplomats at Brussels. Action by France was taken almost concurrently with American ratification. The subsequent ratification by Sweden brought seventy percent of the world's tonnage under the regulation of this international code of uniform law. • Ibid.

"Ibid.

316

The Hague Rules

With final action by the remaining Scandinavian countries and Italy apparendy only a question of time, the I.C.C. committee setded down to the final stages of the campaign with the following immediate objectives: to push ratification in Scandinavian countries and Italy; to supplant optional with mandatory legislation in Holland; to obtain favorable action in Germany and Japan through the respective national committees; and finally, to secure the cooperation of the underwriters in the offering of a rate of premium to insure goods moving lower under a Hague Rules Bill than under any other form. 11 The lastnamed objective, for which the I.C.C. committee have been agitating for some time, appears to be on the verge of realization. Its accomplishment would mean that no carrier, in his own interests, would wish to remain outside the operation of this generally recognized regime of international law. The successful fight for the establishment of this bill of lading "League of Nations" is one of the brightest pages of international cooperation. The bill of lading had become a symbol of uncertainty and distrust to all international traders. Every country had a different law on the obligations of this contract. Every steamship company had a different form of bill of lading, and sometimes as many as a dozen different forms. The forms themselves were so long and so ineffectual that no one would have read them—had they been readable. But reading was impossible, for they were printed in type so small as to require a magnifying glass. A n d in any case they were not worth the reading for the conditions of limitation and regulation were subject to overnight change. The Hague rules have supplanted this chaos with a rule of law. The debt of all international traders to the I.C.C. for its leadership in this achievement was well stated by Sir Norman Hill in a letter to the chairman of the bill of lading committee, "You have saved from the scrap heap one of the few really big steps that have been taken since the W a r to promote and facilitate international trade. W e are all— both producers and consumers—your debtor." 12

11

ibid.

"ibid.

CHAPTER

XXVII

A W o r l d Court of Business

T

H E extensive system of international arbitration which effi-

ciently and peacefully settles hundreds of disputes between mer-

chants, manufacturers, traders, bankers, insurers, and carriers—

all who do international business—is perhaps the most definite and

indisputable achievement directly attributable to the I.C.C. T h e threads of influence emanating from the activities of unofficial organizations and movements are often difficult to trace with precision. T h e development of commercial arbitration, however, has grown up within the organization of private business itself without government aid; its contact with the state has clearly involved merely the recognition of its own handiwork in the form of legal sanction for private arbitration. Thus the system of international commercial arbitration has never been primarily dependent upon legal sanctions. It has rather relied upon the general realization by business men of the inadequacy of ordinary legal procedure in meeting the requirements of rapidity and precision necessitated by the character of present-day commercial disputes. Systems of private commercial arbitration and conciliation were common to commercial nations before the war and had been developed despite the hindrances of national differences in a number of the great international branches of commerce. The system of international commercial arbitration as early developed in various branches of commerce (raw cotton, wool, silk, grain and flour, hides, publications), due to the differences of national legislation, of necessity depended upon moral rather than legal sanction, upon the force of public opinion and the disciplinary measures provided in the statutes of professional associations rather than legal enforcement. A t the Paris international congress which met in 1914 an exhaustive debate upon the subject of commercial arbitration was concluded with a comprehensive resolution cover-

318

A World Court of Business

ing, first, the development of private business arbitration machinery conforming to the precedents furnished by the arbitration rules of the International Cotton Federation and by those of the International Publishers' Congress, also taking account of the important results of the inquiry conducted by the Berlin Chamber of Commerce, and of the proposed rules compiled by the New York Chamber of Commerce, with a view to organizing international colleges of arbitrators for all trades or groups of trades; and, second, the securing of legal sanction through national acceptance of foreign arbitrators and their decisions and the unification of laws on arbitration in an international convention. 1 T h e plan adopted by the congress f o r promoting the international convention was not dissimilar to the policy-forming and law-drafting processes which were to become the regular function of the postwar I.C.C. T h e permanent committee of the congress was asked to call a conference of experts representing the various chambers of commerce and commercial and industrial federations and associations for the purpose of collecting and considering all the data relative to the practical application of the principle of arbitration between citizens of different countries, and of drawing up a plan for an international convention for the unification of laws on arbitration. T h e permanent committee was then to transmit this plan to the Government of the French Republic with the request that it invite other nations to an international diplomatic conference that shall have for its object the establishment, on the basis of the plan drawn up by the said conference, of an international agreement with respect to arbitration for the settlement of disputes between citizens of different countries.2 T h e postwar I.C.C. afforded the permanent international organization necessary to the carrying out of this ambitious program for building a system of international commercial arbitration. T h e constitution of the I.C.C., as drafted by the committee on permanent organization under the presidency of the American representative, John H . Fahey, contained the following provision for commercial arbitration (Article V I I , Section 3 ) : 'I.C.C., First Congress (London, 1 9 2 1 ) , Brochurc No. 13, "Commercial Arbitration," pp. 6, 7'Ibid., p. 7.

A World

Court of Business

319

W h e n the parties to a contract on international commerce agree to submit to arbitration a difference of opinion due to the execution of such contract, they may choose as an arbitration board one or several of the members of the administration commission, who shall act as an arbitration board. T h e decision of the arbitration board shall be submitted to the General Secretary who shall forthwith transmit it to the parties concerned. 3

This provision appears in the draft of the constitution adopted by the Paris congress (1920). Following the action of the congress, the council set up a select committee on international commercial arbitration headed by Lyon-Caen, permanent secretary of the Académie des sciences morales et politiques, and formerly dean of the Faculté de droit de Paris. This committee was composed of lawyers from Belgium, Great Britain, Italy, and the United States, the president of the Dutch Chamber of Commerce, a distinguished American educator then American administrative commissioner, and the secretary-general of the I.C.C.4 The committee proceeded to deal under two headings with the problems raised by the projected international court of business arbitration: legal recognition of arbitration proceedings, and the drafting of regulations for the organization of international arbitration by the I.C.C. The work of the legal subcommittee dealing with the first subject finally came before the London congress of the I.C.C. (1921) in the form of a juridical resolution drafted by the Belgian member of the commission, Edward Huysmans, setting forth the legislative steps necessary to the attainment of legally enforceable international commercial arbitration. The resolution urged national action to secure: ( 1 ) legal provisions recognizing the validity of the arbitration clause (including provision for arbitration by aimables compositeurs) or the undertaking to submit to arbitration disputes arising as to the interpretation of execution of business contracts; (2) legal recognition of "persons designated by the interested parties as arbitrators, without distinction of nationality"; (3) uniform national legislation rendering executory the awards of foreign arbitrators regardless of the nationality of the parties, without further discussion upon the merits of the award except for the purposes of "verification as to whether or not the rules of procedure in force in the 'I.C.C., Proceedings of the Organization Meeting (Paris, 1920), p. 204. * Belgium, Edward Huysmans; Great Britain, Oliver E. Bodington; Italy, Ugo Capitani, Roberto Pozzi; Netherlands, Von Hemert; United States, S. G. Archibald, assisted by F. P. Keppel (I.C.C., Brochure No. 1 3 , pp. 3, 9).

320

A World Court of Business

country where the award was made, have been complied with, and whether or not such awards contain anything contrary to public order in the country in which the exequatur is demanded"; and (4) uniform national rules of procedure for commercial arbitration. This program for legislative action to secure legal sanction for the proposed international regime of commercial arbitration was accepted by the London conference. It proved to be the basis for the successful legislative activities of the I.C.C. which were to follow at Geneva and at the various national capitals.6 T h e subcommittee on regulations for the proposed international business court of arbitration was concerned chiefly with the well-worn problem of reconciling the Anglo-American conception of moral sanctions with the Continental conception of legal sanctions. After considerable study and discussion by a subcommittee under the chairmanship of Von Hemert, president of the Dutch Chamber of Commerce, this was finally accomplished on the basis of a draft prepared by Roberto Pozzi, legal adviser to the Italian Cotton Association. 8 In this scheme the respective advocates of moral and legal sanctions were satisfied by the provision of two procedures, the first to be known as conciliation and the second as legal arbitration. The conciliation procedure was based largely upon the arbitration agreement successfully operating between the Chamber of Commerce of the United States and the Argentine. 7 The commission had before it the report of Charles L . Bernheimer, president of the arbitration committee of the Chamber of Commerce of the state of New York, on the American-Argentine system, with his criticism of Pozzi's first draft of the rules of procedure.8 The final draft provided regulations for the exercise of conciliation by mediation or by mandate for parties who had stipulated the same in their contract. The introduction of the principle of the obligation of conciliation and its confirmation by moral sanctions appeared to Continental lawyers to be a very radical innovation. The plan made use of the administrative commission of the I.C.C. for the machinery of conciliation as suggested in the constitutional provision of the I.C.C. quoted above. The second procedure, the scheme for legal arbitration, followed the earlier initiative of the prewar congress of chambers of commerce, with provisions for a per* I.C.C., Proceedings of the Organization Meeting (Paris, 1920), pp. 9-22. 'Ibid., p. 9. ' I b i d . , pp. 23-29. "Ibid., pp. 4, 17.

A. C BEDFORD 1920-1923

OWEN D. YOUNG

THOMAS W. LAMONT

SILAS H. STRAWN

1928-1930

1930-1933

1923-1928

FORMER CHAIRMEN OF THE AMERICAN SECTION OF THE CHAMBER Thomas J. Watson (Frontispiece) was Chairman 1933-1937.

A World Court of Business

321

manent supervisory body to be constituted by the I.C.C. and to be known as the "Permanent Committee of Arbitration," and to include panels of arbitrators drawn from the several branches of industry and commerce.9 The London congress accepted the work of the commission on commercial arbitration in general outline, with the opinion that it was "not desirable that members of the administrative commission of the I.C.C. should themselves accept the function of arbitrator." T h e congress declared itself unanimously in favor of entrusting to the council the task of setting up a system of commercial arbitration, but recommended further study of details before final action by the Council. 10 During the following year the committee on commercial arbitration continued its study and discussion under the chairmanship of Von Hemert. Additional members were added to the committee. Prominent among these were Owen D. Young, chairman of the committee on commercial arbitration of the Chamber of Commerce of the United States; Raymond Streat, secretary of the Manchester Chamber of Commerce; and Thor Carlander of Sweden. 1 1 At the October meeting of the committee ( 1 9 2 1 ) , Young set forth the nature of the problem confronting the committee with the clarity and precision which were later to characterize his economic statesmanship. Young urged the necessity of recognizing the inherent difficulties and complexities of the situation, the most important of which was the difference between the continental and Anglo-American conception of sanctions. T o insure the co-operation of England, the United States and South American countries some system of arbitration outside the law must be provided. On the other hand, it is clear that wherever such legislation now exists, and wherever business men are accustomed to take advantage of it—and this is true not only nationally in continental countries like Italy and Belgium, but also, I understand, internationally in certain trades, as for example, silk and cotton—it would be wise for the Chamber to take full advantage there, and a code for arbitration within the law is therefore equally necessary. 12

Judged by the six years' experience of the United States Chamber of Commerce and the Bolsa de Comercio of Buenos Aires, "the results which would follow a disinterested and competent form of international arbitration, applicable to all the countries in which the Interna' Ibid., pp. 17, 18, 19, 20, 25-29. " I . C . C . , Proceedings of the First Congress (London, 1 9 2 1 ) , Brochure No. 18, pp. 16, 1 7 . 11 I.C.C., Rules of Conciliation and Arbitration, Brochure No. 2, pp. 6, 7. " I.C.C., International Commercial Arbitration, Digest No. 3, pp. 1, 2.

322

A World Court of Business

tional Chamber is represented, will be great and far reaching." Y o u n g urged the wisdom of not attempting "to set up machinery designed in advance to cover every possible case" but rather of beginning "by designating certain conditions under which the Chamber is prepared to tender to business men its good offices in arranging for arbitration." He could see "no reason why the I.C.C. cannot immediately offer to business men three separate types of service," namely, "arbitration within the law," "arbitration outside the law," and conciliation. In providing for arbitration within the law the I.C.C. "could formulate a code within the law, and conduct, under the provisions of that code, arbitration between business houses which had in advance jointly agreed to abide, in the case of dispute, by the terms of an arbitration conducted under the auspices of the I.C.C., and based, for its enforcement, upon the legal sanctions existing under the laws of the countries in which these houses are situated." With equal care, continued Young, the Chamber could build up a separate code of arbitration outside the law designed for the service of those who agree in advance to abide by arbitration outside the law and based for the enforcement of its award not upon a legal but upon a moral sanction, such as can be exercised by the I.C.C. itself, and by member national committees, with all the force that business men of a country can bring to bear upon a recalcitrant neighbor.

Such arbitration outside the law, in Young's opinion, should never be attempted without the backing of well-organized national business groups in the countries concerned. Before agreeing to conduct an arbitration outside the law, even when both parties should join in a request, the I.C.C. should be convinced that the business men of both countries concerned are sufficiently well organized and that the business organizations are willing to exert moral pressure, if need be, in favor of carrying out the arbitration decision outside the law, and are sufficiently influential to make such pressure effective. 1 3

T h e third type of business peacemaking which Young advocated was conciliation proper, "founded particularly upon the experience of the arbitration scheme between North and South America." Under this plan the I.C.C. would provide machinery for a preliminary effort at informal conciliation for parties seeking arbitration either within or outside the 13

I.C.C., Rules of Conciliation

and Arbitration,

Brochure No. 2, p. 2.

A World Court of Business

323

law. T h e I.C.C. upon receipt of an appeal for arbitration either within or outside the law would tender its good offices as an agent of conciliation with a view to seeing whether the difference between the two parties is not, after all, based upon a misunderstanding on the part of one or the other rather than a desire on either side to avoid the fulfillment of the original terms of the contract. T h e experience of the administration of the United States-Argentine arbitration arrangement showed that in perhaps nine cases out of ten, an impartial preliminary examination of the documents submitted by the two parties will demonstrate the existence of such a misunderstanding and that the two parties may be brought to an agreement without involving either the expense or the delay of a formal arbitration. However, f e w if any of the great majority of arbitration cases w h i c h it had proved possible to settle by conciliation " w o u l d have reached the attention of a disinterested third party, if the existence of machinery for arbitration were not generally k n o w n and if recourse had not been had to such machinery to settle differences arising w i t h regard to the execution of contracts." In Y o u n g ' s opinion the possibility for friendly settlement without arbitration depended "on the existence and k n o w l edge of facilities for arbitration." T h e service of conciliation required no special code of procedure since opportunities for conciliation were "inherent in the organization of the I.C.C. itself." 14 T h e success of the proposed scheme of international arbitration by the I.C.C., in Young's mind, would depend upon the limitation of the court's jurisdiction to these clearly defined areas of economic conflict. In particular the sphere of arbitration outside the l a w should be cautiously delimited to exclude cases where " n o basis for the requisite moral sanction exists in the country or countries concerned." Such a limitation ought not to be considered as a defect but rather as a means for securing the development of the arbitration machinery of the I.C.C. "step by step to meet the demands upon it." Such an evolutionary development would be based "upon results actually obtained rather than upon theoretical reasoning." T h e I.C.C. system of arbitration, in Y o u n g ' s view, must be based primarily upon an intelligent and well-organized business opinion. T h e organization of arbitration should, therefore, be '"•Ibid., pp. 2, 3.

324

A World Court of Business

supported by an intensive educational campaign by the I.C.C. With the court actually set up, international headquarters through the I.C.C. network of national committees should study the situation in each country and endeavor "to encourage the development of whichever type of arbitration (either within or outside the law) is most in keeping with the business traditions of the country in question." Although the Chamber "should look forward, certainly, to the time when every civilized country will have adequate legal provision" for arbitration, "it must recognize the fact that at the present time, and probably for many years to come, it is equally important in the general interest for the Chamber to support and develop the moral sanction upon which arbitration outside the law must depend." 18 This infusion of enlightened business philosophy into the technical deliberations of the committee provided impetus and direction to the enterprise. Young's statement was promptly published as Digest No. 3 and distributed to the entire membership of the I.C.C. It was in this widely read statement advocating commercial arbitration that Young, then busy organizing (with French, German, and British participation) the South American Radio consortium, 18 received his first hearing by that international public whom he was to serve with such distinction. The rules of conciliation and arbitration as finally promulgated by the Council on July 10,1922, show no important variation from the Young plan of international commercial arbitration published by the I.C.C. in 1921. T h e draft referred back to the council by the London congress was revised along the lines advocated by Young. The procedure of conciliation was taken out of the mandatory framework provided by the Pozzi draft and made entirely optional for all classes of disputes. Room was expressly provided within the system of arbitration proper for "arbitration outside the law" by the division of the rules into two sections 17 and, in particular, the entire system was lifted out of the sphere of legal sanctions provided by the Pozzi draft and "Ibid., p. 3" I d a M. Tarbell, Owen D. Young, p. 136. 17 Section B applicable "in every case where at least one of the parties is a national of a country which does not provide legal sanction for the execution of arbitration awards arising out of an arbitration clause in the original contract and not upon a specific agreement to arbitrate a specific dispute" and Section C "applicable in every case where all the parties are nationals of countries which provide legal sanction for the execution of arbitration awards whether arising out of arbitration clauses in original contracts, or out of specific arbitration agreements." I.C.C., Rules of Conciliation and Arbitration, Brochure No. 2, pp. 31-43.

A World Court of Business

325

placed upon the high plane of moral sanctions advocated by Young. The first paragraph of the sanctions article of the original draft elaborating the procedure leading to a legal judgment was dropped from the regulations for both legal and extralegal types of arbitration, and in its place was inserted the simple affirmation that "the parties are in honor bound to carry out the award of the arbitrators."18 The article continued with a provision for disciplinary measures by national chambers and by the I.C.C. This was a remarkable victory for the theory of moral sanctions. The idealism embodied in this conception has never received more lucid exposition than in the statement of Young before the committee referred to above: Let me state at this point my conviction that the real function and opportunity for usefulness of the Chamber in this whole field is not to interest itself primarily in the punishment of the relatively few dishonest and tricky business men with whom the Chamber is likely to come into any business relation, but rather to provide for the honest and well-intentioned men, who form the vast majority, a prompt and effective means of clearing up difficulties which now interfere with the satisfactory conduct of their affairs. 19

The founding of this world court of commercial arbitration should rank as one of the great achievements of postwar economic statesmanship. The successful reconciliation of divergent national points of view incident to the undertaking was in itself a notable achievement. It was the achievement not of an official international bureau supported by governments but rather of a group of business men and lawyers. Many national points of view contributed to the undertaking. The chairman of the committee was a Frenchman, the vice chairman a Dutchman. The actual drafting of the regulation was done by an Italian, an American, an Englishman, and a Swede. And the result was based upon that "entente" between the American conception of moral sanctions and the European conception of legal sanctions for which the secretary-general of the I.C.C., Dolleans, in particular had worked so persistently throughout the negotiations.20 On June 22,1923, the first case was heard by the newly created court of arbitration and successfully settled according to the rules for conciliation. The parties were French and Belgian. Basil Miles, the American a I b i d „ p. 4 1 . " I . C . C . , Digest No. 3, p. 3 . " I . C . C . , "Private Minutes of the Committee on Arbitration, October, 1 9 2 1 . "

326

A World Court of Business

administrative commissioner, presided and the French and Belgian administrative commissioners assisted. The dispute concerned two questions, the quality of a consignment of walnut wood sold by the French to the Belgian firm and the fluctuation of the Belgian exchange. A f t e r an hour's discussion, the parties came to a common understanding and agreed to accept a compromise which was made into a formal agreement and signed by them in the presence of the administrative commission. 21 By the close of the year 1923, or in the first four months of the court's existence, forty-eight disputes had been submitted to the I.C.C. by traders, manufacturers, and bankers of various nationalities, including French, American, Siamese, Portuguese, Belgian, Italian, Japanese, Danish, Polish, Norwegian, Austrian, and Dutch. The subject matter of the disputes covered a wide range from Danish rennets and Portuguese sardines to steel bars and patents.22 Of these first forty-eight cases, sixteen had been settled before the end of the year, one by arbitration, three by conciliation, five by friendly agreement upon the official intervention of the I.C.C. and without the rules of procedure for conciliation and arbitration coming into play, and seven by friendly agreement by the parties themselves after the I.C.C. had been approached. Eighteen cases had been abandoned due to the refusal to arbitrate of one of the parties which was not bound by the I.C.C. arbitration clause. And fourteen cases were pending. 23 These first months of the court's existence made plain the wide usefulness of conciliation backed by the authority of an international court of arbitration. It was apparent that the greater the authority, both moral and legal, that the court commanded, the wider its usefulness both as an agent of conciliation and as a court of arbitration. And the primary necessity of securing the incorporation of the undertaking to arbitrate or the arbitration clause in all contracts was especially evident. The acceptance of the American emphasis on moral sanctions and the prompt establishment of a working business court but stimulated the efforts of the I.C.C. to strengthen by every means possible the legal sanctions of the court. The Rome congress of the I.C.C., meeting in March of 1923, passed unanimously a resolution vigorously advocating support by national committees of the efforts being made by the League of Nations to pro11

I.C.C., Arbitration Report, No. 2, p. 2.

** Ibid., pp. I, 2.

" Ibid.

A World Court of Business

327

mote national legislation recognizing the validity of arbitration clauses in international commercial contracts. T h e resolution urged the negotiation of one or more international conventions with the least possible delay, making effective the arbitration clauses in international commercial contracts and providing that if two parties of different nationalities agree to refer disputes that may arise between them to arbitration, an action brought by either party in any country shall be stayed by the court provided that the court is satisfied that the other party is, and has been, willing to carry out the arbitration. 24

Clementel, president of the Court, and a member of the French Senate in 1923, introduced a bill designed to insure the validity in France of arbitration clauses agreed to with nationals of other countries. In the same year the Chamber of Commerce of Paris reversed a decision of 1921 opposing such a law, and strongly supported both the I.C.C. Court of Arbitration and the Clementel bill. 2 " Events were moving in a similar direction at Geneva where the Economic Committee had been preparing a draft protocol dealing with the question of the valadity of arbitration clauses. On September 24, 1923, a protocol 26 designed to secure the international validity of the arbitration clause was approved by the Assembly and opened for signature. Such was the French enthusiasm for commercial arbitration that although Clementel's bill had not at that time become law, the French delegation at Geneva, under the leadership of Hanotaux, nevertheless accepted the principles of the bill as embodied in the protocol and signed the protocol for the nation. 27 The council of the I.C.C., through the national committees, waged a vigorous campaign to secure national signatures and ratifications for the protocol. This campaign resulted in twenty-eight signatures and ten ratifications during the first two years of the protocol's existence. Among the ratifications were included such commercially prominent states as Great Britain, South Africa, Germany, Italy, the Netherlands, Belgium, and Denmark. And legislative action in France along the lines of the Clementel bill making legally valid the arbitration clause was finally taken on December 8, 1925. Although the protocol of 1924 marked a significant step forward in " I . C . C . , Resolutions of the Second Congress (Rome, 1923), Brochure No. 3 1 , p. 37. I.C.C., Arbitration Report, No. 2, pp. 6, 7. M League of Nations, "Treaty Series," LXXXIII, 393. 71 1.C.C., Arbitration Report, No. 2, p. 6.

x

328

A World Court of Business

the direction of enforcement of arbitral awards in that signatory states bound themselves to enforce arbitral awards made within the territory of the state in which execution is sought, the question of the enforcement of arbitral awards made in foreign territory was left untouched. This question had formerly been considered as a part of the broader question of the enforcement of foreign legal judgments, a question involving the difficulty of reconciling the many differences between legal systems. On the other hand, arbitration, irrespective of divergent legal systems, in its very nature must conform to simple principles common to all systems. The field of arbitration therefore appeared to offer common ground to all legal systems and to be especially susceptible to treatment in the form of an international protocol. The council of the I.C.C. on November 6, 1925, accepted this point of view as presented by the committee on arbitration and urged the League of Nations "to consider the possibility of promoting an international convention" for the enforcement of foreign arbitral awards. T h e resolution continued, T h e committee was keenly impressed with the danger of confusing the problem of the execution of foreign arbitral awards with that of the execution of foreign judgments. T h e committee considered that there was an intrinsic difference between these two questions. A judgment pronounced in a foreign country is an act emanating from a foreign public authority, vested with a validity which ceases at the frontiers of its country. A n arbitration award emanates from the private will of the parties and cannot be limited in its effect to a particular territory. 28

This new approach to the problem of the enforcement of arbitral awards was accepted by the Economic Committee of the League of Nations in its eighteenth meeting in Geneva (March 1-6, 1926). After referring to the unsuccessful attempt to deal with arbitral awards in conjunction with foreign judgments by the conference on international private law held at The Hague in October, 1925, the Economic Committee came over to the position of the I.C.C. in the following statement: But the H a g u e Conference itself appears to have had in view the question of the execution of arbitral awards independently of the larger question of judgments, apparently with the desire to respond to the wishes of the commercial world which were strongly expressed at the I.C.C. T h e committee proposed for the present, therefore, to confine their attention strictly to the " Ibid., No. 5, p. 5.

A World Court of Business

329

specific question of providing better means for enforcing arbitral awards of a nature falling within the scope of the protocol or commercial arbitration and given in the territory of a state party to that protocol within the territories of the other participating states. 29

With this objective in view the Economic Committee of the League and the arbitration committee of the I.C.C. set about the task of preparing the ground for the drafting of a protocol supplementary to the protocol of 1924. An exhaustive study was made both of the "wide differences in the legal provisions and procedure applicable to the execution of arbitral awards made within the country itself' and also of the "great variations in the extent to which the treatment of foreign awards in this respect is assimilated to or differs from the regime applied to awards made within the country." Some of these differences as foreseen by the Economic Committee were "closely connected with differences of legal system and traditional practice," and required "much patient study" before "any practical scheme" could "be envisaged for giving effect to the desire so strongly expressed by the commercial world." The question was placed upon the agenda of the World Economic Conference of 1927 and Sir Arthur Balfour, member of the Preparatory Committee of the conference and representative of the I.C.C., was named by the committee to cooperate with the League secretariat in the drafting of a special report on commercial arbitration which was to be considered by the World Economic Conference under the heading "Judicial Obstacles to International Trade. . . . Impossibility of executing judgments or arbitral awards given in commercial matters in foreign countries."30 And in January and March of 1927 a committee of jurists set up by the League under the chairmanship of Judge Anzilotti of the Permanent Court of International Justice drafted a new protocol covering the subject. Upon this committee sat Benjamin H . Connor, the president of the American Chamber of Commerce in France. And René Arnaud of the I.C.C. secretariat attended the meetings of the committee in a consultative capacity for the I.C.C. 31 These efforts, as has been noted above, received the endorsement of the World Economic Conference of 1927, and the Assembly of the League of Nations officially opened the protocol for signature in September of the same year. "Ibid., No. 6, pp. 5, 6.

10

ibid., p. 6.

n

Ibid., No. 8, pp. 2, 3.

330

A World Court of Business

A s stated in the preamble of Article i, In each of the contracting states an arbitral award made in another contracting state in pursuance of an agreement whether relating to existing or future differences (hereinafter called a submission to arbitration) referred to in the protocol on arbitration clauses which has been open at Geneva since September 24th, 1923, shall be recognized as binding and execution thereof shall be granted in accordance with the laws of that state if the said award fulfills the following conditions. 32

The conditions requisite to enforcement which follow, together with the stipulation contained in the preamble limiting enforcement to awards made in contracting states, represent the terms of the necessary compromise between the particular international regime set up by the protocol and the many diverse national regimes of law represented by the signatories. The skill and statesmanship of the experts and the efficiency of the machinery of cooperation at the League and the I.C.C. may be measured by the nice adjustments implicit in these technical articles which couple and fit the international to the national regime. These adjustments include the following conditions which arbitral awards must be made to satisfy, a schedule, as it were, of technical measurements to which the international arbitral award must be scaled to fit. (a) That it has been made in pursuance of a submission to arbitration which is valid under the laws applicable thereto. (b) T h e subject matter of the award is capable of settlement by arbitration under the law of the state in which the award is sought to be relied upon. (c) T h a t the award has been given by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure. (d) That the award has become final in the state in which it was made. (e) That the award is not contrary to public policy or to the principle of the public law of the state in which it is relied upon. 3 3

T h e importance of a functioning International Court of Commercial Arbitration in the evolution of this regime of international arbitration can readily be seen. The founding of the I.C.C. Court of Commercial Arbitration, the steady extension of its usefulness and its authority in the business world, the growth of national legislation favorable to inter" Ibid., No. 6, pp. 3, 4.

" Ibid.

A World Court of Business

331

national commercial arbitration, and the final drafting and ratification of two great multilateral treaties mark successive steps in the extension of peacemaking in international commerce. The ratification of the protocol by leading commercial states firmly establishes this privileged regime of international arbitration over against the chaotic territory of legal judgments preempted by conflicting national systems of law. When the committee of business men presented the council of the I.C.C. with the draft proposal for the founding of an international court of commercial arbitration in July, 1923, its farsighted advocates had little more to show for their optimism than their courage. FrancoGerman industrial conflict in the Ruhr threatened to extinguish the League and all peacemakers in the general European uproar. The framers of the International Court of Commercial Arbitration laid the foundations of a regime of law which today surpasses the hopes of its most fervent promoters. Its arbitral decisions, backed by the force of the protocols of 1924 and 1927, are enforceable as are the legal decisions of no national court. Its decisions, carefully drawn to fit the conditions stipulated in national and international law, carry an international authority that the legal judgments of national courts have not yet attained. To the business man engaged in international trade this court offers the protection of an established regime of international law which the highest court of his native land is powerless to grant.

Part V WORLD BUSINESS STATESMANSHIP AND CATASTROPHE

CHAPTER

XXVIII

Seeds of Catastrophe

T

H E postwar years dramatically demonstrate the validity in the international sphere of those basic principles of parliamentary government which have been evolved through centuries of national constitutional growth. Disarmament, military and economic, is the corollary of confidence and security. Unarmed security is the sum of public confidence in any society's potentialities for peaceful as opposed to violent change. The society of nations offers no exception to this fundamental principle of parliamentary rule. Obedience to the constitutional state in time of crisis is commensurate to the reserve of authority which has accrued to the state from the willing homage and allegiance of its members for services rendered. Obedience is but the manifestation of an imponderable spiritual sanction of widespread and diverse loyalties. Police power under the parliamentary system is a counterweight to violence and never a remedy. The remedy for violence rests not in the hands of the police department but in the courts, the legislature, and administrative officials. Economic groups within parliamentary governments have, broadly speaking, proceeded on the theory that it is in the long run pleasanter and cheaper to support the latter rather than the former. The stability of parliamentary government is dependent upon the maintenance of this attitude. The final authority in the parliamentary state must always be public opinion organized to promote a reasonable policy of change. The history of parliamentary government is filled with the record of parliamentary crises which mark the ebb and flow of the tides of public opinion, cutting out the channels of social progress. The reign of parliament has never claimed to offer any panacea for progress without commotion. The authority of parliament is in fact dependent upon the capacity of the parliamentary system to assimilate conflict and ultimately give the parliamentary form of law to social crisis.

336

Seeds of Catastrophe

It was the constant objective of the economic liberals of the League, of the I.L.O. and of the I.C.C. to organize a world opinion through the actual operation of the Geneva parliamentary system which would insure the eventual submission of great economic and financial issues to a parliamentary settlement. It was hoped that the crucial issues raised by reparations, war debts, and military and economic armaments would at last be assimilated to the expanding regime of practical "gas and water" internationalism, represented by the parliamentary processes of peaceful change successfully functioning in the diplomacy of technics and the reconstruction of Europe. T h e extension of such a reasonable policy of change was the constant aim of world economic planning within the organization of the International Chamber of Commerce and the League of Nations. W a r debts and reparations were considered by the I.C.C. as early as 1923 as inseparable parts of the larger problem of world economic reconstruction. T h e Rome resolution elaborated an international plan for world restoration through an all-round reconsideration of postwar problems by a general world economic conference. In such a world economic parliament the Rome plan proclaimed the hope of a new economic peace negotiated under world business leadership in the interests of world economic progress. The consistent refusal of the United States to participate in such a lump sum settlement of war costs was one of the obstacles to the realization of the Rome plan of world restoration through the medium of a world conference. Business statesmanship was forced to attempt to realize the Rome plan by piecemeal measures. T h e Dawes plan and the series of war debt settlements made by European governments in Washington were the respective segments of a larger pattern of world restoration formulated by world business opinion. Neither the American government nor the Dawes committee proved to be omniscient in the drafting of these stupendous plans for international payment, but the American government, unlike the modest committee of business men, followed the precedents of sovereign treaty makers and negotiated settlements. T h e Dawes committee, on the other hand, very much in the spirit of business diplomacy at Geneva and Paris, cautiously provided for readjustment before the shifting sands of international conditions. T h e American politicians sitting on the congressional War Debt Funding Commission at Washington

Seeds of Catastrophe

337

closed the question. The Dawes plan left the way open for a Young plan. There was no Young plan opening out of the Washington war debt settlements. There was nothing tentative about the work of the American congressional committee. The American negotiations terminated not in an international plan but in final settlements, settlements made by an aloof creditor with a string of debtors. The distinction between these two types of settlement was to prove of tragic importance for the future of international economic cooperation. The American war debt settlements were the first effort at a definitive war settlement in the economic sphere. How little did the politicians who initiated the American war debt settlements comprehend the essential character and significance of these interstate engagements! The names of the true principals in this transaction are nowhere to be found in these contracts. The stockholders in the great national economies here pledged do not appear on the bond. These pledges concerned people. The moneys, goods, and services contemplated in this undertaking were beyond human calculation. This conception possessed astronomical dimensions in time and space. Its vastness was as far above the comprehension of the signers as was fulfillment above the capacity of any political entity. The farmers of the fertile plains of Iowa, the blue-bloused peasants of the Loire, the sturdy miners of the Ruhr, the proud artists of ancient Florence, the cotton merchants of Manchester—all the infinite varieties of those human fractions which compose respective national economies—these were the human elements in this union. These surviving war-shaken people and their children and children's children—the living and the unborn to the third generation—were by these documents made life members in this new "partnership set up at Washington by American politicians—War Debts Funding, Inc. Not until the grandchildren of postwar European debtors should have safely got the last shipload of war gold into American ports in the year 1987 would the war be won on American soil, on the broad farm lands of the Middle West. The settlements left the farmers of Iowa, Illinois, and Indiana, with their barns and tractors and thousands of acres, mortgaged to victory. The War Debt Funding Commission signed up the American farmer for the duration of the war. For him there could be no economic peace without economic victory.

338

Seeds of Catastrophe

T h e acceptance of the philosophy inherent in an economic peace by separate and conclusive national settlements involved an insidious but very definite commitment by all the parties to such agreements. The fulfillment of these engagements threw national states back upon policies of self-help. T o this movement toward economic nationalism in the spheres both of finance and trade the I.C.C., because of the international character of its organization, was inevitably opposed. Its technique as an international bureau called for group action rather than individual action. This, as observed above, was the philosophy of the international business leaders who represented its opinion in both financial and economic peacemaking in the Dawes and McKenna committees and in the League committees and conferences. T h e technique of settlement by the provision for continuous international collaboration was implicit in the philosophy of the I.C.C. from the start. Its statesmanship is characterized by the escape clause, such as that embodied in the Dawes plan, through which hard-pressed parties might find an emergency exit from the spheres of heated interstate conflict to the protecting authority of a competent international agency. The Dawes committee's provision for the transfer of reparations payments across the frontiers of the international exchanges under the careful supervision of the agent-general for reparations, the gold clause regulating the schedule of payments according to the variations in the price of gold, and the kindred I.C.C. proposals for an international customs commission rejected by the Customs Conference in 1923 and for a permanent international tariff commission rejected by the World Economic Conference in 1927 are all characteristic examples of the methods of a business diplomacy which aimed at supplanting static political forms with dynamic, continuously functioning international organs of conciliation and adjustment. The lines of conflict between the champions of these two philosophies, the philosophy of the separate peace and of world peace, the philosophy of economic nationalism and the philosophy of economic internationalism, have been clearly drawn at every postwar conference which has met at Geneva or elsewhere. At the first world economic conference of 1927, as noted above, this conflict was brought to a climax and the issue was squarely joined on the question of economic disarmament between the representatives of the I.C.C. and the I.L.O. on the one hand and

Seeds of Catastrophe

339

on the other by the representatives of certain powerful sections of national industry, who sought to safeguard markets threatened by freer trade proposals through the erection of a structure of industrial treaties in the form of cartels controlling production. In the face of the irresistible pressure of modern times toward rationalization, economic nationalists did not make the adjustments necessary to meet international competition but fell back more and more behind political frontiers for defense against the effects of the changing economic world about them. This trend was accentuated in the policies of the most powerful states, states dominated by great vested industrial interests whose wealth was drawn from tariff monopolies. The policy of the United States was based upon the assumption that the American standard of living was the result of a protective tariff, that the citadel of American prosperity was impregnable as long as the economic defenses were maintained intact along her far-flung frontiers. American industrialists with something of missionary fervor had carried the gospel of rationalization to the four corners of the earth, but there was no thought among American industrialists of rationalizing American industry as a single unit of world production geared to the genuine demands of consumers the world over, American and foreign, as determined in the free plebiscite of the unprotected market. The gospel of rationalization according to the American industrial translation had nothing to do with the ideal of world prosperity as a whole—with the broad conception of the "wealth of nations." It was founded upon the ideal of American prosperity. Big Business in the United States appeared convinced that American industrial genius had successfully forged an unbreakable monopoly on prosperity. World prosperity, to the American business man, was an ideal f a r over the horizon of a high protective tariff. Big Business in the United States had no intention of inviting foreigners to spread out their wares freely along the sidewalks of the promised land where the colorful throngs of American consumers provided a seemingly insatiable market. The American conception of rationalization was based first and last upon an ironclad monopoly of the home market. American industry, protected by the American tariff, was proudly offered to the world at large by American business men as the standard unit of world production into the master gears of which the wheels of industry all

340

Seeds of Catastrophe

over the world might be meshed. This, however, did not in any sense signify a renunciation of foreign markets by American producers. The American protective tariff was no part of a philosophy of economic nonaggression. On the contrary, a large sheltered market was conceived as a necessary operating base from which to make raids into competitors' territories, dumping the cheap goods of mass production over the most impregnable economic defenses. On the continent of Europe it was French economic nationalists who set the pace in economic as well as military armaments. Reparations, Central and Eastern European reconstruction, and the great mass of postwar politico-economic problems falling under the heading of European reconstruction were viewed by French industry solely in the light of national security and of the probable effect of proposed solutions upon Frcnch markets and French competitors. From the fateful moment of the great refusal to permit German industry to cooperate directly with French industry in the actual rebuilding of the devastated regions, French industrial policy moved with but a single purpose. French industrial supremacy over Europe—this was the plain objective of French nationalists. Industrial conquest was the purpose of French industry when, in the person of Schneider, the attempt was made at Atlantic City (1919) and in Paris (1920) to recreate the Allied industrial front. It was still the objective of French industrial policy when Loucheur, with somewhat softened manners, presented at Geneva in 1927 the French thesis for economic security by industrial treaties as a substitute for economic disarmament. Between the Atlantic City and Geneva conferences, French industrial power had ebbed and flowed. The years passed, into the old bottles of European nationalism flowed the new wine of American rationalization, distending and distorting old social and political forms and philosophies into new fanaticisms. The world became drunk with the heady draughts of the new materialism. The grappling of powerful national industrial combines crowded the weak farther and farther back upon those desperate resources discovered in recent years to underlie the modern fighting nation-state. Old liberal political forms shaken by the war went to pieces under the merciless hammering on a thousand fronts of industrial competition. In distressed areas of the world the life of the liberal

Seeds of Catastrophe

341

parliamentary state was slowly taken by a military business organization, the corporative state, better suited to the desperate stand of nationalism against the ruthless competition of mighty industrial neighbors. This destiny, from the time of the industrial revolution, lay deep in the nature of both the state and industry, of both public and private empire. The war and the postwar era provided an international crucible in which these two forces fused into that singularly dangerous politicoeconomic instrument of aggression, the economic-nationalist state. In those pleasant twilight years after Locarno, during the brief interval of European appeasement, it was the same resistless pull of the tides of materialism which carried postwar liberal statesmen from conference to conference, treaty to treaty, understanding to understanding, in desperate démarche after démarche to ward off the day when the slight structure of international cooperation, skillfully built upon the foundation stones of a reconstructed nationalism, should be swept out in the wake of rising industrial empires. The Washington treaties, the Austrian and Hungarian reconstruction schemes, the Dawes plan, the Locarno Pact, and the Pact of Paris, these were the constructive engineering projects of postwar liberal statesmanship. They were designed to canalize the turbulent streams of an expanding, many-sided industrial civilization into channels of cooperative action. These pacts made peace in the Pacific, lifted the weight of economic serfdom from Central and Eastern Europe, put an end to the steel war in the Ruhr, demobilized fear and hatred on the Franco-German front, and brought the United States, through the antiwar pact, at last into the Geneva regime of international cooperation. They were deposited not in the dead air of secret archives but in the stirring atmosphere of a dynamic internationalism at Geneva. Had the Locarno spirit of Briand and Stresemann conquered ? The ceaseless conferences and treaties and understandings of those indefatigable partners of reconciliation, Briand, Stresemann, and Chamberlain and their European and American entourage, supply the all too easily forgotten record of the heroic stand of international liberalism—political and economic—against economic nationalism. The ensuing years saw the campaigns for economic and military disarmament fought through to the bitter end. The World Economic Conference of 1927, as noted above, took up the challenge of economic

342

Seeds of Catastrophe

nationalism on the tariff issue and carried the campaign home to national governments through the vigorous efforts of the League and the I.C.C. As in the case of military disarmament, the direction of the efforts toward economic disarmament was taken out of the hands of the experts and placed under the direct control of a sort of mixed commission known as the economic consultative committee, including not only government experts but also representatives of other relevant interests. Under the chairmanship of the president of the I.C.C. (19291 9 3 1 ) , Theunis, the economic consultative committee acted as the continuation committee of the World Economic Conference of 1927. Throughout this protracted and hard-fought tariff war, ending with the ill-fated tariff truce of 1930, the distinguished business men representing the I.C.C. as members of the economic consultative committee and elsewhere stood firm for the cause of tariff reform. Economic leadership in the last bitter fight for the tariff truce showed those same qualities of liberal statesmanship which characterized postwar efforts of business diplomacy—practical provisions for the maximum of immediate concerted action, combined with the principle of continuing international collaboration. The tariff truce agreement was the first and only international multilateral treaty based upon the principle that tariff policy is a matter of international as well as national concern, the signatories pledging themselves to consult before raising the level of economic armaments. T h e council and committees and congresses of the I.C.C. provided a forum for the discussion of the proposal for a United States of Europe into which Briand threw his whole strength in the closing desperate moments of diplomacy preceding the series of breakdowns which were to reduce to wreckage the whole structure of liberal internationalism. T h e Austrian national committee, under the leadership of Riedl, was the repeated sponsor of plans for various forms of European economic union. T h e discussion of all such proposals in the I.C.C. as elsewhere showed the inevitable division upon the interpretation of the mostfavored-nation clause. In this division the United States and Great Britain supported that unconditional form of the clause which would render impossible all programs for intra-European economic disarmament. It was in pursuance of an objective world business policy upon

Seeds of Catastrophe

343

the whole question of a United States of Europe that the I.C.C. undertook the Europe-United States investigation as the main item upon the program of the Washington congress of 1931. In the field of international finance the dangerous increase in national economic tension forced business statesmanship back upon one ingenious device after another to keep intact the hazardous structure of international finance. The I.C.C. committee on international settlements closely followed the effects of the huge transfers of capital across the exchanges in the form of the reparation and war debt payments. The collaboration at times took the form of direct contact with officials, as when in October, 1926, the I.C.C. committee on international settlements held an informal joint meeting with the official government committee on transfers at which the existing situation was thoroughly discussed.1 Early in 1928 the committee on international settlements, in view of the increasing importance of movements of capital in relation to balance of payments, the practical advantage that the knowledge of such movements would be to the business world, and the inadequacy of existing information, decided to conduct an inquiry into the question of investment statistics. The committee, of which Pierre Quesnay, later general manager of the Bank for International Settlements at Basle, was rapporteur, called for a study on "existing statistics of international investments, their value, the means of improving them, and how best in practice members of the I.C.C. might bring their prestige and influence to bear in order to obtain the desired statistics or other improvements so as to make it possible to compile full, accurate, and comparable investment statistics."2 The final report which Quesnay made at the Amsterdam conference in 1929 initiated international action toward the collation of statistical information on the money markets which was later to be taken up at the Bank for International Settlements. The activities of the subcommittee on the balance of payments, under the chairmanship of Charles Rist, who was later to sit with the special advisory committee under Article 119 of the Young plan at Basle in December, 1932, and the report on movements of capital, by Alberto Beneduce, also later a member of the same committee, aided materially 1

World Trade, N o . n . Pierre Quesnay, " T h e Importance of International Statistics of Public Issues of Securities," World Trade, No. 3. 2

344

Seeds of Catastrophe

in clarifying world business opinion as to the exact nature of the final stages of the reparations problem. 3 When the Young committee of business men was persuaded by the overzealous national optimism of the early months of 1929 to attempt the dangerous hazards of a definitive settlement of the reparations bill, they wrote into the settlement provision for an impartial and international administration of the plan by the newly created Bank for International Settlements. By the creation of a world bank the Young committee hoped to have set in motion an instrument for central bank collaboration which would prove powerful and flexible enough to secure the liquidation of reparations by peaceful cooperation. The second committee of experts thereby brought to a settlement the reparations controversy with the final monument of postwar liberal statesmanship—a world bank. When the following September Briand made his great appeal for European economic cooperation before the Assembly of the League of Nations the agencies of a rapidly developing society of nations included a world council and parliament, a world court, and a world bank. The regime of law appeared to have been considerably strengthened by the universal adoption of the Pact of Paris, outlawing war. In politics, law, and finance, international regimes had been skillfully tied into the Geneva system of world peace bounded by the five great pacts, the Covenant, the Washington treaties, Locarno, and the Pact of Paris. But beneath the regimes of politics, law, and finance lay an economic universe bounded by industrial chaos and feverish markets. The universe of law rested upon a universe of chaos. Locarno was being financed by an industrial sweepstakes. This was the logical sequel to American World W a r financing, the economic sequel to the policy of the separate peace, the moral consequence of the American decision to stay out of a realistic lump sum settlement of the war costs. American policy had turned from a war to save democracy to make a peace to save war profits. While Briand was appealing to the world from Geneva for constructive economic cooperation to save liberalism, the upward revision of the American tariff was in full swing at Washington. In the spring of 1929 the American Congress had begun the erection of the insurmountable Hawley-Smoot tariff, with the raising of those indefensible * I.C.C., Amsterdam Congress, Documents.

Seeds of Catastrophe

345

barriers of greed and stupidity termed by the vice chairman of the United States Tariff Commission the "gold brick duties—which carry a maximum of irritation to the foreigner and the minimum of benefit to the home people."4 Six months later the investment sweepstakes entered the last lap. In October the American casino suddenly collapsed in the Wall Street crash of '29. 'Alfred P. Dennis, "An American Economic Policy," Annuls of the American Academy oj Political and Social Science (July, 1930); Joseph M. Jones, Jr., Tariff Retaliation.

CHAPTER

XXIX

T h e Statesmanship of Nationalism

T

H E year 1929 was the ending of an era. The hopeful days of credit and pseudo-liberalism were ending. The materialistic civilization of the '20s was plunging into the default and revolt of the '30s. Nationalism was destined to eclipse the rule of international parliamentarianism at Geneva and of gold at Basle. In the eyes of the debtor members of the society of nations the Geneva system appeared the bulwark of the propertied classes. The shadow of the League fell over European nationalism like the shadow of Versailles. As the Wall Street crash cut Europe off from American credit and the Hawley-Smoot tariff from American markets, storm warnings began to go up all over Europe and America. German industrial activity declined and unemployment rose. Unemployment insurance, doles, public works forced a budget crisis in the Reichstag at the beginning of 1930. The government fell and Heinrich Briining in March began the heroic last defense of the German republic against the forces of nationalist default and revolt. The unemployment figures rose to 4,000,000. The debt burden fell with increasing weight upon the taxpayer. In the elections of September, 1930, National Socialist strength in the Reichstag leaped from 12 to 107. In the same month Briand made his last dramatic appeal for constructive economic action to save European liberalism in the proposal for a United States of Europe. It was sabotaged in national lobbies by those same economic nationalists who had manned the tariff walls against every effort at economic disarmament since Versailles. In March, 1931, as the German economic situation grew steadily blacker the rising tides of German nationalism forced Curtius, the German foreign secretary, to leave the enervating atmosphere of international parliamentarianism at Geneva for a coup d'état at Vienna. In March, 1931, a tentative agreement for an Austro-German customs

Nationalism

347

union was announced, accompanied by a blanket invitation to other European nations to join. The German action struck French, Czechoslovakia^ and Polish economic nationalists as a far graver threat to industrial security than Briand's United States of Europe. The German proposal had a fateful precedent far back in the early history of an expanding Prussia. And it was not a proposal but an announcement, a tentative fait accompli. As events were to prove, it was a closer approach to the diplomacy of Bismarck than the strength of the hardpressed German and Austrian republics would warrant. It was a blow of desperation. The German revolt was on. Locarno was dead. The old chasm of Franco-German industrial hate opened wide. This time hostilities caught American bankers and industrialists in the center of the war zone. The cables to America carried grave warnings to New York business houses from their German correspondents and representatives. The second battle of the Ruhr had commenced. Could the era of revolt be turned back? Could liberal parliamentary institutions centered at Geneva yet evolve a means of orderly change in international affairs ? European liberalism once more turned to America. The international financial structure was already buckling under the tension of reparations and war debt payments in a declining world market. Was the Hawley-Smoot tariff the only American answer? Economic and military disarmament were the lost causes of the period of industrial expansion. Expansion was at an end. The crisis revived old issues in an atmosphere of desperation. Under the pressure of imminent catastrophe might not a liberal international regime be established in the universe of economic chaos? The weight of the international debt structure was unsupportable. War debts were the first cause of the growing movement toward default and revolt against the whole system of international liberalism. Revision by force or by consent was imminent. The fate of liberalism lay in the choice. Were it possible for European nations to ease the overwhelming debt burden with a draft from an American treasury of grace, the sin of default would be effaced. In the return of sanity, might not a new economic and financial peace be at last written in the disarmament and appeasement of Europe and the world? The time had come for another effort at world economic reconstruction. In the spring of 1931 statesmen and business leaders were compelled

348

Nationalism

to take decisions. Conditions of social and economic distress were manifest in definite signs of revolt and default. The centers of action were Geneva and Washington where events forced decisions upon the respective issues of revision, the Austro-German customs union and the war debts. In the tense atmosphere of European nationalism the May session of the League of Nations Council proceeded with the usual Geneva decorum to the consideration of an alleged infraction of the Treaty of Versailles, the Treaty of Saint-Germain, and the Geneva Protocol of 1922. Briand's ideas of a United States of Europe were perceived to have a revolutionary ring when echoed from across the Rhine. Proposals for greater European economic cooperation were to be made the occasion for invoking important sections of the constitutional law of Europe. Advocates of economic disarmament were to be placed on trial as treaty breakers. Under the deft diplomacy of Great Britain and France the German edition of the United States of Europe was given a polite but cool reception and all preparations were made for judicial interment at The Hague. This was the answer of France and her allies at Geneva to the Austro-German revolt against the economic status quo. In any event the interminable debates on economic disarmament were at last to eventuate in action—the case of Austria and Germany vs. French hegemony over Europe. On the odier hand, events were about to force a reluctant Washington to make a decision upon the issue of revision of the financial status quo. The American government, inspired by Senator Borah, was ponderously considering the academics of a sort of European-American trade agreement of war debts for disarmament. Such a solution had its political attractions to a senatorial leadership in foreign affairs based upon the isolationist philosophy of the separate peace. Since 1929 American soil had become the scene of one of the bitterest phases of the postwar world economic depression. The American administration had its own theories as to the importance of armaments as a factor in European economic troubles. A trade agreement-disarmament for war debts would leave the United States without League commitments. In the minds of astute politicians such a proposal had its merits as a campaign argument in the Middle West where the spirit of generosity and independence ran strong despite the depression. Such were the senatorial auguries of slowly maturing American policy on disarmament and war debts as

Nationalism

349

financial catastrophe lowered over Europe in the spring of 1931. On May 3 the American government in a semiofficial statement made clear that the administration did not wish to be roused from its academic reveries. The American government, ran the declaration, could not contemplate any change in the intergovernmental debt arrangements.

CHAPTER

XXX

T h e Statesmanship of W o r l d Business

W

H I L E the status quo was thus being made secure by poli-

ticians against revolt and default in Europe and America, Washington was made the scene of the largest international

business gathering assembled by the I.C.C. in the ten years of its postwar history. Washington became overnight the center of one of the

most far-reaching discussions of international financial and economic problems since the war. What the League financial and economic conferences of Brussels (1920) and Geneva (1927) had been unable to achieve the I.C.C. conference of 1931 made bold to attempt in the capital of the world's creditor nation—a frank discussion of reparations and war debts. T h e twelve hundred business leaders from thirty-seven countries which met at the sixth biennial congress of the I.C.C. at Washington under the joint presidency of Silas H . Strawn, president of the United State Chamber of>'Commerce, and Georges Theunis, president of the I.C.C., chairman of the Economic Consultative Committee of the League of Nations, and former president of the World Economic Conference of 1927, provided for the questions at issue in the impending crisis of revolt and default a type of hearing different from that afforded by politicians in Geneva or Washington. The approach of the Washington business congress to the crucial problems of economic peacemaking presented as great a contrast to national policies in 1931 as did the Rome congress in 1923. N o general international economic conference since the Rome I.C.C. congress of 1923 had assembled in a more difficult political atmosphere. A n d the Rome congress had the advantage of meeting upon neutral ground away from the centers of political crisis in the Ruhr struggle. The I.C.C. congress, which opened in Washington on the day following the semiofficial statement by the American government on war debts,

World Business

351

found itself on the spot. T h e American government obviously desired to eliminate the subject of the war debts from the agenda of the conference because of the possibilities of embarrassing repercussions in domestic politics. The time and the place, in the view of the American administration, could hardly be less opportune for a wide discussion of this critical issue. This was the attitude of the American government and of the American delegation headed by the personal friend of President Hoover, Silas H. Strawn. It was hoped that the unofficial statement from the State Department on the eve of the conference, coupled with a vigorous lead on disarmament by President Hoover in the opening session, would provide the necessary impetus for steam-rolling the American program through the congress. T h e preparatory movements were carried out by the administration's business friends with the skill and finesse common to the managers of American political conventions. In this hostile political atmosphere the Washington business congress showed great independence and statesmanship in dealing with the debt crisis. President Hoover's lead of disarmament in opening the congress was received with acclamation. W e cannot ignore the malign inheritances from the great war. This is not an occasion for review of the action and interaction of such a multitude of forces, but I do wish to give emphasis to one of those war inheritances in which international co-operation can effect a major accomplishment in reducing the tax burdens of the world, removing a primary cause of unrest and establishing greater confidence for the long future. That is the limitation and reduction of armaments. 1

From this American keynote, the congress continued, despite all political pressure, with a courageous and frank consideration of the relations of the impending war debt crisis to world prosperity. In speech after speech European leaders of unquestioned authority urged the gravity of European events in clear and unequivocal terms. T h e position of European business men on the significance of the debts in the world depression was given its clearest exposition at the Washington congress. Never before or since has financial and economic authority been afforded such a world audience as that offered by the platform of the I.C.C. in Washington. Distinguished business statesmen like Karl Bergmann, former German secretary of state for finance, who had " N e w York Times, May 5, 1 9 3 1 .

352

World Business

experienced the trials of the war debts question since the tragic failure of the Seydoux plan in 1921 when, as German representative on the Reparation Commission, he had acted for the German government— names like those of Pirelli, Theunis, Henry Bell, and Edward Hamm, which carried the greatest authority at Geneva or in business circles in Rome, Brussels, Paris, London, and New York, but which were entirely unknown to the general American public—were given an unprecedented popular audience in the United States. The frank response of the conference to President Hoover's keynote was clearly stated by Pirelli in a speech raising the war debt issue. Sir Alan Anderson followed with a cautious attack upon the Hoover position on tariffs and war debts. There is scarcely a trade or commodity in which rival nations are not competing to secure business for their own producers by restricting the sales of other nationals. In the race to get rich did we not forget that to make business someone must buy and be able to pay; that trade is barter; that this simple civilized life of ours is only possible because each of us is willing not alone to be employed but to employ, not only to pay debts but to receive payment, and that the trade of nations is ruled by the same law? Till we are once more prepared to buy from each other, the more w e struggle to produce and refuse to buy the less we shall sell. But good credit, free buying and following the advice which the President of the U . S. gave us—less armies—would soon restore us all. 2

On this philosophy of liberal economic and financial reform the British and German delegations took their stand for a resolution recommending a revision of the reparations and debt settlements against the determined opposition of the majority of the American delegation, strongly backed by the French delegation who were acting on the familiar grounds that any revision might upset French dominance of the status quo. The committee drafting the war debts resolution deadlocked along these lines on a proposal for a two- or three-year war debt and reparations moratorium. On May 7, with only one and a half working days left, the final outcome of this issue was as uncertain as on the opening day. During the period of committee discussion, leaders of the American delegation were continuously in communication or in conference with President Hoover. It was privately stated among the delegates that the attitude of the Administration toward the deliberations of the Chamber complicated its work, particularly the work of ' ¡btd., May 6, 1 9 3 1 .

ELIOT WADSWORTH CHAIRMAN OF THE AMERICAN SECTION OF THE CHAMBER, 1937—

World Business

353

the American delegation. Strawn, who had conferred at least once with President Hoover since the congress opened, was the active as well as the titular leader of the Americans in the fight to maintain the official government point of view. This effort of the American government to dominate the policy of American business men in an international conference did not fail to arouse resentment among a section of the American committee who wished for more freedom in discussing questions on which they found themselves aligned against the Administration. On May 7 Bergmann, in addressing the conference on the subject of reparations, frankly recognized the protests being made in official circles of the United States government against discussions of political questions by groups in the I.C.C. Conceding "the extreme delicacy of the problem," he continued, Nobody can contest the right and duty of the I.C.C. to discuss fully the great economic problems which are involved in the matter of international debts and more especially to examine closely the effects which the payments of these international obligations have upon the movement of international trade. . . . T h e I.C.C. from its very beginning has not only given its close attention to the economic side of international debts but has also called the attention of the whole world to this great problem in the resolutions passed at its biennial conferences more particularly at Rome in 1923 and at Amsterdam in 1929. T h e Chamber has, therefore, every reason, he asserted, and even the duty, now, on the occasion of the present congress not to let the matter pass by in silence. 3

On the question of American tariff and debt policy the well-known British business leader, Henry Bell, unhesitatingly arraigned the Hoover government as follows: It is an attitude of one part of the world, if not of more, to be most anxious to sell its goods, but to be very careful that it should not buy anybody else's goods in exchange; that is the sort of thing that is going on in the world today. W h a t is hurting the world mostly today is, I think, a misconception on the part of the great nation whose guests we are.

After three days of aggressive attack by British and German members of the congress, American and French opposition collapsed. The deadlock in the drafting committee was broken by the intervention of the leaders and the final compromise report drawn up by a small committee 'Ibid., May 8, 1931.

354

World Business

composed of Strawn (American), Balfour (British), Maioux (French), Pirelli (Italian), and Frowein (German). This resolution reaffirmed the principles of the Rome resolutions of 1923 and stated that the observance of the "essential principle" of "the integrity" of international obligations "is not inconsistent with an impartial examination of the effects of those obligations on international trade, if warranted by changed economic conditions, such examination to be based on the principles laid down by the International Chamber of Commerce at its congresses." The congress concluded its session on May 8th with the election by the council of the distinguished German banker, Von Mendelssohn, to the presidency of the I.C.C. Von Mendelssohn, who was unable to be in Washington, accepted the nomination in a widely broadcast radio program from Berlin. The amount of space devoted to the congress in the American press was without precedent. The proceedings were covered by some hundred special correspondents. The New York Times gave its most important front-page columns every day throughout the conference to the reports of proceedings. On the Sunday following, this paper had sixteen columns on the subject, including editorials, special articles, an entire front page of one of its supplements, etc. Editorial comment alone on the conference was given 25,417 inches in sixty-seven American newspapers in all sections of the country.

CHAPTER

XXXI

T h e Sabotage of Parliament

B

E N E A T H the surface of events, economic and financial forces were being marshaled in the spring of 1931 for a major test of strength between the French continental system and the Austro-German rebellion. T h e general struggle for economic disarmament led by the League and the I.C.C. had been slowly sabotaged by economic nationalists in the lobbies of the great powers only to break out again in the movement toward regional cooperation in the form of the Briand United States of Europe scheme and the AustroGerman customs union. T h e Briand plan, under the impetus of French economic nationalism, had turned out to possess all the familiar political safeguards to the economic status quo characteristic of French disarmament plans. T h e rival Austro-German customs union was notice to Europe of a national agreement with a conversion clause entitling recipients to convert it into an international instrument by the simple endorsement of the powers. This was a bold proposal: a German United States of Europe idea in formation. When the German declaration reached the Quai d'Orsay, would not social sense inspire friendly comparison of the German statement and the somewhat similar French offer with the thought perhaps of polite reciprocation or even friendly collaboration in the early planning of these kindred affairs? The German proposal was obviously somewhat tentative, as was the French. What forces restrained Briand from proposing an economic Locarno between the French and the German ideas of a United States of Europe? Here was the door to European economic cooperation once more thrown wide open by the desperately pressed liberal democracies of Germany and Austria. In the spring of 1931, with German economic and financial catastrophe imminent, economic nationalists were no more ready to walk the way of economic disarmament and cooperation than on the day French troops went into the Ruhr. Economic na-

356

Sabotage of Parliament

tionalism in France was no closer to economic disarmament on the eve of the disastrous summer of 1931 than were the American authors of the Hawley-Smoot tariff. These were the forces which pressed for a decision in the fateful days of May and June. While the parties to the dispute were preparing for the legal battle at The Hague, other more subde and disastrous influences operated to make unnecessary this celebrated case. In Vienna public accountants were proceeding with the revaluation of the assets of the leading private bank of Austria, the Credit Anstalt. T h e assets of this bank, like the assets of every other bank in the spring of 1931, were found to be gravely diminished by the trade depression. Most of the assets of the Credit Anstalt were involved directly or indirectly with grants of credit to national industries. The intangible assets of these banks, therefore, were in reality written in the national trade policies controlling the industrial markets on which these credits were based. T h e two most important single factors in international trade policy in the spring of 1931 were financial questions, tariffs and war debts. T h e keys to the control of these factors were largely in the hands of the French and the Americans. Any offer from Paris or Washington indicating a willingness to reopen with practical proposals the question of war debts or the question of economic disarmament (such as French or American trade concessions, a lowering of the Hawley-Smoot tariff, a compromise between the Austro-German and Briand proposals for European economic action) would be strikingly reflected in a return of confidence in Germany and Austria. While the bank examiners checked the assets of this Austrian bank in the center of Europe, action was being taken in Washington and Paris. Washington was slowly moving toward a moratorium, Paris toward a vindication of her powerful vested interests in the Treaty of Versailles. O n the twelfth of June the Credit Anstalt was shown to be insolvent. The run on Vienna commenced. The British came to the aid of the Credit Anstalt. The run continued. President Hoover announced the moratorium. The French government interposed objection to certain provisions regarding the suspension of German reparations payments. While the French and the Americans argued the run continued. On July 6 a Franco-American agreement was reached and the moratorium became operative. T h e delay and controversy had

Sabotage of Parliament

357

resulted in a further blow to world confidence. The mid-July run on German banks had commenced. The threat to large British short-term advances in Germany gravely affected the position of the Bank of England. The consequent withdrawal of French balances from London rapidly developed into a run on the Bank of England. This in turn undermined British support of the Credit Anstalt. London's support of Vienna had to be withdrawn. In mid-July the representatives of the Credit Anstalt appeared hat in hand at the Bank of France. And so it transpired that this brief but harrowing chapter of European financial history had a political sequel. The Bank of France replaced London as a guarantor of the Credit Anstalt. The Austrian government, followed later by the German government, finally announced the abandonment of the AustroGerman customs union. The Austro-German revolt had collapsed. French markets were secure. The economic revolt of Austro-German liberalism had failed. French economic nationalism had won the second battle of the Ruhr. The terms of surrender were unconditional. For German liberalism the renunciation of Anschluss was another national humiliation, another Versailles. In the summer of 1931 the economic nationalists of France and her Continental allies were arrogant over Europe. As the foundations of the Locarno and Dawes-Young economic system everywhere crumbled, French financial and economic power stood impregnable. Everywhere French economic preponderance was thrown into the scales on the side of the resurgent nationalism of the right against the liberal internationalism of the center and left. It was with gravely depleted forces that German liberalism came through the summer crisis of 1931, culminating in the political humiliation of the Anschluss surrender and the legal defeat represented in the eight-to-seven adverse decision of the World Court immediately following. T o the abject renunciation of these two prostrate democracies, an arrogant France of military and economic power replied officially in the voice of none other than Flandin that the French government would take note of this renunciation. The extent of the losses which German liberalism suffered in the international reverses of 1931 was apparent in the next major trial of strength between the Briining government and the Nazis. The presidential elections of the spring of 1932 showed the Nazis to

358

Sabotage of Parliament

have more than doubled their forces, with a total of nearly thirteen and a half millions. The cause of economic peace, however, was not yet lost. The League parliamentary machinery was still available for the settlement of Franco-German strife. The Assembly and the Council of the League brought the usual galaxy of prime ministers and officials to Geneva during the autumn of 1931. Why could not this undeclared FrancoGerman economic war be submitted to the Geneva parliament? Lord Cecil, speaking before the Assembly, openly declared that the disagreement between France and Germany caused seventy-five percent of the economic and political insecurity of Europe. Why should not this disagreement between two major powers be submitted for the international procedure of parliamentary adjustment provided by the Covenant? Article 1 1 , paragraph 2, specifically granted such a "friendly right" to "each member of the League to bring to the attention of the Assembly or of the Council any circumstance whatever affecting international relations which threatens to disturb international peace or the good understanding between nations upon which peace depends." International influences accordingly pressed national statesmen to permit the League machinery to operate. International influences from all three of the great unofficial popular world movements—labor, business, and peace—actively promoted the use of parliamentary techniques in this conflict. Although there was no machinery provided in Geneva for the direct representation of these influences in the Assembly or the Council as was the case in the World Economic Conference of 1927, specific proposals designed to promote economic conciliation with the available League machinery were unofficially pressed upon national statesmen by leaders in the labor, business, and peace movements. Such a proposal was urged without success upon both Briining and Laval by a high official of the I.L.O. A similar proposal to bring the question before the Council of the League with the possibility of the United States participating as an observer, and a proposal for a "second peace conference" called by the United States to promote the economic reconstruction through an international approach to debts, reparations, and the depression, were rejected on one ground or another largely at the instigation of French economic nationalists. The most promising

Sabotage of Parliament

359

of these plans, however, involved an entirely new démarche toward economic reform, starting with Central European reconstruction. Both Austria and Hungary, due to the failure of Anschluss, had been thrown back upon another resort to League financial supervision. Under these circumstances a plan was developed which provided for the broadening of League financial supervision to include the promotion of commercial treaties. This plan, known in the League secretariat as the Davis-Shotwell plan, was drawn along the following lines: League supervision should take the form of two committees under a single chairman whose duty it should be, as agent of the League's financial committee, to provide for the restoration of credit. The chairman's task, however, would involve the negotiation of commercial treaties which alone could provide the means for sound financial reconstruction. The League agent's authority as chairman of the finances of both countries would naturally put him in a strong position for negotiating with other governments. The plan was, in essence, an approach to the old problem of Central European economic disarmament which had grown naturally out of earlier efforts in this direction by Shotwell and the Carnegie Endowment. During the summer of 1931 Shotwell, in conversations with officials in Austria, Hungary, and Czechoslovakia, had at last won the good will of these governments for such a program of tariff reform. The support of President Masaryk and Benes was especially notable as indicating the possibility of a complete reorientation of Czechoslovakian policy toward Hungary. During the autumn of 1931 the Shotwell plan, under the expert guidance of Norman Davis, then the American member of the League Financial Committee, was, over French opposition, successfully put through the preliminary stages of League procedure. It was never put into effect, however, due not to the Danubian countries or the League, but to the economic rivalries of the great powers who had turned their backs on the Geneva system that they might freely apply the techniques of colonial imperialism to the center of Europe. In Great Britain the same forces of international crisis overturned the British labor government, necessitated the abandonment of the gold standard, and imposed the discipline of a national government dominated by conservatives. The members of the British Labour party, broken in ranks, were forced to retire from the international scene

360

Sabotage of Parliament

leaving their gallant leader, Arthur Henderson, deprived in the general election of even his seat in the House of Commons, to carry on at Geneva to the bitter end as the president of the ill-fated Disarmament Conference. And while in Europe economic nationalism swept from country to country, Japanese nationalism suddenly broke over Asia in the first major revolution against the League system. Where German liberalism had failed Japanese imperialism, fully panoplied in the most modern armaments, was boldly successful. Anschluss sounded the end of German liberalism. Mukden opened a spectacular chapter in the dynamic history of Asiatic empire. While Geneva discussed disarmament and security Japanese troops were steadily moving in Asia. Throughout the early months of 1932 international parliamentarianism at Geneva, in a double-barreled world parliament known one day as the Disarmament Conference and the next as the Special Assembly of the League of Nations, successively debated and tried the well-worn question of security which had become the inevitable line of demarkation between the party of the haves and the party of the have-nots. The Disarmament Conference debated the various academic proposals for the organization of the peace. The Special Assembly slowly and cumbrously operated the peace machinery. Neither body attempted to deal with the essential problem of change and how it can be most effectively and peacefully accomplished. The dominant military powers were not interested in change but in its reverse—security for the status quo. This kind of security was not obtainable through parliamentary processes. It meant the unconditional surrender of the party of the have-nots to the party of the haves. It meant in effect the renunciation of the right to revolt against the status quo, a right guaranteed by the Geneva system. This sort of security could only be obtained by recourse to power politics. Liberal internationalism called for the development of a system of peaceful change through international cooperation which would ease economic distress in the pressure centers of the world. It involved a world economic settlement including war debts and tariffs. It meant the long-dreamed world economic conference. For this conference neither France nor the United States was ready in the winter of 1932. American cooperation with the League was confined first to the effort to assist in the enforcement of peace culminating in the Stimson doc-

Sabotage of Parliament

361

trine of nonrecognition of violent change brought about in defiance of the Briand-Kellogg pact and second to attempting to secure general land disarmament. Although the possibility of war debt revision was occasionally brought out by American spokesmen and dangled rather vaguely before European eyes as the eventual American thank offering to a disarmed Europe, nothing definite was proposed by the government of the United States in any way affecting American vested interests in the status quo. Tardieu, the Davis-Shotwell plan for League action having been successfully shelved, in February made a determined effort to set up under French influence a Danubian economic union excluding Austria's two best customers, Germany and Italy. Like its predecessors, this French-sponsored Central European economic union came to nought against the opposition of the excluded powers. The Tardieu proposal for a Danubian economic union under French patronage, standstill financial agreements, central bankers' meetings at Basle, these were the meager fruits of international economic cooperation brought forth in the winter of 1932. As the Hoover year waned, the general economic siege grew tighter. T o the vexatious system of tariff barriers had been added the still more vexatious system of exchange restriction and control which had followed the widespread abandonment of the gold standard. As the siege progressed the vulnerability of the leading gold standard powers, the United States and France, became increasingly evident. There were signs that these wealthy bourgeois republics were in no better condition than their weaker neighbors to withstand a prolonged economic siege. Economic war demanded a complete reorganization of quasi laissez-faire economies. The pressure of distress, no matter how great the sum total of natural wealth, forced the middle classes and workers in France and America toward a more active concern in government, particularly those functions of government affecting the distribution of wealth. This movement predetermined the trend of politics in the dominant gold countries. At this moment of choice between the alternatives of peace or war, of conciliation or hard-fisted defense of the status quo, of international cooperation or stern national regimentation, the haves of the international community must decide either to conciliate their impoverished neighbors or to suffer the inconvenience of drastic reorganization. During this period of reexamination of public policy,

362

Sabotage of Parliament

the initiative is with that section of the state which bases public policy upon the cooperative functions of government in which the many may participate as distinguished from those disciplinary functions of government arrogated to the few. At this moment a broader base for international negotiations is reached. This is the phase of the political cycle entered by the French people in April 1932 and by the American people one year later. And so it transpired that as liberals were being cast out of Germany, their opposites of the center and left were winning in France. On May 30, Briining's resignation brought German liberalism to an end. Five days later Herriot, at the head of a liberal coalition, took control of the Quai d'Orsay. In July Herriot initialed at Lausanne a liberal resettlement of the reparations bill. Briining was not present to receive it. This liberal present of the Lausanne reparations settlement from the French center and left went to the German nationalist, Von Papen. French liberalism had arrived too late to save the Second Reich. Nor were the liberal elements in the overwhelming American majority which in Washington overturned the Republican protectionist regime in its twelfth year of sufficient strength or intelligence to reverse the nationalist trade and war debt policies of its predecessor. In fact, the liberal democratic program of international economic cooperation was made secondary to a nationalistic program of American recovery— with or without world cooperation. So far had the American pendulum swung toward economic catastrophe that liberalism in America, as represented by the political heirs of Jefferson and Wilson, felt impelled to accept the gauge of battle in international affairs, both economic and financial, and to attempt a national victory over the world depression through the enforcement of a national economic program. American liberalism came into power in scenes reminiscent of wartime. And the most powerful capitalist system in the world was with great energy and skill mobilized to fight human distress at home. This tremendous national enterprise, conceived to meet an overwhelming national emergency, rapidly assumed the proportions of an experiment in economic nationalism of grave economic consequence to other nations. President Roosevelt did not see fit to unite with the retiring President, Hoover, in a dramatic effort to extend the new deal to the war debts. The great exponent of French liberalism, Herriot, who had

Sabotage of Parliament

363

so rcccntly led the French parties of the left in the overthrow of Tardieu nationalism, was permitted to perish among his own people for his liberal international principles on the duty of France to make the December war debt payment to the United States. And with the adoption of unilateral action in the voluntary American devaluation of the dollar without previous international agreement, New Deal nationalism appeared to be determined to rebuild national prosperity along the lines of the corporative state in a seal-tight American economy protected from international contamination by the Hawley-Smoot tariff and a fighting currency exchange fund. The international repercussions of the first years of the American New Deal resulted in the intensification of the general economic war.

C H A P T E R

XXXII

T h e Breakdown: A Proposal for Economic Peace and Its Rejection

I

N T H I S atmosphere the long-heralded economic conference assembled in London in June of 1933. It was preceded by a few days by the I.C.C. congress at Vienna which had succeeded, after prolonged study and consultation, in reconciling clashing interests in the adoption of a program of constructive international action for the forthcoming world conference. 1 In a document which deserves a place in the history of international economic cooperation, the I.C.C. gave "wholehearted endorsement" to the report of the preparatory commission of experts of the world monetary and economic conference known as the draft annotated agenda and offered "to place the massed opinion of its members in all quarters of the globe at the service of the World Conference." Like its predecessor, the I.C.C. Trade Barriers report to the World Economic Conference of 1927, this report pulled the veil of ambiguities from policies which were being hesitatingly enunciated by national politicians, and set forth practical proposals. Principles must be asserted and re-asserted, but the conference must not stop there. International declarations and good intentions will not in the future any more than in the past, produce the degree of action which will now save the world situation. T h e conference must apply its principles by practical measures. T h e conference must check the present drift toward insolvency and intransigent economic nationalism.

A new orientation of policy was required to revive international trade and put 30,000,000 idle men into useful employment. This could be accomplished only if the members of the conference would bring themselves "to visualize the world as one economic unit." It must be recognized that "the peoples which grant them their mandates will also 1

A l l quotations in this chapter are from I.C.C., Report

ference

(London,

1933).

to the Monetary

and Economic

Con-

The Breakdown

365

have their duties and responsibilities." This was the practical moral in the opinion of the I.C.C. to be drawn from the draft annotated agenda of the experts which had been accepted as the basis for conference action. "Every phrase" of this experts' report, politicians were sternly reminded, "contains a tacit reference to the policies pursued in some one or more, or in all countries. The monetary and economic conference means reform and change otherwise it has no purpose." Governments must turn from "an intensification of those national endeavors to contract out of the crisis by emergency measures which only serve in the long run to accentuate the general depression." An end must be made of present tendencies and conditions. The division of the world into small units at economic war with one another; their striving after self-sufficiency; the growth of tariffs and all manner of new obstructions to trade; the general refusal to accept payments of debts in goods and services; all this could only mean starvation for many and a lower standard of living for the rest. The report elaborated an international policy upon the crucial questions at issue: currency instability, disarmament, war debts, and tariffs. Taking as its text the recommendations of the preparatory commission, the report proceeded with a terse endorsement of the commission's plan of action for the conference, item by item. This section of the report concluded with the advocacy of the significant proposal of the I.C.C. to establish "an international currency stabilization fund and an urgent appeal for immediate de facto stabilization and a return, at the earliest possible moment, to a regime of stable foreign exchange .

M

rates. Under a section of the report dealing with prices a brief analysis of the essential factors controlling prices was presented with the succinct observation that "the I.C.C., however, has not been able to conceive how such an improvement [in prices of primary commodities] can be brought about by measures which are solely monetary in character." In a section devoted to a concise statement of the problems involved in any resumption of the movements of capital, the report put foremost necessary debt readjustment, both public and private. In order that the sanctity of contracts might be preserved it was necessary that creditors and debtors assume responsibilities commensurate with the international importance of this problem. In this connection creditor countries

366

The Breakdown

had "a peculiar responsibility to frame their economic policies so as to permit the fulfillment of debt obligations in goods and services." A s to the actual machinery of necessary debt readjustment, the report suggested a continuation of efforts successfully begun along these lines by "The Council of Foreign Bondholders, The League Loans Committee and various European Associations of bondholders supplemented if necessary by adoption of the Preparatory Commission's suggestion of a list of competent mediators." All international efforts in the direction of the promotion of the resumption of capital movements should be facilitated by creation of accurate investment statistics through central bank collaboration with the League of Nations or the Bank for International Settlements. And the dangerous preponderance of short-term financing must be altered by "conversion into long term or medium term obligation" of "at least a portion" of existing short-term indebtedness. The climax of the I.C.C.'s report, as in 1927, is reached in the sections dealing with international trade, which presented a severe indictment of governmental trade policies. Although a standstill agreement on this subject should be immediately undertaken, "such a temporary standstill agreement must not be taken as an excuse for delaying the essential task of removing such barriers altogether." Under the heading of tariff and treaty policy the report proceeds with a brief but comprehensive analysis of the factors controlling prevailing commercial policies and the possible modes of action available to the conference to initiate general reform. The chief factors promoting tariff increases—the increase in import pressure of quantities of goods and services due to war debts and postwar debts to a volume greater than creditor countries were prepared to receive, war-inflated capacity of industrial and agricultural production, postwar break-up of large economic units into small economic units aspiring to self-sufficiency, tariff retaliation, the upward influence of tariff-protected internal prices upon tariff schedules in response to internal pressure to maintain the margin of protection—all required that "the monetary and economic conference must discover incentives which would counteract these impulses." The mere voting of general resolutions advocating a wider liberty of trade and a reduction of tariffs had been proved inadequate and inoperative.

The Breakdown

367

As to the ancient subject of technical discrimination, against which the I.C.C. had fought many a dreary campaign, the report continued with some feeling: It is still regrettably necessary to repeat and to emphasize certain principles of equity and good conduct in the matter of tariff treatment and commercial policy. Tariffs should be simple. Tariff classification should be uniform. Tariffs should be stable, and commercial treaties should be more durable. Discrimination open or concealed should be avoided. Herein lies the great value of the unconditional most-favored-nation clause. This value is too often lost through violation of the spirit of the clause if not its letter.

Getting down to the details of proposed methods of concerted tariff reduction, the report took up possible methods of action, and on the basis of the far-reaching investigation of its world business committees weighs objectively the practical possibilities of these proposals. The numerous methods of reduction—including mechanical and automatic steps (reduction by fixed percentages on a single occasion or progressive proportionate reductions), the reduction of all tariffs to an agreed minimum, the limitation to an agreed maximum, and open negotiations and bargainings—all, as the report pointed out, might be attempted separately or together in bilateral or multilateral negotiations, irrespective of whether the conditional or unconditional most-favorednation clause is the basis of treaty relations. And the subjects covered might vary from the whole of national tariffs to groups or categories of commodities. Of these methods the report made the following concise practical working observations: It is necessary to stress the fact that the utility of the so-called mechanical procedure has been tested in practice. T h e famous Cobden Treaty of i860 gives a successful example of the tariff maximum, whilst the recent Pact of Ouchy shows how to combine a reduction by percentages with a tariff minimum. T h e reduction of tariffs by autonomous action on the part of governments is a rare occurrence. Reduction by bilateral negotiation is always a possibility. It is to be hoped that this method, which in prewar times gave satisfactory results, will be found useful in the near future.

Many quarters considered the unconditional most-favored-nation clause a handicap to such a solution. The conference must first "test the possibilities of tariff reduction by

368

The Breakdown

general agreement." " A major obstacle" to success in this direction lies in "the wide divergencies of existing tariff levels, standards of living, differences which have recently been accentuated by currency depreciation." "Failing the general reduction of tariffs" there was the possibility of "collective agreements between groups of governments" stimulated particularly in Europe by the natural trend toward large-scale organization of production despite economic nationalism. The recently concluded pacts of Ouchy and of Oslo offered the conference interesting and constructive experiments along these lines. It was significant that the Pact of Ouchy was limited in scope because the particular method of tariff reduction employed was "attractive only to countries which have considerable affinities" in tariff levels and systems, and that "the provisions of the Pact of Oslo bound the contracting parties not to increase their tariffs without consulting each other." "These considerations prove the necessity, in certain cases, of combining the various methods mentioned above." A s to the difficulty offered to bilateral negotiation by the unconditional most-favored-nation clause, the report offered the following wise guidance, based upon thorough investigation of world business opinion through the medium of the national committees of the I.C.C.: "In the opinion of the majority, the clause should remain the foundation of international treaty relations." " A considerable proportion of the national committees of the I.C.C. are in favor of courageous experimentation" in the direction of "modifying or limiting the operation of the clause in order to render practicable the formation of economic groupings." Multilateral agreements along the line "should be based on the following principles: such agreements should be free from aggressive intention toward nonparticipating countries and should not hamper trade with such countries"; such agreements should embody "the adhesion clause" rendering them open to the signature of any country, and the equity clause generalizing the benefits to all states fulfilling the obligations of the pact without formal adhesion, and should operate on a long-term basis. On the highly delicate subject of the legality of such agreements

The Breakdown

369

under existing treaty obligations imposed by the most-favored-nation clause the report made the following observations: T h e respect of the I.C.C. for the sacredness of contractual obligations, both public and private, leads it to recognize that unless suitable reservations exist in commercial treaties concluded with such third states, they are legally justified in availing themselves of their rights under the clause.

In this dilemma the report suggested negotiations with third states on the basis of moderate import duties at the external frontier of a union formed for the clear purpose, to quote the economic committee of the League of Nations, "of aiming at the improvement of economic relations between peoples" rather than particular ends for certain countries. Third states enjoying most-favored-nation benefits under such circumstances should have no reason to consider a proposal to modify the original contractual relationship as "an unfriendly act, and while their desire to avail themselves of their rights is legitimate they should avoid making any excessive claim to them. The I.C.C. sincerely hopes that this will be the case." If this method should prove impractical there would remain the possibility of the conference drafting "an international convention binding the contracting parties to interpret the most-favored-nation clause of their bilateral treaties as not obstructing the application of multilateral agreements concluded in the spirit described above." T h e final section of the report, dealing with the organization of production and trade, strongly advocated constructive action looking toward national and international agreements in the field of production of primary commodities. The section concluded with a discussion of the economic position of that industry which is so peculiarly dependent upon international trade—the transport industry. The delegates were directed to consider in particular this industry: "the monetary and economic conference will find an incentive to constructive action if it studies the great amount of capital which has been invested in transport, and which is now endangered, with most detrimental effects on the volume of employment." The conference was advised of the I.C.C. study, then in progress on the international aspects of the coordination of the various forms of transport, of which a report would shortly be published. The report ended with a stern reminder of the failure of

370

The Breakdown

governments to carry out agreements made at the Fourth Communications and Transit Conference of the League of Nations in response to a report compiled by the I.C.C. relative to ( a ) flag discrimination, (b) customs and consular difficulties, and (c) sanitary regulations: T h e delegates of member governments of the League of Nations represented at the conference agreed in recognizing the harmfulness of these measures. Representation to the governments concerned was contemplated and also negotiations with a view to the substitution of other measures which would be less troublesome in practice than those now in force, safeguarding at the same time the public interests involved. N o representations were made to governments, however, nor were negotiations started.

T h e situation, in the opinion of the I.C.C., demanded "the permanent organization of direct conversations between the representatives of the technical services of the different governments and the duly authorized representatives of the economic circles concerned." In conclusion the conference was notified that the I.C.C. had "also compiled a report on barriers to air traffic" and that this report had been forwarded by the national committees of the I.C.C. to their respective governments. This is not the place for the analysis of what took place in the confused debates of the London Economic Conference. We are concerned here only with the fact that organized world business was prepared to take the floor of the conference and wage aggressive war upon economic nationalism and that the opportunity was denied it. T h e same statement might have been made of the I.C.C. report of 1933 which was made of the trade barriers report of 1927 by the head of the Economic Section of the League of Nations, Sir Arthur Salter.2 Like its predecessor, "the outcome of consultations and discussions by national committees in many parts of the world followed by a close examination by the central authority of the I.C.C.," it provided the "very wide range" view of world economic problems necessary to intelligent action by any world conference. It was "a picture of trade barriers as seen by those who have daily experience of their consequences." A n d it included "(indeed consisted of) specific recommendations and proposals." All that had been said of the weight of the influence of an international delegation of ' League of Nations, International Economic Conference, ference (May, 1927), C. E. I. 40 ( 1 ) , p. 6.

Guide to the Documents of the Con-

The Breakdown

371

distinguished business leaders at the World Economic Conference of 1927 and at every League economic or financial or technical conference up to this date—all this and much more might have been said and was said privately to the officials of the conference by I.C.C. spokesmen in behalf of the active participation of an I.C.C. delegation at the London conference. The I.C.C. was ready to put into the committees and on the floor of the conference a delegation of unquestioned authority in the world of business, a delegation prepared to fight for the Vienna congress plan of world economic peace against the interference of national politicians. There never was a moment more urgent for the adjournment of national politics. Here, if ever, was the time for a Dawes or a Young business committee. The world monetary and economic conference of 1933 might, by economic disarmament, have at last laid the enduring foundations of a disarmed peace. Disarmament, economic or military, ranked far second to national economic plans in the minds of the statesmen who controlled the destinies of this world conference. The national state was determined to warp business into the politically predetermined pattern of supposed national interests rather than to assist business peacefully to form a natural world economic pattern in conformity with the primary interests of world prosperity and peace. National statesmen appeared to be under the delusion that world economic peace could be made by patching together predetermined national economic plans at an international conference. What happened at London in July of 1933 was not an international economic conference. It was a world conference of the economic general staffs of national states. And the absurdity of the entire enterprise was apparent when the hopelessness of the proceedings forced the president of the conference, after two weeks of wrangling, to proclaim that this assembly of plenipotentiary delegates of sovereign states was not an executive conference at all. After that it was no longer a conference but a discussion—a general staff discussion. Internationalism never got beyond the threshold of the world monetary and economic conference of 1933. It was left waiting on the doorstep at London with the nonpolitical committee of business men from the I.C.C. and their program for international economic peacemaking. The politics of nationalism barred the way to world economic cooperation. Business influence at London was limited to the participation of the

372

The Breakdown

financial experts from the Bank for International Settlements and the negotiation outside the conference of the international agreement on wheat. There were too many officials from sovereign states at this conference to permit the seating of a modest committee of business men such as that to which national governments had been compelled by world business opinion to bow ten years previous. What happened at London was a complete breakdown of a political conference on economic issues. This was no breakdown of the Geneva system. It was a breakdown of the Versailles system of economic peacemaking by nationalist politicians. The Geneva system of internationalism, based upon the techniques of international policy-forming and international action as exemplified at the World Economic Conference of 1927 and in the Dawes and Young committees by the interpénétration of extranational and extragovernmental forces, such as the I.L.O., the I.C.C., and the International Institute of Agriculture, into the sphere of international action, was given no trial at the London conference. This type of internationalism has never been put to the test in an executive conference on major international questions of nontechnical policy. Its trial would, of necessity, predicate a philosophy of nationalism at striking variance with that prevailing even among national liberals in 1933. Such an internationalism would presuppose the willingness of national politicians to cooperate to the full and if necessary at personal sacrifice with international institutions to formulate and implement international policy. It would have meant the implicit acknowledgment of the national statesmen gathered at London that the interests of national constituencies must be considered as a part and only a part of a broader world constituency. Such a decision by statesmen in 1933 would have marked the consummation of an evolutionary movement in international organization which had been steadily developing since the war. It would have signified the determination of statesmen to apply the principles of liberal parliamentarianism in more than a half-hearted manner to international politics. As it was, the world monetary and economic conference adjourned in the summer of 1933 in complete impotence to formulate international policy. The significance of breakdowns in the sphere of foreign policy is more difficult to estimate than that of ordinary political breakdowns, due to the multiplicity and vast spread of the affected interests. Common

The Breakdown

373

action having collapsed, the parties resume their individual freedom of action. The failure of collective action foreshadows self-help, with or without mutual consent. The Genoa conference breakdown presaged the disastrous conflict of the Ruhr. But the Geneva system was hardly formed in 1922 and the new Fascist nationalism of revolt yet in the pangs of birth. The Genoa disaster quickly faded in the light of collective action under the Dawes regime. The failure of nationalism at Genoa and in the Ruhr was speedily eclipsed by the triumph of the new parliamentarianism in international affairs. Genoa was a disaster the true significance of which could not be written before the fall of the Second Reich. But the breakdown of the World Economic Conference of 1933, measured by the chain of disasters which have followed in its immediate wake of economic distress, must go down in history as a major catastrophe of modern times. It was in London that the stage was set for the final breakdown of the Disarmament Conference at Geneva a year later. While nationalists postponed the hour of decision on world economic reform, the Geneva system, with the definite collapse of the international regimes of economics and finance, became a vacuum. International parliamentarianism had been operating on the assumption of a slowly but steadily evolving regime of international cooperation in world affairs. The death blow to this confidence was struck by economic nationalists at London, where it was publicly and dramatically shown that the substance of things hoped for at Geneva was false. The day of military economics had arrived.

CHAPTER

XXXIII

World Business Opinion and the N e w Statesmanship of Reform

T

H E breakdown at Geneva threatens the survival of all international organizations designed to promote by opinion leadership peaceful change within an international regime of law. Organizations for finding facts and molding opinions are dependent first and last not only upon absolute freedom from political interference in the exercise of their essential functions, but also upon a stable yet flexible political authority which is itself sensitive to an informed public opinion. The survival of international organizations with those functions is, in fact, dependent upon the same factors that determine the maintenance of kindred organizations in the national and local sphere. A return to the ad hoc conferences of the prewar concert of powers would relegate the I.C.C. and the I.L.O. to the limited orbit of the prewar International Congress of Chambers of Commerce and the Universal Postal Union. Such a return to prewar conceptions of international relations would not, however, stop with prewar nationalism. The war carried politico-economic relations beyond the possibility of prewar laissez-faire national policy. The necessary limitations of the type of economic nationalist state able to survive in a world of military competition inevitably jeopardize the survival anywhere of independent fact-finding and opinion-forming institutional life. The Geneva breakdown has in fact been swiftly followed in the national sphere by the reestablishment of a wartime partnership between government and business. The forces creating this partnership have today predetermined the destructive mold into which this politicoeconomic relationship will fall. The creative forces to which independent organs of investigation and opinion give constructive form are being smothered by destructive forces. These forces are entirely outside

Business and Reform

375

the orbit of the control of those governments whose destinies they determine. With the utter collapse of the disarmament sections of the peace treaties and of the Washington naval agreements, the national state definitely lost all semblance of control of the international armaments regime which sets the figures for the largest item on national budgets. These figures are now set in the open competition of the world armaments markets by competitive bidding. A great industrial boom motivated by human fear now dominates the markets of the world. The postwar reconstruction boom, dominated by war losses and war profits, reached the maximum high in 1929 and terminated in the world depression. It is a sinister fact that recovery from the postwar depression is being dominated as we round the economic cycle in 1938 not by the cooperative forces of peaceful change and progress, but by the coercive forces of human destruction. It is impossible to escape the terrible implications of the fact that twenty years after rocking the earth in the most gigantic and most destructive conflict of men and machines ever conceived, a highly integrated industrial civilization which has sought its moral justification in the idealism of individualism and humanitarianism has proved completely powerless to promote industrial expansion on the basis of other than human destruction. World capitalism, its economic system still tainted with billions of unliquidated war debts, has turned afresh its energies to the printing of new billions of this worthless commercial paper mortgaged to plant and equipment, the value of which is computable solely in the index figures of material destruction and of human suffering. The present armaments boom is due to reach the new high of armaments prosperity only when this plant assumes active operations. And when this phase of the boom is reached, if not before, the partnership between business and government will inevitably assume the most inflexible form of the military business state. N o continent and no nation was able to claim immunity from the effects of the postwar boom. And no continent and no nation will be in a position to claim immunity from the effects of the present-day frenzied armaments boom. There is no escaping the fact that influences controlling national capitalism are essentially international. These systems are today traveling rapidly down national highways to a dead end—the frontier. Circumstances

376

Business and Reform

have combined to underscore with devastating reality the great issues represented by the lost causes of the postwar era—causes for which the I.C.C. and the I.L.O. have fought seemingly in vain. Great public issues have never been more clearly drawn in history than today. In 1927 these issues were before leading business men at the first world economic conference. In 1933 the same issues were before national statesmen at the London conference. Today the choice is being put to all business men in the dramatic course of world events. Economic groups—big business, little business, the farmer, labor, the consumer—are being forced by grim circumstances to face issues proclaimed at Geneva throughout the two postwar decades. The choice simplified by present calamities is now unmistakable: national regimentation or international cooperation; national military economics or international economics. Today the nature and extent of the armaments regime which dominates modern industrial civilization is far better and more generally understood than, for example, were the nature and extent of those forces animating the ancient regime in the eighteenth century. The fundamental error of attempting to overthrow the crushing regime of world armaments by appeals to a vague utilitarianism and by mass pacifism in a separate emotional tour de force apart from the overthrow of the economic nationalism of which armaments are the most destructive manifestation has been made plain. This type of disarmament campaign has been played to its bitter end. It has been proved that national armaments are inseparable from the material substance of the competitive nationalist regime which they defend. On the other hand, modern armaments and the present competitive situation are rapidly making the cost of national sovereignty in taxation prohibitive at the present standard of living. The cost of this cherished right of national states to substitute a feudal defiance for what the author of the first declaration of national independence, Thomas Jefferson, was pleased to call "a decent respect for the opinion of mankind" is everywhere registered in rising budget totals. Like those institutions of a decadent feudal society which survived in the ancient regime to the closing years of the eighteenth century, national sovereignty today takes its toll from the merchant, the manufacturer, the laborer, and the farmer. From all who

Business and Reform

377

contribute to the constructive enterprise of raising the standard of human life by the production and distribution of wealth, sovereignty exacts an onerous feudal levy to arm the borders of the national domain. A rising bourgeois at the close of the eighteenth century, awakened by the cost of an outworn system of government which was unable to reform the budget, overthrew the ancient regime and abolished the feudal dues. The revolutions which followed the breakdown of feudalism and ushered in modern times, however, did not consist in the spectacular episodes of violent liberation, but rather in those manifold changes in the structure of society which signified the substitution of new things for old. The real revolution was accomplished when enterprising merchants, after a century of enlightened criticism, broke through the tottering defenses of feudal waste and incompetence, and step by step replaced the outworn institutions of a violent past with new social and economic forms adapted to the more cooperative type of society which was already in being. Who can deny that today, a century later, the outworn institutions of national sovereignty constitute as menacing a burden upon the new industrial society of the twentieth century as that imposed by eighteenth-century feudalism upon an era awakened to its inner potentialities in the "Englightenment" ? Can modern business men, emulating the merchants of the eighteenth century, break through the feudal armaments regime of national sovereignty and reform the national budget? Like the revolutionary movements which liberated the capitalism of the eighteenth century, the present-day attack upon the old regime of armaments consists in a concerted offensive by all progressives upon those surviving institutions of an out-dated national sovereignty—the economic and the military frontier. As foreign trade smashed the guilds of the medieval city, so international trade, if the feudal control of the national frontier is broken, will today transform limited national economies into productive members of the larger family of nations. Between modern capitalism and the realization of this objective stand those national frontiers which form the feudal defenses of the privileged members of the society of nations. It is this feudal prerogative of the modern state which has been rendered no longer defensible without the destruction of modern civilization. The abolition of trade barriers can no longer be con-

378

Business and Reform

sidered as merely a helpful circumstance contributing to the peace of nations. Trade barriers are today revealed as the substance of the military regime of a feudal national sovereignty. Economic disarmament is the crux of military disarmament. It has become evident that capitalism can only break through the armaments regime at this point. A n d it is obvious that this break cannot be accomplished by violent frontal attack upon economic sovereignty. It must be brought about by the substitution of international cooperation for isolated national action. International machinery of adjustment must be provided which is cheaper and more effective to operate than the machinery of national force. Events have rendered obsolete the philosophy of a static international political world divided in perpetuo into national feudatories under the rigid control of the privileged haves as against the have-nots of the society of nations. It is at last generally recognized that it is necessary to accept the well-established fact of the inevitability of change as an essential element in human progress, and that it is the part of wisdom to employ for the control and guidance of change the same technique utilized within the liberal constitutional state. T h e constitutional state, in so far as it continues to function as a working institution, is a demonstration of the truth that change cannot be prohibited by force, but can be directed by intelligence. T h e disastrous results of attempts to attain disarmament by the guarantee of a static world order are before us. Social distress destined to eventuate in mass violence and war is the natural revolt against an unreformed international social order. It follows that war starts not with the actual outbreak of hostilities but with the diversion of labor and materials from constructive enterprise to arm property interests in the status quo—whether it be American neutrality or the safety of world empire. Is it possible for national economic groups to be withdrawn altogether from the unholy alliance with national armaments? Can business be brought to renounce militarism as an instrument of economic policy? If this is to be accomplished, constructive machinery of peaceful change must be erected which can successfully compete with those destructive processes of feudal change that are perpetuated to modern times in the war system. The products of human violence and misery must be driven from the markets of the world by the products of peace.

Business and Reform

379

This enterprise can be the undertaking of no one sect. It belongs to no "ism." If modern civilization is to be saved in this late year of armaments, it can be saved only by the combined effort of all who believe in the works of peace. There must be a united front formed by business men for the overthrow of the old regime of armaments. The times demand a new, a broader, a more resolute, a more concerted and better organized démarche than any so far attempted to reform international affairs. This world reform movement should mark the gathering in of the various enterprises and activities which have been operating in different spheres since the war in furtherance of international cooperation and world peace. Such a movement was actually inaugurated by a private international conference of prominent citizens of high national and international repute held at Chatham House, London, March 5-7, 1935, under the auspices of the Carnegie Endowment for International Peace for the purpose of discussing, as stated in the invitation, steps to be taken to restore confidence by promotion of trade and reduction of unemployment, stabilization of national monetary systems and better organization of the family of nations to give security and to strengthen the foundations on which international peace must rest. 1

The conference, which included representatives from Belguim, France, Germany, Holland, Italy, Norway, Sweden, Great Britain, Canada, and the United States, gave a broad consideration to the three sets of problems outlined in the invitation. The discussions took place under the chairmanship of the Marquess of Crewe, J. A. Spender, and Sir Austen Chamberlain. After a frank and confidential exchange of views, the conference recommended that the governments of the United States and Great Britain initiate action directed toward the adoption of "measures to enable the debtor nations to meet their obligations in goods and services," endorsed projects for low-tariff unions on the model of the Ouchy convention, and called attention to the multilateral economic treaty and especially the most-favorednation clause therein, drafted at Montevideo. It advocated provisional monetary stabilization, general strengthening of the habit of consultation between nations on equal terms, thorough strengthening of the League, building of the habit of the judicial settlement of 1

Carnegie Endowment for International Peace, Chatham House

Conference.

380

Business and Reform

international disputes, and checking the constant growth of armaments. It advocated also the adoption of steps to increase the effectiveness of the Pact of Paris, recognition of the fact "that continuous consultation is the best safeguard against war" and that economic measures could or would be effective if virtually universal, rendering military measures unnecessary, and, finally, international cooperation to raise the standard of living and to solve social problems along the lines undertaken by the I.L.O. The recommendations concluded with a significant resolution calling for the initiation of a joint investigation by the Carnegie Endowment and the I.C.C. through the institution of a competent commission to make a comprehensive and exhaustive survey and study of international economic relations in all of their aspects, to the end that a better understanding of these relations by the peoples of the world may be promoted and the cause of economic stability and progress furthered. 2

This recommendation was acted upon favorably by the council of the I.C.C. and the trustees of the Carnegie Endowment. And at the large Paris congress of the I.C.C. held in June, 1935, the position of the I.C.C. upon monetary stabilization and trade barriers was reaffirmed and the Chatham House project for joint action by the Carnegie Endowment and the I.C.C. in placing the problems of world economic peace in the hands of a commission of experts of internationally recognized authority for thorough investigation and report was enthusiastically adopted. On November 16, 1935, the joint committee of the I.C.C. and the Carnegie Endowment for International Peace initiated the investigation at a full meeting of the committee at the I.C.C. headquarters in Paris. The committee included representative business leaders from the Netherlands, Great Britain, France, Poland, Germany, Belgium, Japan, Italy, Sweden, Switzerland, and the United States, among whom were Thomas J. Watson, head of the American committee of the I.C.C., and James T. Shotwell, representing the Carnegie Endowment. In the list of distinguished experts and business leaders were such well-known names as Charles Rist of the University of Paris and the Bank of France, T . E. Gregory of London University, Jacobsson of *ibid.

Business and Reform

381

the Bank for International Settlements, Owen Jones of the I.C.C., Sir Alan Anderson of Great Britain, René P. Duchemin of France, A . E. Janssen of Belgium (formerly of the Dawes committee), and Ernst Trendelenburg of

Germany. T h e committee succeeded

in

reconciling the divergent views regarding the priority in importance of the questions of monetary stabilization and tariffs held respectively by the gold block countries and the sterling and American group. A t the suggestion of Shotwell, it was decided to pursue both investigations concurrently and to accord to both problems a broad consideration as a part of the larger problem of world restoration, and to plan the work of the committee so that it could be coordinated with any other work being carried out by competent bodies in such a way as to prevent duplication. In this connection he suggested the study on raw materials now being conducted by the International Studies Conference and the health studies now being carried out by the I.L.O. and the League of Nations. The program of work which the Committee of Experts agreed upon covered a wide range of technical discussion in both monetary stabilization and the improvement of commercial relations. Their monographs were finally published in two volumes which were distributed by the International Chamber of Commerce. The list of studies incorporated in the two volumes is as follows: Monographs on the Improvement of Commercial Relations between Nations : T h e technological long-term factors in the reduction of the volume of overseas trade: Professor Eugen Boehler (Zurich) T h e fundamental reasons for increased protectionism: Professor Lionel Robbins (London) T h e technique of protectionism : D r . Leo Pasvolsky (Washington) and Professor Jacob Viner (Chicago) T h e road to recovery: Dr. Pasvolsky, Professor Andreas Predóhl ( K i e l ) , and Professor Charles Rist (Paris) Monographs on Monetary Stabilization : PART I. THE SIGNIFICANCE OF STABILIZATION

1. T h e relationship between currency instability and tariff (and allied) changes: Professor Predòhl 2. N e w technical arguments for postponing stabilization: memoranda by

382

Business a n d R e f o r m

3. 4.

5. 6.

Professor T . E. Gregory, Dr. H . D . Henderson (London), and Professor Ludvig von Mises (Vienna) Exchange stabilization and the problem of internal planning: memoranda by Professor Boehler and Professor von Mises The position of individual countries or groups of countries: Dr. Pasvolsky on the United States; Dr. Antonin Bäsch (Prague) on Czechoslovakia; Professor Gregory on the sterling area; Professor Rist on the gold bloc; Professor Predöhl on the countries practising exchange control The possibilities of the sterling area: Professor Gregory The technique of the forward exchange market and the elimination of uncertainty: Mr. A . A . van Sandick (Rotterdam) PART n . THE TECHNIQUE AND NATURE OF RE-STABILIZATION

1. 2. 3. 4. 5.

The existing price problem: Professor Gregory The gold problem: Professor Feliks Mlynarski (Poland) The cooperation of Central Banks: Professor Feliks Mlynarski The frozen credit problem in Central Europe: Dr. Antonin Bäsch International short-term indebtedness: Mr. G . Conolly (Assistant to Mr. Jacobsson, Bank for International Settlements) 6. The changes in economic structure and their repercussions on the movements of capital and balances of payments: Professor Giorgio Mortara (Milan) 7. The problem of parities: Professor Giorgio Mortara 8. Note on " A disintegrated, provisional monetary standard as a basis of stabilization": Mr. Dag Hammarskjöld (Stockholm) These memoranda were published in one volume. T h e other, which was introductory to it although prepared after the completion of the studies, contained t w o comprehensive reports, one on " T h e Problem of International Economic Reconstruction," by Bertil Ohlin, and the other on "Monetary Stabilization," by T . E . Gregory. A l o n g with it were published the statement of "Conclusions" by the experts and the "Recommendations of the Joint Committee." T h e monetary report of this committee was in the hands of the League finance committee w h e n the decision was made at Geneva to recommend concerted action toward devaluation by the gold block as a first step toward stabilization. T h e Anglo-Franco-American monetary pact growing out of improved international monetary relations evidenced by the League report enabled a liberal French government to adapt its domestic economy to the world price level without serious

Business and Reform

383

domestic or foreign repercussions. The technique of national monetary action exemplified in the action of France in 1936 forms an instructive contrast to the technique of the British and American devaluations which preceded it Concurrently with action in the monetary sphere, the French government, following the report of the economic committee of the League, initiated a parallel movement at Geneva against trade barriers. The report of the experts was accepted at a meeting of the Joint Committee of the Carnegie Endowment and the International Chamber of Commerce on August 4, 1936. After due consideration, both bodies voted to accept the Practical Recommendations of the Joint Committee, thus making it not only an analysis of the fundamental principles underlying the present world situation but, also, offering recommendations "for the serious consideration of all thinking people." The text of this important document is given in the Appendix. It is apparent that a new démarche in economic peacemaking is now under way. The united front represented by the joint action of the I.C.C. and the Carnegie Endowment, coordinated with the permanent studies committee and the I.L.O., has a broader base than any similar international movement hitherto attempted except the World Economic Conference of 1927. It marks the attainment of that cooperative relationship between the I.C.C. and the Endowment which was vigorously but unsuccessfully sponsored by Shotwell in behalf of Danubian reconstruction in the early postwar days. What a united front by world business interests and world peace interests might have accomplished in the Danubian Valley before economic nationalism became firmly entrenched, historians can only conjecture. The enterprise would seem to fall within the philosophy of the Rome resolutions, the Dawes plan, and the function of the I.C.C. in the League economic system. The formation of a united front with the peace movement represented by the Carnegie Endowment for International Peace appears to be a natural fulfillment of twenty years of effort by the I.C.C. to promote international cooperation in world economic affairs. It is too early to judge the effects of this new movement toward economic reform. The League of Nations commission on raw materials, the conference on peaceful change held in the summer of 1937

384

Business and Reform

under the auspices of the International Studies Conference (an autonomous group under the League Organization for Intellectual Cooperation), the International Labor Organization, and the Economic and Financial Committees of the League of Nations have joined with extensive research and investigation in a concerted attack upon this problem now commonly known as the problem of peaceful change. In the British empire and the United States, opinion-forming organizations such as the League of Nations Associations and in the United States, the National Peace Conference, composed of forty American peace societies, have been prominent in nation-wide educational drives devoted to the subject of international economic cooperation. T h e regular biennial congress of the I.C.C., meeting in Berlin in June of 1937, carried the economic reform movement to the capital of economic nationalism. T h e congress provided an open forum for the free discussion of all aspects of the problem of world economic reconstruction. The I.C.C. reasserted the fundamental position taken at other congresses regarding armaments, raw materials, currency relations, debts, international trade, and investment. The keynote of the conference, to quote the words of the newly elected American president, Thomas J. Watson, was "world peace through world trade." T h e congress gave a business endorsement to the type of trade program being successfully pursued by Secretary Hull and to the Tripartite Monetary Declaration. In the resolutions and discussions the trend toward bilateralism in international trade was attacked. "Governments will serve best," reads the congress resolution, " w h o can check the drift into bilateralism and restore the machinery of multilateral trade." 3 T h e congress, in the presence of Reich Chancellor Hider, heard Goering extoll the Four Year Plan and Schacht excoriate the circumstances which have produced economic nationalism. "Economic nationalism only arises when the nation's natural conditions of life have been cramped by external forces," Schacht told the conference. 4 Raw materials and the colonial question were issues frequently before the congress. The final resolution upon raw materials "I.C.C., Resolutions, Ninth Congress, Brochurc No. 98, p. 1. * World Trade, July-August, 1937, pp. 1 5 , 16.

Business and Reform

385

came out strongly for universal "access to essential foodstuffs and raw materials without discrimination."5 In the discussion on economic nationalism, James T . Shotwell, representing the Carnegie Endowment for International Peace, suggested that the I.C.C. make a new approach to the problem of trade barriers through consideration of tariffs as protection not only to capital but also to labor. Shotwell proposed that the I.C.C. should examine "the principles in virtue of which a country could encourage foreign competitors by lessening its tariffs upon articles produced in other countries under conditions of labour at least equal to and preferably better than those prevailing in its domestic market." This proposal offers an interesting possibility for a continuation of the combined efforts of the Carnegie Endowment and the I.C.C. in the formation of economic policy through the collaboration of an international committee of experts. The I.C.C., under the leadership of Thomas J. Watson, who is well known in the United States as a staunch supporter of the Hull trade policy, is taking an active part in furthering the general movement toward economic reform. Through the action of the American National Committee this new I.C.C. offensive against trade barriers has been carried to American business men with notable success. American business groups totally unfamiliar with the philosophy of tariff reform are coming to accept the view, to quote the words of Eliot Wadsworth, chairman of the American National Committee, speaking before the American Bankers Association, that America has "a surplus of raw materials and finished goods which the world wants, ample domestic markets to absorb the imports we must take in return, capital to finance the business and initiative to carry it through." 6 In the congressional hearing upon the Hull trade policy the I.C.C. came to the aid of the administration forces in the person of Harper Sibley, president of the United States Chamber of Commerce, who testified as a representative of the I.C.C. that "many countries have found in our reciprocal trade agreements program something clear-cut, concise and helpful for the solution of the world's economic ills."7 * I.C.C., Resolutions, Ninth Congress, Brochure No. 98, p. 2. * N. Y . Times, Oct. 14, 1937. ' Ibid., Jan. 27, 1937.

386

Business and Reform

There has always been a tendency on the part of students of government to underestimate the immediate practical importance of private international movements outside the orbit of governmental action. The significance of such movements has been commonly recognized as confined largely to the history of those gradual changes of a climatic character which influence the course of civilization in the long range of human development. Such was not the effect of the Cobden Movement of the nineteenth century which, starting in Manchester business circles, without the aid of standing international organizations, spread its influence rapidly over Europe and the world in the Cobden treaties of tariff reduction. As compared with the scattered civilization of the days of Cobden's triumphant reform movement, world activities today have been brought by material progress within the limits of a country village. People whom the radio and aircraft have made close neighbors would not be expected normally to confine their social, political, and economic relations to official correspondence. The nation-state system has tended to dominate the social activities of mankind. Other institutions—the church, the university, the hospital, the business corporation, agriculture, organized labor, the local community—have by material circumstances been forced into the shadow of this galaxy of omnipotent, all-inclusive national corporations, sovereign states, which have arrogated to themselves complete independence of action subject to no law but their own. But now material circumstances have changed. Will the world neighborhood created by the twentieth century, covered by a network of institutional activities which cut across all boundaries, remain passive while its entire civilization is menaced in the name of national interest? Are we to share the fate of Hellenic civilization ? The hope for escape today can at least be justified in part by the strength of nonpolitical institutions of the kind described in these pages. The fundamental principles and the necessary devices to make effective these principles lie before us today in the constructive achievements of liberal internationalism accomplished during the postwar period of trial and error at Geneva. The principles and technique of international cooperation are embodied in Central and Eastern European reconstruction, the Dawes plan, central bank cooperation, the

Business and Reform

387

World Court, the I.C.C. world business court of commercial arbitration, the host of ratified and unratified draft labor conventions promulgated by thorough investigation and international consultation at the I.L.O., and the myriad of draft conventions and constructive but politically unacceptable recommendations from the finance, economic, and transit sections of the League of Nations, the International Institute of Agriculture, and the I.C.C. This practical work by international institutions is strong enough to stand unsupported by armaments on the basis of common interest and merit alone. The effectiveness of this work designed for healing the distress of the world has been prevented by a single destructive institution—the sovereign as distinguished from the welfare state. From the national side, the problem resolves itself into the question : can sovereignty be curbed by liberal international institutions? Can acts of sovereignty be qualified by provision to substitute international cooperation in such a way as to bring into play the healing function of liberal institutions? Or, viewing the problem from the international standpoint, can a world parliamentary system be made to work? Is it possible to adapt the parliamentary system to modern international conditions ? Within the area of national sovereignty the motive force of parliamentary action springs from opinion-forming institutions which give a tangible social expression to individual thought and emotion. This philosophy, as we have seen, League leaders attempted to apply at Geneva in the recognition accorded to unofficial representatives and organizations at League expert conferences. The device has been extended to executive conferences in the field of technical cooperation, in particular in the recognition of the I.C.C. It was attended with marked success, as we have seen, at the International Customs Conference in 1923, the chairman of the I.C.C. delegation, Clémentel, presiding over one of the two conference committees and the I.C.C. delegates actually signing this formal convention with the representatives of sovereign states. In the field of major economic policy, however, this device has never been tried. The same principle, to all intents and purposes, was applied, as noted above, by the Allied powers in the appointment of committees of business men to draft the reparations settlements. At the only attempt at a world economic confer-

388

Business and Reform

ence of an executive type, this well-established and successful League technique, however, was abandoned. The only nongovernmental institution permitted representation at the London World Economic Conference was the Bank for International Settlements which, however representative of world financial and economic life it may be, can scarcely be called an opinion-forming organization. The world of 1933 was a very nationalistic world. International opinion-forming organizations like the I.C.C. would certainly have encountered formidable opposition from government officials had they been admitted to the London conference. The Vienna plan, for example, of the I.C.C. might well not have resulted in a London plan in 1933 as the Rome plan eventuated in the Dawes plan ten years previously. There were present, however, in 1933, the elements of a considerable international economic reform movement. Had the London conference been a representative assembly of the familiar national parliamentary type these elements would certainly have made themselves felt in the usual type of national party debate. Issues would not have been left in segments of provincial interest. The issues would have been clearly defined in terms of large national policy for the final decision of the general public within the whole area of the parliamentary regime. It was too much to expect government officials necessarily limited by precise terms of reference to divide along lines of essentially international rather than national policy. Such a parliamentary division would presuppose national officials to be members of active international opinion-forming political parties, cutting across national frontiers. It would presuppose, in fact, the familiar parliamentary type of political machine built along international lines. The national party has, in fact, provided the answer raised by similar problems involved in the extension of the parliamentary regime to the federal form of an interstate government such as the United States. The conditions for the formation of national parties in the several sovereign states of the American federal union, however, have been much more favorable than are conditions in the contemporary world for the formation of international parties of the usual parliamentary type functioning within the legal framework of the representative system. But the beginnings of an international alignment on issues of international significance can be clearly seen in the functioning

Business and Reform

389

of international opinion-forming organizations within a limited section of the Geneva system. The techniques of action developed by the I.C.C. in twenty years of close cooperation with official internationalism represent definite progress in the direction of such a new international alignment of opinion. The history of the League system justifies the assumption that, were the economic organization of the League of Nations enlarged along lines which would provide for a continuously functioning world economic parliament including a considerable section of nonvoting representatives of international organizations, a realignment of opinion in world parliamentary patterns would be greatly accelerated. Had international institutions in the crisis of 1931 been able to set in motion machinery through active participation in a world economic parliament, issues might have been formulated along international lines and an international leadership might have been asserted. Such a united front against economic nationalism at Geneva might, for example, have coordinated various national reform movements. Objections to " A Second Peace Conference" in 1931 might have been overcome by desperate pressure on Tardieu from an aroused world reform movement centered on a Geneva parliamentary struggle. Or had such an international alignment been possible a year later, American interest in supporting Herriot against his own nationalists with an approach on the debt question might have been made apparent. The League, were such a procedure adopted, would have the means of bringing these international institutions into a legal system of an international character in the articles of regulation providing for the representation of such organizations. In this manner an international party system of a unique character could be introduced into the machinery of official international consultation and action. Inasmuch as international conferences do not function on the principle of parliamentary majorities but rather on the principle of attaining the maximum of agreement between sovereign states, the presence of a considerable body of nonvoting delegates would lead to no confusion. It should give ground for no valid objection. It is a matter of international record that government delegates at international conferences in which the I.C.C. has been represented have found these unofficial delegates to be of the greatest service in the work of the conference.

39°

Business and Reform

The establishment of such an international party system would not only make possible, quite apart from the vicissitudes of party politics, the continuous participation of distinguished leaders of opinion in actual international negotiations. It would also tend to popularize enormously the League of Nations among the masses. The great advantages offered by direct participation in the debates and committee work of executive international conferences would undoubtedly inspire nationalist sentiment to seek international organization for its direct expression. Such a procedure would put a definite premium upon the formulation of national policy in terms of international interest. Thus national sovereignty, like state sovereignty in the United States, might be expected ultimately to express itself in terms of "states' rights." International institutions, if actively participating in such a collective system, would also be in a better position to exert influence in national legislatures in support of international policy. This has been done, in fact, very effectively by the I.C.C. in the case of Congressional hearings on the Hull tariff policy. In such a reorganized world economic system, international institutions would be impelled to turn from vague declarations to the practical demonstration of the profits to be derived from and the services to be rendered by collective internationalism. We need an international improvement association formed along the lines of a village or neighborhood improvement association, determined and powerful enough to force a liberal reform program in the sphere of international politics, as its local prototype has done in the sphere of local politics. The international armaments machine will be found as vulnerable to this type of concerted attack by a united liberal front as have local political machines in the sphere of local reform. There is a legitimate profit interest in international cooperation held by the church, the arts, the sciences, business, agriculture, and labor—by all who live by the works of peace. It is the task of enlightened statesmanship to make this interest apparent to individuals and to enable individuals to act collectively in defense of their collective interests in international peace. The new techniques of international cooperation deserve precise application in the field of national legislation. In every national statute calling for the use of independent national sovereignty there should

Business and Reform

391

be inserted an escape clause drawn along the lines provided by the business statesmen who drafted the Dawes plan, providing very definitely for escape from interstate conflict by all possible measures of international coooperation. This principle should be written not only into matters of immediate despute; it must be written into the texts of all national laws which are in the broad sense of international concern, particularly those national laws regulating national military and economic armaments. In this respect the present American reciprocity tariff act is deserving of careful study. Liberalism must impel the nation-state to face outward upon a world filled with international realities. Such a change of view will inspire a saner, a more realistic, a new nationalism. Nationalism has always worn its most romantic luster in that society of nations where common interests have become one in a cause, which, lifted above the interests of a single nation, has become the cause of humanity itself. The great world-wide voluntary institutions clustered about the church and the university represent causes which far transcend the horizons of any nation, race, creed, or class. They are the institutions which are set for the healing of the nations. A new nationalism alert to cooperate in the common interests of the society of nations must be brought into being. Contemporary civilization requires a readjustment of relationships between the state and those institutions which carry the seeds of a new world society. In particular, present events demand that the politico-economic partnership between the state and business in the interest of private gain be dissolved. It is a partnership limited to no particular trade. All who take dividends from the control of markets or raw materials protected by arbitrarily fixed national tariffs or regulations must assume responsibility as business partners of the military state. Economic nationalists are the real armament profiteers. This partnership has always been a partnership with debt. It has become a partnership with death. The evolution of a fair and equitable partnership between government and business conceived in terms of a broader world interest has been slowly taking shape in the twenty years of business diplomacy represented by the activity of the I.C.C. in international affairs. The statesmanship of those who have labored through the I.C.C. to overcome destructive postwar nationalism with

392

Business and Reform

the good sense and practical idealism of international business cooperation today offers the basis of a new association between business and government. Its effectiveness is dependent upon the absolute renunciation of war as an instrument of national policy by the merchants of peace.

APPENDICES

APPENDIX A R e c o m m e n d a t i o n s of the Joint C o m m i t t e e of the C a r n e g i e E n d o w m e n t for International Peace and the International C h a m b e r of Commerce A U G U S T 4, 1936

H E Joint Committee of the Carnegie Endowment for International Peace and the International Chamber of Commerce finding the world at the cross roads between fear and hope—fear that, unless the right lead is given promptly by the nations who have the power, another great war may submerge civilization with the suffering, the cruelty, the ruin from which we have not yet recovered— hope that with the right lead now, we may help each other forward in a progress even faster than the great progress of last century, being agreed in this fear and in this hope and seeking a clear and dispassionate statement of what can and cannot be done and by whom: Appointed seventeen distinguished economists from various nations to establish facts and discuss remedies; Now publish the thirty-one reports and the practical conclusions of these experts which lead to the following conclusions: An active campaign is necessary in every country to inform public opinion of established and agreed facts. By working for the common good, each individual of each nation will do his part to remove the fear which oppresses all who think and to realize the hope which they all share; Policy, Debt, Currency and Trade and, in particular, the movements of raw materials and men must be considered as parts of one great problem; the solution of each part is necessary for and helps the solution of

396

Recommendations of Joint Committee

the whole and by that general solution we shall not only secure Trade and prosperity but a PEACE real and of value to all and so permanent. In Politics the leading nations should seek without delay by a closer understanding to substitute friendship for fear and to stabilize the politics of the world. Direct negotiations between these few nations are immediately imperative and should be supported by public opinion in all countries; Unless this closer understanding is secured promptly, it may be too late. The world is running great risks and no more time should be lost in settling these great problems in whose happy settlement we are all directly and vitally concerned; There can be no question, without a real sense of security, of arresting the race to arm; There can be no security unless confidence in the future is restored— based on international justice; While political confidence is being restored, the few nations on whom as great creditors falls the duty and to whom alone is given the power to revive world trade, to stabilize the currencies and to lead the world to prosperity: should set themselves to adjust international debts to the power of the creditor nation to receive goods and services in payment and of the debtor nation to pay; should recognize and enforce the fundamental principle under which goods and services must be accepted in payment of international obligations; should agree together and with other nations on the measures to be taken to restore that confidence in the practical stability of international exchange which will release gold now hoarded and restore buying power; The rulers of all nations should convince themselves and their nationals and act upon the belief that a general policy of less restriction and more trade initiated by the creditor nations will expand the world market even faster than the ability grows to produce; They should look with suspicion on restrictions which raise the price to their consumers and thus depress their living standard and in choos-

Recommendations of Joint Committee

397

ing methods to help their citizens to employment should select those which are least likely to reduce consumption. As first steps towards the fulfilment of this improvement of political and economic relations, the Joint Committee recommends: 1. the conclusion of multilateral agreements, open to "all comers," stimulating international trade; 2. pending the development of a situation favourable to such negotiations, the conclusion of bilateral treaties consciously used as an instrument for the demobilization of trade barriers; 3. the deliberate inclusion in all such treaties of the M.F.N. clause as a means to realize that purpose; 4. the general use of the M.F.N. clause in its unconditional form, with a possible exception in the case of countries which, even after the restoration of more orderly currency conditions, would continue to practise discriminatory quotas or foreign exchange regulations; 5. the establishment of an international centre which shall compile indices for measuring the comparative incidence of protection in the various countries, in order to encourage the reduction of excessive barriers to trade; 6. the abolition, preferably by multilateral agreement, of import quotas, as soon as the way to a definite recovery of world trade has been paved by appropriate monetary and other measures; 7. an acceleration of this process by the substitution of "tariff" quotas for "import" quotas during a transitory period; 8. an orientation of commercial policy towards a limitation of the use of import quotas to purposes of temporary expediency, thus facilitating the establishment of a time-limit for their removal; 9. the application to the quota system of a "fair play code," as laid down by the International Chamber of Commerce; 10. the conclusion of regional and restricted collective pacts as long as the purpose and results thereof are the increase of trade and the appeasement of nations; 11. the establishment of the correct relation of national currencies which no longer represent a fair parity, taking into account: the position of balance of payments, relative costs and prices and the domestic debt structure;

398

Recommendations of Joint Committee Such an adjustment should be encouraged by an assurance given by countries in a financially strong position to countries contemplating devaluation, that this procedure would coincide with a stabilization of currencies, or serious endeavours to this end.

12. a Joint Declaration on Monetary Policy by the leading World Powers covering the following points : the avoidance of currency depreciation as an instrument of international trade competition; the preservation and extension of the existing stability of rates except as necessitated by adjustment to fair parities; the elimination of seasonal variations in the volume of currencies ; recognition of the desirability for a transition to a more permanent regime without undue delay; 13. the progressive abolition of exchange and clearing régimes, in the measure that it has been possible to solve the problems of international indebtedness, to resume international lending, and to restrain uncontrolled flights of capital (e.g. by standstill agreements). T h e Joint Committee recommends the study of these documents to all thinking people and finally pleads that public opinion in all countries should press their Governments to act as suggested without further loss of time. Peace we want, and Peace we must have if the people of the world are to be employed and their standard of living improved.

APPENDIX

B

T h e International Chamber of Commerce in 1 9 3 8 * OFFICERS PRESIDENT THOMAS J . WATSON,

International

President of the

Business

Machines

Corporation, New York HONORARY PRESIDENTS G. ANDERSON, G.B.E., M.P., Chairman of the Orient Steam Navigation Co., Ltd., London; Member of the Board of Governors of the Bank of England W I L L I S H. BOOTH, Vice President of the Guaranty Trust Company of New York

SIR ALAN

D R . F . H . FENTENER VAN VLISSINGEN,

Managing Director of the Steenkolen-Handelsvereeniging N. V. and of the Administratiekontoor Unitas; President of the Algemeene Kunstzijde Unie N. V., Utrecht ABR. FROWEIN, President of Frowein & Co. A. G., Wuppertal-Elberfeld; President of the German National Committee D R . ALBERTO PIRELLI, Managing Director of the Società Italiana Pirelli, Milan; President of the Associa• From I. C. C. brochure, The International

zione fra le Société Italiane per Azioni GEORGES T H E U N I S , former Prime Minister of Belgium; President of the Institut National de Réescompte et de Garantie, Brussels HONORARY VICE

PRESIDENT

K. A. WALLENBERG, former Minister of Foreign Affairs; President of the Stockholms Enskilda Bank Aktiebolag VICE

PRESIDENTS

Louis CANON-LEGRAND, President of the Permanent Committee and of the first six International Congresses of Chambers of Commerce, Möns CHANG KIA-NGAU, Vice Governor of the Bank of China, Shanghai Senator; President of the Banca Commerciale Italiana, Milan R E N É P. DUCHEMIN, President of the Etablissements Kuhlmann, Paris J. SIGFRID EDSTRÖM, President of the Allmanna Svenska Elektriska Ak-

ETTORE CONTI,

Chamber

of Commerce,

February, 1938.

400

The International Chamber in 1938

tiebolaget,

Stockholm;

former

President of the Swedish Federa-

the French Federation of Chemical Industries

tion of Industries DR.

OTTO CHRISTIAN FISCHER,

glied des Vorstandes der Reichskredit-Gesellschaft, Berlin; President of the Reichsgruppe Banken President of the Scindia Steamship Navigation Co., Bombay

WALCHAND HIRACHAND,

J . B . VAN DER HOUVEN VAN OoRDT,

President of the Board of the Vereenigde Nederlandsche Scheepvaart Maatschappij, T h e Hague MANZO KUSHIDA, President of the Board of the Mitsubishi Bank, Tokyo D. CARLOS PRAST, former President of the Madrid Chamber of Commerce LORD RIVERDALE, K.B.E., Chairman and Managing Director of Arthur Balfour & Co., Ltd., Capital Steel Works, Sheffield former Minister Plenipotentiary and Commissioner General of the Polish Republic at

H E N R I STRASBURGER,

Danzig; President of the Central Union of Polish Industries, Warsaw SILAS H . STRAWN, Senior Member, Winston, Strawn and Shaw, Attorneys, Chicago HONORARY TREASURER BERNARD S . CARTER,

Morgan & Co.,

Bankers, Paris

Managing Director

of the Société des Usines Chimiques Rhône-Poulenc, Paris; President of

Honorary President

E R I K HAGUENIN,

of the Banque Nationale pour le Commerce

et l'Industrie,

Paris;

Chairman of the Board of Management of L'Urbaine et la Seine SECRETARY GENERAL PIERRE VASSEUR

ASSISTANT SECRETARY LEONARD J . CROMIE

EXECUTIVE COMMITTEE President:

THOMAS J . WATSON

Ex-Officio Members: The Honorary Presidents of the I.C.C., the Chairman of the Budget Committee of the I.C.C. (LORD RIVERDALE, K.B.E.), the Honorary Treasurer, the Treasurer, and the Deputy Treasurer Elected Members: R E N É P. DUCHEMIN, ALFRED FALTER, D R . GUSTAV GRATZ, LORD L U K E OF PAVENHAM, K . B . E . , SHINJIRO MATSUYAMA, D R . RUDOLF M E E S , D R . V I L É M POSPISIL, JOSEF E . SACHS, ERNST RITTER VON STREERUWITZ,

DR.

HANS

SULZER,

G R . C R . ING. RAIMONDO TARGETTI, ELIOT WADSWORTH (NELSON DEAN JAY,

TREASURER GEORGES ROCHE,

DEPUTY TREASURER

Mit-

Alternate),

VASSA

U.

YOVANO-

VITCH

DEPARTMENT HEADS Council

and

General

WILLARD H I L L

Questions:

The International Chamber in 1938 Production and Distribution Department :

GILBERT COURTOIS DE VIÇOSE

Financial Department :

VIRGILIO D E L

401

Interior and Budgetary Services : L u CIEN R . D U C H E S N E

Assistants:

M.

BAYLIS,

REGINALD

P.

VAN B I E N E , E L E M E R B Ö H M , R E N É DE

RIO

Trade Department:

RICHARD BARTON

N I C O L A Y , GASTON P I C Q

Transport and Communications Department: Louis H . E . Legal Department:

DELANNEY

ANDRÉ BOISSIER

Press and Journal Department: HAR-

COURT OF

ARBITRATION

Secretary General :

A N D R É BOISSIER

Technical Advisor:

R E N É ARNAUD

OLD K I N C

NATIONAL AMERICA (United States of) President: DEAN

Secretary General:

JAY,

ELIOT

WINTHROP W .

Members:

NELSON

ALDRICH;

Alternate

FRED I . K E N T , C L A R K

H.

THUR BALDWIN

K.B.E.;

SANDERSON,

SIR

OWEN

JOHN

Commissioner:

BULGARIA

President:

DIMITER ST. SAWOFF

Member of the Council :

DIMITER ST.

SAWOFF; Alternate Member: WLASecretary:

D R . GEORGES SARAILIEFF

President :

KWANC-PU CHEN

CHINA

o£ VON

the

Council:

STREERUWITZ;

nate Member: LOETZEN

GUSTAVE L . GÉRARD

ERNST RITTER VON STREERU-

WITZ

RITTER

PAUL RAMLOT,

DIMIR T R N K A

AUSTRIA

Member

GUTT;

TAVE L . GÉRARD

Alternate

JONES

President:

JUSSIANT,

CAMILLE

Administrative Commissioner: GUS-

H . JAMES

Administrative

GUINOTTE,

Secretary :

Member: A. E . HEATH, C.M.G. Secretary: S.

Members of the Council : C.

H E N R I STORY, E M I L E B E R N H E I M

SPENCER W A T T S

Member of the Council:

GEORGES T H E U N I S

Alternate Members:

JAMES J . O ' N E I L

AUSTRALIA President: A .

BELGIUM

President: LÉON

CHAUNCEY D . SNOW

Paris Assistant:

RICH-

ARD F Ü R T H

WADSWORTH,

MINOR, CHARLES S . HAIGHT, E . A R -

Manager:

D R . ROBERT BREZA

Administrative Commissioner:

E L I O T WADSWORTH

Members of the Council:

COMMITTEES

ERNST

Alter-

ERICH SEUTTER VON

Member of the Council:

KWANG-PU

CHEN

S e c r e t a r y G e n e r a l : K . H . LING

402

The International Chamber in 1938

CZECHOSLOVAKIA President : D R . V I L É M POSPISIL Members of the Council: D R . V I L É M POSPISIL, D R . K O R N E L STODOLA; A l -

ternate Members: HODAC,

EDOUARD

DR.

FRANTISEK

LANCER-SCHROLL

Secretary: D R . JOSEF V A N E K Administrative Commissioner: OTAKAR

DANZIG President: HUGO SCHNEE Member of the Council: Huco S C H N E E ; Alternate Member: ERNSTKRÖHNERT

Secretary:

GODET,

ROBERT

SCHNEIDER;

ERNSTRUDOLF KRÖHNERT

DENMARK

EISTRUP

Secretary: M. F . RAFFENBERG Administrative Commissioner: A AGE

HENRY

JOAKIM P U H K

Member

of

the Council:

JOAKIM BARON

E R N E S T ROSEN

Secretary:

GERMANY President: A B R . FROWEIN Members of the Council: POENSGEN,

bers:

KELL;

CARL ENCHENRIK

RAMSAY

M A U N O NORDBERG

T.

ESSBERGER,

Alternate Mem-

TRENDELENBURG,

KURT

JÄRNSTRÖM

Commissioner:

ERNST

FREIHERR

VON ScHROEDER

Secretary : D R . FERDINAND H A E R E C K E Administrative Commissioner: DR. GERHARD RIEDBERG

GREECE EPAMINONDAS CHARILAOS

SPIRIDON M E T A X A S ;

ANGELOS

Alternate Mem-

b e r : GEORGES L . NICOLA'IDÈS

Secretary :

JEAN C H E L M I S

HUNGARY S . E . T I B O R DE SCITOVSZKY

Member of the Council:

Alternate Member:

Secretary: D R . EDW. Administrative

JOHN

D R . ERNST

DR. KARL LÜER, DR.

President:

CARL ENCKELL

Member of the Council:

Commissioner :

ALEXANDRE DE LAVERGNE

VOLDEMAR G R O H M A N N

FINLAND President :

R E N É ARNAUD

Member of the Council:

Alternate Member:

DE F O N -

TENELLE

President:

ESTONIA President :

JULES

EUGENE

Members:

DE P E Y E R I M H O F F

L . DESSAU

PUHK;

Alternate

EWALD H E C K E R ;

President: HOLGER LAACE-PETERSEN Members of the Council: HOLGER LAAGE-PETERSEN, A . H O L M ; Alternate Members: C. A. MÖLLER, J .

MASSON,

LOUIS FERASSON, E T I E N N E FOUGÉRE,

Secretary General: Administrative

FLANDERKA

RUDOLF

FRANCE President : R E N É P. D U C H E M I N Members of the Council:

S . E . TIBOR

DE SCITOVSZKY

Secretary : D R . TIBOR DE G Y U L A Y Honorary Administrative Commissioner: Louis M A N H E I M Administrative Commissioner: CHARLES BINDER-KOTRBA

The International Chamber in 1938 INDIA President:

THE

CHOKYURO

HON.

TOOLA M . C H I N O Y ,

SIR

RAHIM-

Members of the Council:

LALA

PA-

DAMPAT SLNGHANIA, D A V I D S .

ERUL-

KAR, H E M C H A N D M O H A N L A L ;

Alter-

Honorary Secretary:

G.

Commissioner:

CHANDULAL JEYCHAND G U J A R

Member of the Council: P. Member: Secretary:

LA

RENÉ

Commissioner:

DOTT.

ALBERTO

Members of the Council : ON. GR. CR. A w . GIUSEPPE BIANCHINI, O N . U F F . BIAGIO BORRIELLO, O N .

GR.

DOTT.

Alternate

LANTINI ;

Members:

ON. GR. UFF. A W .

OLIVETTI,

GR.

GINO

RAIMONDO

General :

LUXEMBURG ALOYSE MEYER

of

COMM.

the

DOTT.

DOTT.

NICOLA

Commissioner:

CELESTINO

FRIGERIO

JAPAN President:

MANZO KUSHIDA

Members

of

SEINOSUKE

the GOH,

Council:

Alternate Member:

MEYER;

ALOYSE ALBERT

ALBERT CALMÉS

N E T H E R L A N D S

President :

D R . RUDOLF M E E S

HARTOGH, D R . GUSTE P L A T E ;

Council: KEIJIRO

RUDOLF

MEES,

H.

J.

KNOTTENBELT,

E.

D.

Secretary:

J. G .

J. W .

KOOPMANS

Commissioner : DR.

WYNAENDTS N O R W A Y

President:

ERLING STEEN

Members of the Council: ternate Members:

HORI,

VAN

WALREE

MORTEN

LIND, ALBERT VOIGT HANSEN;

BARON

AU-

Alternate Members:

D R . CHARLES E . H . BOISSEVAIN, D R .

GIOVE

Administrative

FRID-

RICHS IGALS

Administrative

TARGETTI

Secretary

ALBERTS ZALTS

Members of the Council: DR. H . A.

ING. E T T O R E C O N T I

ING.

ALBERTS

ZALTS

Secretary:

PIRELLI

CR.

BERZINS

CALMES

ITALY

FERRUCCIO

ANDREJS

of the Council:

Member

A L E X A N D R E DE L A V E R G N E

President :

Member

President :

ARNAUD

Honorary President:

President:

BLAN-

SAMBUC

Administrative

HOTTA

Alternate

BROSSE;

HENRI

NAOMICHI

Administrative Commissioner:

E D M O N D GISCARD D'ESTAING

DE

MATSUMOTO

TAKASHIMA

Correspondent :

Secretary:

INDOCHINA

CH ARD

YAKJ-

LATVIA

MULHER-

KAR

President:

London

SEICHI

MEHTA

D.

Administrative

Secretary:

Alternate

KADONO;

KAMATARO A O K I ,

CHI A T A K A , K E N J I R O

Kt.

nate Member : A. B.

Members:

403

SEN, E I N A R

Secretary :

D R . GUSTAV

EITREM

ERLINC O Y E N

AlJEB-

404

The International Chamber in 1938

Administrative Commissioner: ALBERT VOIGT HANSEN

Administrative Commissioner : THOR CARLANDER

POLAND Honorary

President:

SWITZERLAND BOGUSLAW

P r e s i d e n t : D R . HANS SULZER

Members of the Council: DR. HANS

HERSE P r e s i d e n t : CZESLAW KLARNER

SULZER, D R . ERNST WETTER, ROBERT

Member of the Council: ALFRED FAL-

LA ROCHE;

TER; Alternate Member: EDMOND TREPKA

CARL

Members:

RENÉ

HENTSCH,

FR. HUG

Secretary General: DR. WLADISLAW

S e c r e t a r y : D R . OTTO HULFTEGGER

Administrative Commissioner: MAU-

RASINSKI

Administrative

Commissioner:

RICE T R E M B L E Y

H E N R I STEBELSKI

TURKEY

PORTUGAL P r e s i d e n t : EDUARDO A . L I M A BASTO

Member of the Council: EDUARDO A. LIMA BASTO; A l t e r n a t e

Member:

ANTONIO VASCONCELOS CORREA Secretary:

Alternate

KCECHLIN,

JOAQUIM ROQUE DA FON-

SECA

P r e s i d e n t : MITHAT N E M L I

Member

of

the

Council:

MITHAT

NEMLI S e c r e t a r y : GALIP BAHTIYAR

U N I T E D KINGDOM P r e s i d e n t : LORD L U K E OF PAVENHAM,

Administrative Commissioner: JOSE PEDRO FERREIRA DOS SANTOS

K.B.E. M e m b e r s of the C o u n c i l : LORD LUKE

RUMANIA

OF PAVENHAM, K . B . E . ,

SIR

GEOF-

P r e s i d e n t : MIHAIL MANOILESCO

FREY R . CLARKE, C . S . I . , O . B . E . ,

Member

D'ARCY

of

the

Council:

MANOILESCO; Alternate

MIHAIL Member:

Administrative Commissioner: VICTOR ORESCO

Members of the Council: JOSEF E . A X E L EGNELL,

Commissioner:

YUGOSLAVIA

P r e s i d e n t : J . SIGFRID EDSTRÖM

Alternate MARCUS

WALLENBERG, J R . S e c r e t a r y : W I L L I A M GORDON STIERNSTEDT

S e c r e t a r y : O W E N JONES

O W E N JONES

SWEDEN

Members:

b e r s : GUY H . LOCOCK, C . M . G . , L T .

Administrative

PRYTZ;

F.

Mem-

D.S.O.

S e c r e t a r y : I. N . JONESCO

BJÖRN

Alternate

COL. T H E H O N . R . M . P . PRESTON,

GEORGES G . ASSAN

SACHS,

COOPER;

Member of the Council: DR. JULIJE MOGAN; Alternate Member: DR. STEVAN POPOVITCH S e c r e t a r y : D R . STEVAN POPOVITCH

Administrative RISTA CHANTITCH

Commissioner:

INDEX

Index Aalst, C. J. K. van, 39« Abernon, Lord d', 107, i n , 1 1 3 Addis, C. S., 390 Ador, Gustave, 77 Agriculture, antitariff pressure, 256 Agriculture, International Institute of, 250, 254, 264, 372, 387 Air mail, 293 Air transportation, 293, 301-5; taxation, 2 8 1 ; mail service, 301, 306; law, 301, 302-4; insurance, 303, 304, 308; air regulation reform, 305; report on barriers, 370 Alberti, Mario, 60, 183 Algeciras, Bank of, 98 Allen, Sir John Sandeman, 293, 295 Allied Supreme Council, 4, 39, 57, 165; reparations problem, 49 ff., 55, 66, 80, 195; negotiations at Paris meeting, 1 1 4 - 2 1 ; trade policy endorsement, 197 Amelio, d', , 107 America, see United States American Institute of Meat Packers, 3 1 3 Amsterdam congress, 2 7 1 , 282, 300, 302, 306; see also Beneduce; Quesnay; Rist Anderson, Sir Alan G., 289, 290, 3 8 1 ; quoted, 249. 352 Anglo-Franco-American monetary pact, 382, 384 Anschluss, renunciation of, 357 Anzilotti, Judge, 329 Arbitration, commercial, 190, 3 1 7 - 3 1 ; moral vs. legal sanctions, 320, 324-25; the Pozzi draft, 320, 324; Young plan, 3 2 1 - 2 5 ; three types of service, 322; recognition of validity of awards, 326; ratification of protocols, 327-31 Argentine-American arbitration, 320, 323 Armaments, world competition, 375 ff.; see also Disarmament Arnaud, René, 329 Asquith, H. H., 39« Atlantic City conference, see International Trade Conference Attolico, Bernardo, quoted, 29 Austria, trade with Italy, 29, 30; currcncy stabilization, 97, 105, 160, 173; movement of public sentiment toward, 105, 106; admitted to League, 106; Danubian reconstruction, 126, 1 3 1 ff., 156-62, 168. 169, 185, 187, 383 (see alio Ter Mculen scheme); treatment of, at l.C.C. London

congress, 1 3 3 ; U. S. failure to release liens against, 150, 154; customs Anschluss, 357; Davis-Shotwell plan, 359; proposal for a Danubian economic union, 361 Austro-German customs union, 346, 348, 355, 357 Avenol, Joseph, quoted, 94 Balfour, Sir Arthur James, 229, 276, 329, 354; quoted, 49 Balkans, "the railway incident," 286 Banker, American, role in reconstruction, 35 Bankers and industrialists, struggle between, 65 ff., 74 Bank for International Settlements, 343, 344, 372, 388 Banking, Belgian system, 26 Bank of Algeciras, 98 Bank of England, 26, 357 Bank of France, 357 Banks, runs on, 356, 357 Barcelona conference on communications and transit, 285, 286 ff., 295 Barclay, E. G., 60 Baring, Hugo, 60 Barnes, George Nicoll, quoted, 104 Barter, international, 58 Barthou, Louis, resolution by, 181 Basch, Antonin, 382 B. D. K „ 28 Beaufort, H. L. de, 150 Beaumont, K. M., 303, 304 Bedford, A. C., 22, 34, 56, 150; quoted, 24, 164 Belgium, at Allied business conference, 2 1 ; seizure of property by Germany, 25, 28; financial problem, 25, 30; banking system, 26; currency stabilization, 65, 66; attitude toward reconstruction finance, 70, 74; Ruhr occupation, 167 Bell, Henry, 352; quoted, 353 Beneduce, Alberto, 343; quoted, 96 Benes, Eduard, 157, 158, 160, 162, 359 Bcnn, Sir Arthur S., 23, 60, 159; quoted, 29 Bergmann, Karl, 80, 86, 87, 144, 145; 3 5 1 ; quoted, 103, 109, n o , 1 1 2 , 1 1 8 , 182, 183, 184, 186, 353; influence at reparations conferences, 103, 107 ff. Berlin, reparations conference ( 1 9 2 1 ) , 1 1 2 Berlin congress, I.C.C., 384 BerUner Tageblatt, 105

4o8

Index

Berne bureau of Union for Protection of Industrial Property, 273, 274, 275, 277 Berne railway conventions, 302, 304 Bernheimer, Charles L., 320 "Besserungsschein," 87 Bethmann-Hollweg, Theobald von, quoted, 25 Bilateralism attacked, 384 Bills of lading, 309-16; move for international legislation, 309; Hague Rules, 3 1 1 - 1 6 ; ratification delays, 314 Birkenhead, Frederick Edwin Smith, Earl of, 123; quoted, 124 Bismarck, Otto Eduard Leopold, Prince von, 347 Bisschop, W. R., 310, 3 1 1 Blank, Aristide, 161 Boehler, Eugen, 381, 382 Bolley, Ernest, 2 1 1 Bolsa de Comercio of Buenos Aires, 321 Booth, Willis H., 4, 57, 60, 68, 171, 177, 290 Borah, William Edgar, 348 Boston meeting of International Congress of Chambers of Commerce, 15, 18, 178, 179 Boulogne, conference, 56, 57 Boulogne Agreement, 57, 89, 109 Bourgeois, Leon Victor Auguste, 96, 143 Boyden, Roland W., 4, 60, 76, 166, 235 Bradbury, Lord John, 107, 111 Brand, R. H., 39»; quoted, 95 Branteug, J. H., 39« Briand, Aristide, 145, 153, 154, 341, 344; influence on reparations negotiations, 114, 118, 120, 1 2 1 ; United States of Europe scheme, 241, 258, 342, 346, 348, 355 Briand-Kellogg pact, 361 British Association of Chambers of Commerce, 159 British Board of Trade, 3 1 3 British Federation of Traders Associations, 313 British Labour party, 359 Brittain, Sir Harry, 305 Brouckere, Alfred de, 139 Brunet, J., 2 1 2 Brüning, Heinrich, 346, 357, 358, 362 Brussels conferences, see International Financial Conference; Reparations Conference Brussels congress, I.C.C., 217, 219 Bryce, James, Viscount, 39« Budget balancing, 108, 185, 187 Buecher, Hermann, 186 Business, relationship with government, 5, 44, 374. 3 9 i ; prewar cooperation, 13-18; economic policy, 13; economic nationalism. 16; postwar peace conference, Atlantic City,

21-38, 48, 56, 93, 177; attitude of Allied business mind, 28; subjects considered dangers to stability, 34; Paris Business Conference (1920), 59-77; division into distrustful groups, 75; principle of international cooperation, 93; organization of international opinion within I.C.C., 144, 145; American policy in regard to European affairs, 163 ft.; reparations settlement advocated by American, 165-67, 168; hearings on reconstruction at Rome congress, 169-77; settlement by Dawes and McKenna committees, 18292; re-creation of international capitalist system the objective of 1920, 197; I.C.C. as a business organization, 263-72; membership in, 265; denied hearing at Monetary and Economic Conference, 370-72; world opinion, statesmanship of reform, 374-92; see also Industrialists Business men's League of Nations, 15, 21-38, 65 Butler, Nicholas Murray, 158 Buxton, Sydney Charles, 1st Earl, 209; quoted, 210, 213 Cables, rates, 298 Cannes, conference at, 145, 153, 154 Canon-Legrand, Louis, 23, 28; quoted, 16, 2%, 30. 33 Capitarne, Albert, 276 Capitalist system, prewar, 13; control by City of London, 13, 43; changes caused by war, 44; victory of private over international, 195; re-creation of prewar system the objective of business, 197; armaments regime, 375 S. Carlander, Thor, 321 Carnegie Endowment for International Peace, 17; Chatham House conference, 7, 379-84; scheme for Danubian reconstruction, 15662, 359; recommendations of Joint Committee of I.C.C. and, 383, 395-98 Carriage of Goods by Sea Act, 3 1 5 Carroll, Mitchel B., tax survey, 282 Cassel, Gustav, 126, 128, 129; quoted, 127, 238, 239, 245 Catastrophe, underlying causes, 335-63 Cecil, Edgar Algernon Robert, Viscount, 39», 358; quoted, 225 Chalendar, André, Count, 217, 218 Chamberlain, Sir Austen, 251, 341, 379; quoted, 252 Chamber of Commerce, see under place, e.g., British Association; International Chamber; International Congress; Manchester; Milan; Paris; Southeastern Europe; United States

Index Change, problem of, 3, 335, 336, 360, 378; doctrine of nonrecognition of violent, 361; conference on (1937), 383 Chatham House conference, 379-84 Chemical industry, 29, 30 Cbcysson, , 107 Clémentel, Étienne, 4, 22, 56, 61, 123, 147, 148, 150, 169, 183, 187, 20;, 211, 212, 213, 216, 23;, 387; quoted, 2 1 ; ; bill on validity of arbitration clauses, 327 Close, F. N. B., 148, 150 Clynes, J- R., 39» Coal, 25, 30, 32, 72, 80, 82 ff., 167; protocol, 78, 86 Cobden, Richard, 3 Cobden Treaty, 367, 386 Codification, customs regulations, 214 Colonial exploitation, 25 Col ver, William B., 58 Comité international technique d'experts juridiques aériens, 302, 303 Comité maritime international, 309, 311, 312, 313 Commercial arbitration, see Arbitration Commercial policies, 367; League of Nations study of, 201-8; action on, at customs conference, 209-16; divergence of opinion on, 224; see also Customs; Tariffs; Trade Commercial relations, monographs on, 381 Commercial treaties, year of, 25; Commission on International Trade, 98 Committee on Trade Barriers, 227-49 passim, 269, 293 Committee on World Restoration, 227 Communications, 284, 285, 296-308; League provision for freedom of, 285 Communications and Transit Conference, 370 Conciliation and arbitration, 317, 320, 322 Conference of Ambassadors, 57 Conferences, number discussing reparations, 52; of ministers of state, 52, 56; delays, 53; intergovernmental, 78, 79; scheme for a Danubian, 157, 158; world economic advocated by I.C.C. congress, 174; see also under name of conferences, or place where held, e.g., International Trade Conference; Spa, conference at Congresses on Customs Regulations, 205 Connor, Benjamin H., 329 Conolly, G., 382

Cozmoz, Pierre, 305 Credit, need of Allied countries for American, 26, 27, 30, 34; principles underlying cooperation in the granting of, 42; prospectus for a new credit structure, 4 ; ; demobilization of, 50; relation to reparations, 53, 61, 65 ff.; see also Ter Meulen scheme Credit Amtalt, 356, 357 Crewe, Robert Offley Ashburton Crewe-Milnes, Marquis of, 379 Currency stabilization, 65, 66, 96-98, 10;, 108, 160, 185, 187-89, 365, 380; studies of experts, 381 f. Curtius, German foreign minister, 346 Curzon of Kedleston, George Nathaniel Curzon, ist Earl, plan for settlement with Germany, 180 Customs, I.C.C. resolution, 63; preparation for world conference, 201-8; regulations, 20416, 230, 288, 305; Paris congresses, 205; League conference, 209-16; publicity, 213; provision for an international commission, 216; International Conference of 1923, 387 Customs Formalities, Convention on, 232 Customs Regulations Congresses, Permanent, 205, 206 Customs Truce Convention, 203 Customs union, Austro-German, 346, 348, 355. 357 Czechoslovakia, policy toward Hungary, 159, 359

Dangers, to industrial stability, 34; in enforcement of reparations, 35 Danube River inquiry, 295 Danubian economic union, 361 Danubian Valley eonomic reconstruction, 126, 131 ff., 156-62, 168, 169, 185, 187 f., 222, 383; plans for conference, 157, 158; see also Ter Meulen scheme Davis, Norman H., 23, 25, 359; on financial cooperation and reparations, 37, 38; quoted, 245 Davis-Shotwell plan, 359, 361 Dawes committee, 7, 66, 143, 144, 181, 18292, 234, 235, 336, 338, 372 Dawes plan, 6, 21, 172, 183, 195, 233, 235, 269, 336, 337, 357, 373 . Debtor, solvent, 40 Debts, League barred from war debts scene, 5; I.C.C. aid, 6; intergovernmental, 41, 54, Convention on Customs Formalities, 232 68, 95; American advances for reconstrucCorporative state, 341 tion, 69; inter-Allied, 129, 141, 172, 173; Council of Foreign Bondholders, 366 cancellation, 175; I.C.C. policy on war Court of Commercial Arbitration, Internadebts, 269; war debt settlements, two types tional, 190, 317-31; Young plan adopted, of, 336 f.; U. S. stand on war debts, 336, 324; eases heard, 325; ratification of proto344, 348, 350 f., 362; war debts as cause cols on, 327-31

410

Index

Debts (Continued) of default and revolt, 347; Washington congress discussion on war debts, 351-53; see also Reparations Deflation, discussions on, 126; endorsed, 128, 129 DeGoutte, General, 84 Delacroix, Leon, 81, 102, 107, i n Del Rio, Virgilio, 283 Despret, Maurice, 171 Deutsch-Amerikanischer Wirtschaftsbund, 16, 18 Devaluation, 363, 382, 383 Devastated regions, reconstruction financing, 59, 61, 62, 136-41, 142; refusal to permit Franco-German cooperation in rebuilding, 340 Disarmament, 79, 93, 198, 200, 348, 351, 375 Disarmament conferences, Geneva, 360, 373; Washington, 145, 149, 150, 151, 172 Dolléans, Édouard, 123, 191, 212, 233, 325; quoted, 192 Domicile, taxation by state of, 281 Double taxation, 279-83 Doumer, Paul, influence on reparation negotiations of Allied Supreme Council, 11418 Drouets, , 276 Drummond, Sir Eric, 169 Duchemin, René P., 381 Duke, Henry (Lord Merrivale), 313 Economic and Financial Organization of the League of Nations, 144 Economic Committee, see League of Nations Economic conferences, etc., see under World Economic Consultative Committee, 254, 255, 258, 342 Economic disarmament, history of postwar efforts, 335-63 Economic Restoration, Committee on, 217 Edge Act, 73, 132 Edstròm, J. Sigfrid, 4, 148, 150, 299 Eighen, S. P. van, 39« Eliot, Charles W . , 39 Embargoes, l.C.C. resolution, 63 Entrepot trade, 29, 32 "Equitable treatment," 201, 222 Erzberger, Matthias, 82 Europe-United States investigation, 343 Exchange stability, 126-29, 142; see also Currency stabilization Ex-enemy countries, development of public sentiment toward, 104-6 Exhibitions, international, 273 Experts, Committee of, 380; list of 381; monetary report, 382

studies,

Export and import prohibitions, on, 257 Export duty, German, 138, 139

convention

Fabry, H., 303 Fact-finding organizations, survival of, 374 Fahey, John H., 61, 318 Fair competition, principles of, 274 Federal Bill of Lading Act, 314 Federal Reserve Board Journal, 152 Federal Reserve system, 36 Fehrenbach, Konstantin, 80, 104 Ferguson, Homer L., 45 Feudalism, 376 ff. Filene, Edward A., 4, 22, 56, 148, 160 Final Report of the Trade Barriers Committee of the l.C.C., 229 if. Finance, international: control by City of London, 13, 43; Brussels conference debate, 93 ff.; history of postwar efforts, 336 f., 343-45 Financial Committee, see International Financial Committee Financial Conference, see International Financial Conference Financial crisis, American side, 68; situation of devastated countries, 70 ff. Financial reconstruction, see Reconstruction movement Flag, maritime, 286, 287, 289, 290 Flandin, Pierre fitienne, 301, 306, 357; quoted, 301 Foch, Ferdinand, 84 Foreign Credit Interchange Bureau, 63 Foreigners, treatment of, 230, 248, 270 Foreign traders and their goods, tariff practices, 214 Fourteen Points, 198, 200 France, at Allied business conference, 21; reconstruction plans, 27, 28, 32; financial situation, 27; requests reparations priority, 53; attitude toward reconstruction, dependence upon German payments, 70 ff.; FrancoGerman industrial strife, 78, 80 ff.; political intervention in reparations negotiations, 114 ff.; responsibility for failure of Genoa conference, 154; refusal to accept nonpolitical settlement of reparations, 167, 168; occupation of the Ruhr, 167; effect of Rome resolution upon, 181; stand of protectionists on tariff reform, 240 ff., 255, 340; commercial arbitration, 327; goal of industrial supremacy, 340; answer to Austro-German revolt, 348; wins Franco-German economic war, 355-62; growth of liberalism, 362; Anglo-Franco-American monetary pact, 382 Franco-German Treaty ( 1 9 2 7 ) , 255

Index François-Poncet, André, 23 Frankenstein, Baron, 1 5 7 Fraser, Sir D r u m m o n d , 1 5 5 ; supports T e r Meulen scheme, i o o n , 126, 130-36, 150 F r e e d o m of transit, 285, 286, 287, 305 F r e e trade, see T a r i f f s Frowein, Abr., 3 5 4 General Confederation of Production, 22, 56 Geneva conference, see World Economic Conference Geneva Convention on the International Reg i m e of Maritime Ports, 288 Geneva Convention on the International Rég i m e of Railways, 289 Genoa conference, 1 4 5 , 153, 154, 160, 288, 3 7 2 ; tariff resolution, 202 Gérard, Gustave L . , 148, 150 G e r m a n National Liberals, 16 G e r m a n Society of World Commerce, 16, 18 G e r m a n War Burdens Commission, 86 Germany, economic nationalism, 16; admission into international organizations, 2 1 ; relation of G e r m a n to Allied economy, 25, 58; coercive banking practices, 25, 190; role in reconstruction program of Allies, 27 ff., 41 ff.; seizure of machinery, 28, 82; taxpayers denied hearing on Reparation Commission, 34; at Peace Conference, 49; secures Treaty Protocol, 50; failure to fulfill Treaty terms, 6 1 ; interest in recreating normal financial relationships with, 65 ff.; dependence of devastated countries upon, 70 ff.; efforts to form an international business organization, 75; coal deliveries, 78, 80, 82 ff.; Franco-German industrial strife, 78, 80 ff., 3 5 5 - 6 2 ; attitude of industrialists, 81, 84, 1 1 2 , 186; Ruhr occupation, 84, 1 2 1 , 167, 1 7 3 , 3 7 3 ; provision for miners, 85; financial offer at Spa, 87 ff.; negotiations at Brussels Reparations Conference, 103, 107 ff.; relations between reparations officials, 103; strained Allied relations, Rhine speeches, 104, 106; labor's liberal attitude toward, 104; financial situation discussed by Allied Supreme Council, 1 1 4 - 2 1 ; question of inclusion of, in I.C.C., 124; export tax, 138, 139; move for a moratorium, 145; makes offer of cooperation, 179; Strcscmann bccomcs chancellor, 180; admitted to I.C.C., 1 9 1 ; restrained f r o m unfair competition, 274; Austro-German customs union, 346, 348, 355. 3 5 7 ! economic crisis, fall of government, 346; result of economic war, 3 5 5 - 6 2 ; customs Anschluss, run on banks, 3 5 7 ;

4 1 1

end of liberalism, 3 6 2 ; see also Danubian Valley . . . reconstruction; Reparations Ghiron, Mario, 276 Giannini, Francesco, 76, 107, 150 Gidoni, Domenico, 2 3 ; quoted, 30 Gilbert, S. Parker, 2 1 9 Girard, Hubert, 3 1 1 Glass, Carter, quoted, 45, 46, 47, 48, 196 Godet, Jules, 23 Goering, H e r m a n n Wilhelm, 384 Gold standard, 1 9 ; , 1 9 7 , 3 6 1 Goodenough, F . C., 39»» G o o d w i n , E . H., 22, 1 4 8 Government, relationship with business, 5, 44, 374> 3 9 ' ; assistance to business reconstruction interests, 46-48; unofficial representatives at conferences, 92; g r o w i n g concern of middle classes and workers in, 3 6 1 Gratz, Gustav, 1 5 7 , 1 6 1 , 162 Great Britain, at Allied business conference, 2 1 ; position on reparations, 118-21, 1 6 7 , 180; bills of lading, 3 1 3 , 3 1 ; ; aids A u s trian bank, 3 5 6 Gregory, T . E., 380, 3 8 2 Grosclaude, £tienne, 76

Guide to the Documents 229, 2 3 1

of the

Conference,

Hadley, Arthur T . , 39 H a g u e Arrangement, 293, 306 H a g u e convention on industrial property, 274, 277 H a g u e Rules, 3 1 1 ; compromise draft, 3 1 3 ; convention signed, 3 1 4 ; ratification, 3 1 4 - 1 6 Haight, Charles S., 309, 3 1 0 , 3 1 1 , 3 1 4 , 3 1 5 Hamel, van , 212 H a m m , Edward, 352 Hammarskjold, Dag, 382 Hankar, Florimond, 23 Hanotaux, Gabriel, 3 2 7 Harbord, James Guthrie, 297 H a r d i n g , Warren G., 164 Harding, William P. Gould, 23, 36, 1 3 2 , 1 7 7 Harmsworth, Lord Cecil, 124 Havenstein, Rudolf, 107 Hawley-Smoot tariff, 2 5 7 , 258, 259, 344, 346, 347. 356. 363 Heer, Henri, 2 1 2 Heldring, E., 3 9 « Hemert, Ph. von, 320, 321 Henderson, Arthur, 360 Henderson, H . D., 382 Hepburn, A. Barton, 39 Herrick, Myron T., 57; quoted, 58 Herriot, £ d o u a r d , 362, 389 Hill, Sir N o r m a n , 3 1 1 , 3 1 3 ; quoted, 3 1 6 Hines, Walker D., 288, 295, 3 1 0

412

Index

Hitler, Adolf, 384 Hlavacek, François, 4, 148, 150, 159 Hobson, A. J., 60, 61, 1 3 ; Hodges, George W., 57 Hoover, Herbert, 6, 39, 157, 164, 356, 362; at I.C.C. Washington congress, 351-53 Home, Sir Robert, 123 Hue, Otto, quoted, 82 Hughes, Charles Evans, 164, 166, 174, 184, 313; plan for business settlement of reparations, 165, 166, 168, 180 Hull, Cordcll, tariff policy, 259, 384, 385, 390 Hungary, Davis-Shotwell plan, 359; see also Danubian Valley . . . reconstruction; Ter Meulen scheme; Vienna Huysmans, Edward, 319 Hythe communiqué, excerpts, 90 Hythe conference, 53-55, 56, 57 I. L. O., see International Labor Organization Imperial Airways, Ltd., 281, 303 Imperial Shipping Committee, 3 1 3 Improvement association, international, 390 Inchcape, Lord, 39« Income tax, 279, 281, 282 Industrial ententes, 231, 246 Industrialists, struggle with international bankers, 65 ff., 74; Franco-German strife, 78, 80 ff.; negotiations at Spa, 80 ff.; struggle with advocates of tariff reform, 237 ff.; French, policy, 339, 340; tariff protection, U. S„ 339 Industrial property, protection of, 273-78; Union for, 273 Inflation, 126 Inland states, freedom of transit, 287 Inland waterways, 286, 295 Institut Français aux États-Unis, 31 Insurance, airway, 303, 304, 308 Inter-Allied debts, see Debts; Reparations Intergovernmental conferences, 78, 79 Intergovernmental debts, see Debts; Reparations International Bureau for the Protection of Industrial Property, Berne, 147 International Bureau of Distribution, 271, 272 International Chamber of Commerce, 22, 36, 37, 188, 374, 376, 387; political background, 3; history, activities, 4, 15, 146, 263-72; not subject to government control, 5; participation in reconstruction movement, 6; technical ability and economic power, 7, 264; headquarters, 7, 8, 146, 266; administrative organization, 7, 265-67; objectives, 8, 263; journal, 8, 266, 268; relations with International Labor Office, 9; reconciliation of Germans and Allied in-

dustry within, 2 1 ; Organization Conference (1920, Paris), 2i, 59-77, 93, 309, 3 1 9 ; preparations for organization meeting, ; 6 ; Washington meeting of American Committee, 57; German rival organization, 75; failure to bridge gap, 76; first congress (1921, London), toon, 122-43, 288, 310, 3 1 1 , 319; international character of London congress, 122; countries represented, 122; meetings made public, 123; question of inclusion of Germany in, 124; approves recommendations of Brussels Financial Congress, 129, 142; technique for business settlement of reparations, 144, 145 ff.; main committees, 145; cooperation with League, 146, 155, 2oo, 204, 268; recommendation re Genoa conference, 153; conferences upon Danubian problems, 157, 158; second congress (1923, Rome), 168-77, 275> 289, 290, 301, 326; American delegation, 169, 171, 175-77; hearings on reconstruction, 169 ff.; Rome resolution on world restoration, 174, 178, 181, 184, 191, 217, 219, 336, 354; committee work, 176, 181; representatives on Dawes and McKenna committees, 183; extension of arbitration, 190; admission of Germany, 191; cooperation in customs regulation, 205, 207, 209, 211 ff., 216; survey of economic conditions, 2 1 7 ; third congress (1925, Brussels), trend toward economic restoration, 217, 219; participation in World Economic Conference (1927), 22749; Committee on Trade Barriers, its report, 227-49 passim, 269, 293; representation in membership, 236, 250, 265; fourth congress (1927, Stockholm), 250 ff., 294, 296, 306; adopts report of World Economic Conference, 251; economic gospel pledged by, 251; technical services, 264, 268 ff.; Council, 265 ff.; officers, 266, 399-404; congresses, 267; diplomacy of technics, trend of policy, 269-72; fifth congress, Amsterdam, see Amsterdam; shift of emphasis from finance to trade, 271; sixth congress (1931, Washington), 271, 343, 350-54; activities re protection of industrial property, 273-78; campaign against double taxation, 2 79-83; communications and transit, committees on, 284-308; seventh congress (1933, Vienna), 305, 364; bills of lading, 309 ff.; campaign for acceptance of Hague Rules, 312; arbitration work, 318, 3 2 1 , 324; phitosophy of economic internationalism, 338; Europe-U. S. investigation, 343; Report to the Monetary and Economic Conference, 364-70; eighth congress (1935, Paris), 380; project for joint action with

Index Carnegie endowment, 380-84; recommendations of Joint Committee of Carnegie Endowment and I.C.C., 383, 395-98; ninth congress (1937, Berlin), 384 International Commission on Air Navigation, 302 International Congress of Chambers of Commerce and Commercial and Industrial Associations (1905-1914), 3, 13-18; constitution, program, 14; congress in Paris (1914), 14, 22, 3 1 7 ; in Boston ( 1 9 1 2 ) , 15, 18, 178, 179 International Consultative Telephone Committee, 297, 299, 300 International Convention Relating to the Simplification of Customs Formalities, 2 1 1 International cooperation, prewar, 13-18; principle of, 92; outline of new sphere, 1 0 1 ; process of transition, 122, 142 International Court of Arbitration, see Court of Commercial Arbitration International customs commission, 216 International Customs Conference, 387 International Dictionary of Shipping and Quotation Terms, 64 International Economic Union, 75 International exhibitions, 273 International Financial Committee, 140, 145, 165; membership, 147; work of, 148-50; report, 1 5 1 International Financial Conference, Brussels, 4» 53. 57» 76. 78, 79» 92-102, 103, 104, 2 53> 310; movement for, 39; memorial, 39; excerpts, 40-45; countries concerned, 40; U. S. Treasury opinion on memorial, 45-48; British cooperation, 49; delayed by reparations tangle, 49, 52; preparations for organization meeting, 55; resolution on exchange, 129; recommendations approved by I.C.C., 129, 142; resolution on reparations, 143; economic ambiguities, quoted, 196 International Headquarters of I.C.C., Paris, 7, 8, 146, 266 International Institute of Agriculture, 250, 254, 264, 372, 387 Internationalism, prewar, 3; postwar history of efforts in behalf of, 335-49; doomed by economic nationalism, 355-63 International Labor Organization, 4, 21, 76, 82, 227, 250, 254, 264, 265, 358, 372, 374, 376, 380, 381, 383, 384, 387; relations with I.C.C., 9; admission of ex-enemy states, 104 International law, see Law, international International Law Association, 309, 310, 3 1 1 International Maritime Committee, 64, 309, 313

413

International Office for the Publication of Customs Tariffs, 214 International Shipping Conference, 281, 309, 312 International Studies Conference, 381, 384 International Telegraph Union, 297, 298, 299 International Trade Conference (1919, Atlantic City), 21-38, 48, 56, 93, 177; objectives, plans, 22; committee organization, 23; task of, 24; discussions, 25 if.; a clearinghouse for business plans, 36; ominous reparations program, 37 International trade policies, evolution of, 195200 Interstate Commerce Commission, 292 Investments stimulated by reparations settlement, 191 Investment statistics, 343 Investors, American, 36 Iron and steel industry, 72, 81 Italy, at Allied business conference, 2 1 ; postwar trade, 29-31; chemical industry, 29, 30 Jackson, Andrew Marvel, 3 1 3 Jacobsson, Per, 122, 380 Janasz, Daniel J., 150 Janssen, Albert E., 23, 26, 60, 183, 190, 3 8 1 ; quoted, 25, 26, 2 1 1 Japan, nationalism, 360 Jay, Nelson Dean, 4, 148, 150 Jefferson, Thomas, quoted, 376 Joint Committee of the Carnegie Endowment and the I.C.C., Recommendations, 383, 39598 Jones, Owen, 381 Jouhaux, Leon, 1 2 1 , 243; quoted, 244 Juilliard, Robert, 279, 283 Kent, Fred I., 60, 68, 1 7 1 , 175, 183; quoted, 69-70, 176 Keppel, Frederick P., 160, 164, 287 Keynes, John Maynard, 25 Kindersley, R. M., 39» Konig, , 215 Kotzenberg, , 235 Krone, Austrian, 97, 105, 173 Labor, German, at Spa, 82; provision for miners, 85, 86; attitude toward ex-enemy states, 104; proposal for international cooperation, 244; see also International Labor Organization Lamont, Thomas W., 22, 56 Larnaude, F., 199 Laurent, Charles, 76, 289, 290 Lausanne reparations settlement, 362 Laval, Pierre, 358

Index

414

Shotwell

L a w , A . Bonar, 178, 179; quoted, 179

plan

for p r o m o t i o n

of

commer-

in-

cial treaties, 359; b e g i n n i n g of revolt against

dustrial property, 2 7 3 , 2 7 6 ; navigation, 284,

L e a g u e system, Special A s s e m b l y , 360; at-

295;

294;

tacks problem of peaceful c h a n g e , 383, 384;

inland w a t e r w a y s , 2 9 5 ; airways, 301, 302-4;

recognition of unofficial representatives and

Law,

international, 3, 2 8 ; ; protection of communications,

292;

transit,

postal l a w , 306; bills of lading, 309,

310,

organizations, 387, 389,

390

L e a g u e of Nations, business m e n ' s , 15, 21-38,

3» L a w of nations, maritime ports, railways, 291 L a y t o n , Sir W a l t e r , 246; q u o t e d ,

65 L e a g u e of Nations Associations, 254, 384

245

L e a f , W a l t e r , 4, 39n, 60, 126, 128, 135,

139,

L e a g u e to Enforce Peace, 17

1 4 1 , 142, 1 4 7 , 148, 150, 2 7 6 ; q u o t e d , 6 7 -

Lees,

68, 2 3 2 - 3 5 ; resolution supporting T e r M e u -

Legal vs. moral sanctions, 320, 324-25

len scheme,

133,

1 3 6 ; c a m p a i g n for freer

Loans Committee,

L e a g u e of Nations, 4, 165,

48, 63, 65,

122,

383, 3 8 7 ;

con-

264, 2 6 5 , 348, 3 8 1 ,

ception

which

gave

birth

f r o m reparations and

war

to,

3;

barred

debts scene,

impetus f o r reconstruction, 5 1 , 52, 5 5 ;

5; re-

lation to Brussels Financial Conference, 9 2 , 93,

96;

Austrian

reconstruction

and

M e u l e n plan, 99, 130, 1 3 1 , 154, 156, 160, 1 6 1 ,

162,

168, 1 9 5 ; system of

Clare,

150,

276

, 107 commerce

Lewandovski,

366

17,

William

Lepreux, Levant,

trade, 2 2 7 , 232, 233 League

Sir

in,

29

Maurice,

127,

strivings

for

international

Lloyd

George, David,

54,

145,

157,

at

Spa,

80,

83

ff.;

financial

work

correspondence

negotiations

L o a n s o n securities, increase in, 191

states,

104;

Austria admitted, 106; meetings m a d e p u b lic, 123; Economic and Financial O r g a n i z a -

Lobbies,

reparations

Bankers, and

reconstruction,

L o c a r n o Pact, 3 4 1 , 344, 3 4 7 ,

1 4 6 , 1 5 5 , 200, 204, 268; failure of

L o g a n , Colonel, 162

leadership clears w a y for, 1 5 4 ; doctrine of self-determination

in

Covenant,

173;

aids

ciples and M e t h o d s of Financial Reconstruc-

London

of

328-30;

arbitration

clauses,

190,

327,

Article 23 of Covenant, 1 9 7 , 198, 201, 2 1 1 , 222, 274, 2 8 5 ; Economic C o m m i t t e e ' s study of commercial policies, preparation for customs

conference,

201-8;

Congress

for

Simplification of Customs and Other

the

Simi-

congress, I.C.C.,

310, 3 1 1 , London

Economic

123,

'36,

London

Preparatory C o m m i t t e e , 227, 229, 238; rec-

Luiggi,

ommendations

Lyon-Caen,

Con-

Conference,

see

World

Conference

see

122,

Times

iron ore districts,

2 55>

288,

144

Times,

Lorraine

n o m i c Conference, 220, 225, 227; T e c h n i c a l Economic

122-43,

L o n d o n Schedule of Payments, 79, 1 2 1 ,

Loucheur,

World

ioon,

319

Monetary and Economic

lar Formalities, 209-16; sponsors W o r l d E c o -

to

357

13. 43 L o n d o n , Treaty of, 183, 189

validity

78;

L o n d o n , City of, domination of w o r l d finance,

D a w e s and M c K e n n a committees, 1 8 4 ; Printion W o r k , 185, 1 8 7 ; protocols on

165

tariff, 259; of A m e r i c a n shippers, 3 1 4

tion, 1 4 4 ; coordination w i t h w o r k of I . C . C . , Allied

with

Supreme

Loan

ex-enemy

of

Allied

tion

admitting

Committee

of

suggested at Brussels conference, 101 ; quesof

quoted,

negotiations

W o o d r o w Wilson, 89-90; influence on repaCouncil, 114, 116, 117-21

195;

153;

80; influence upon reparations

rations

188,

coopera-

tion, 3 3 5 - 4 5 ; conferences and treaties, 341

184,

187,

147,

i n g in France, 362 Liberals,

Ter inter-

141,

Liberalism, 16, 1 7 ; ended in G e r m a n y , g r o w -

national reconstruction, 100, 1 0 1 , 168, 1 7 0 , 185,

135,

171

Louis,

118,

32

153,

224,

231,

244,

3 4 ° ; quoted, 222, 223, 240-43, 252 Luigi,

23; q u o t e d , ,

31

319

ference, 248, 249; reaction to resolution of support

for

World

report,

251-53;

against

trade

Economic

leads

147

M a c D o w e l l , Charles H . , 30, 5 7 Machinery

taken by

McKenna,

R.,

taxation,

M c K e n n a committee,

ff.;

of

the

organization,

protection

M c C u l l o c h , J. E.,

of

transit organization,

253;

drive

industrial property, 274 ff.; w o r k on d o u b l e 279

barriers,

Conference

international

communications 285, 286,

292, 3 7 0 ; 288

ff.;

and work Rhine

Germany,

28, 82

143,

182-92, 235,

39« 181,

338 Maclcan, Donald, 39«

and D a n u b e inquiries, 295; efforts to sub-

Madrid

m i t F r a n c o - G c r m a n dispute to, 358; D a v i s -

Maillard, G., 276

regulations, cables, 298

Index

415

tive state, 3 4 1 ; default and revolt, 346-49; triumph of, in Europe, 355-60; in Asia, 360; in U. S., 360-63; American New Deal, 363; causes failure of Monetary and Economic Conference, 370-73; cost of sovereignty, 376 National Liberals, 1 7 National Peace Conference, 384 National state as instrument of international action, 16 Nation-state system, 386 Navigation law, see Law Nazis, growing strength, 357 New Deal nationalism, 363 " N e w imperialism," 16 New York Times, 354 Nicolle, Louis, 1 3 7 , 138, 147, 150 Nobel Peace Foundation, 1 7

Mail service, see Postal service Maioux, , 354 Malkin, Herbert W „ 2 1 2 Manchester, Chamber of Commerce, 3 Manchester, Cobden movement, 386 Marais, Baron du, 27 Maritime flag, 286, 287, 289, 290 Maritime law, see Law Maritime Law Committee, 3 1 0 , 3 1 1 Maritime ports, 288, 290, 291 Maritime terms and laws, 64 Maritime transportation, see Shipping; Waterways Marling, Alfred E., 138 Masaryk, Thomas Garrigue, 157, 158, 160, 162, 359 Masaryk, son of Thomas G., i ; 8 Materialism, triumph of, 340 f. Mazot, , 23 Melchior, Carl, 87 Memorial calling international conference, 39; excerpts, 40-45 Mendelssohn, Franz von, 1 9 1 , 354 Merchant marine, German, 3 1 Merrivale, Lord (Henry Duke), 3 1 3 Milan Chamber of Commerce, 75 Miles, Basil, 166, 172, 216, 325; experience, appointment as I.C.C. commissioner, 163; quoted, 164 Miller, David Hunter, 197 Millerand, Alexandre, 53, 6 1 , 68, 7 1 , 76, 80, 81, 82, 83, 84», 89, 90, 167 Miner, E. G., 22 Miners, foodstuffs for, 85, 86 Mises, Ludvig von, 382 Mlynarski, Feliks, 382 Monetary stabilization, 65, 66, 96-98, 105, 108, 160, 185, 187-89, 365, 380; studies of experts, 381 f. Monopolists, debate upon, 238, 241 Moral vs. legal sanctions, 320, 324-25 Morgan, J. Pierpont, 39 Mortara, Giorgio, 382 Mosch, H. R. du, 4, 148 Most-favored-nation clause, 2 3 1 , 246, 255, 257, 258, 342, 367, 379; I.C.C. suggestion for interpretation of, 368 f. Motor vehicles, 293 Mouchy, E. P. de, 390 Mussolini, Benito, 168; quoted, 169 Mylius, Giorgio, 128, 1 4 1 , 147, 170

Pact of Oslo, 368 Pact of Ouchy, 367, 368, 379 Pact of Paris, 344 Pacts, postwar, 3 4 1 , 344 Page, Thomas Walker, 58 Panceno, Antonio, 138 Papen, Franz von, 362 Paris, I.C.C. congresses ( 1 9 2 0 ) , 2 1 , 59-77, 93, 309, 3 1 9 ; ( 1 9 3 5 ) , 380 Paris, reparations conferences, 1 1 1 , 1 1 3 Paris Business Conference, 59 ff., 78; importance of, 76 Paris Chamber of Commerce, 327 Parliamentary system, 3, 335; the objective of economic liberals, 336; replaced by corporative state, 341 Parmentier, Jean, 23, 28 Party system, 388, 389 f. Pascalis, Georges, 22, 56 Passports, 64

National Bank of Belgium, 26 Nationalism, trade hampered by, 195 IT.; as obstacle to international cooperation, 336 ff.; conflict between philosophies of internationalism and, 338; rise of the corpora-

Pasvolsky, Leo, 381, 382 Patents, protection of, 273-78 Peace Conference, Paris: war settlements, Atlantic City conference the corollary to, 24; Germans denied entry, protest Treaty terms, 49; tariff policy, 198

Ocean carriers, bills of lading, 309, 3 1 4 Ofenheim, Wilhelm von, 1 3 3 Ohlin, Bcrtil, 382 Olivetti, Gino, 147 Opinion-forming institutions, 386, 387, 388; leadership threatened by breakdown at Geneva, 374 ff.; see also Public opinion, rule of Oriental Railways Company, 286 Oslo, Pact of, 368 Ouchy, Pact of, 367, 368, 379

4i6

Index

Peace Treaty, see Versailles, Treaty of Permanent Court of International Justice, 164, 291; decision against Germany, 357 Pesson-Didion, , a8 Picard, Roger, 148, 149 Picot, , quoted, 70 Pirelli, Alberto, 4, 147, 150, 1 7 1 , 183, 186, 189, 218, 352, 354; as liaison officer, I.C.C. and League of Nations, 146, 204 Poincarc, Raymond N. L., 14, 18, 79n, 154, 167, 1 8 1 , 189, 190 Political control, in economic affairs, 48; in reparations negotiations, 1 1 4 - 2 1 ; in Danubian affairs, 1 6 1 ; by middle and lower classes, 361 Poncet, André François-, 23 Porto-Rosa conference, 156-158, 288 Ports, maritime, 288, 290, 291 Postal Congress, 293 Postal service, 297, 306-8; air mail, 301, 306; law, 306 Postal Union, 306, 307, 308, 374 Pozzi, Roberto, arbitration draft, 320, 324 Predöhl, Andreas, 381, 382 Production, controlled, 238 Professors in Vienna, relief for, 157 Profits, allocation of, 283 Progressives, 17 Proix, Jean, 77 Property rights, protection of, 273-78 Publicity for customs regulations, 2 1 3 Public meetings, international organizations, "3 Public opinion, rule of, 3; development towards ex-enemy countries, 104-6; influence on economic policy, 224; authority in parliamentary system, 335; attempts of economic liberals to influence, 336; see also Opinion Quartieri, Ferdinando, 30, 76 Quesnay, Pierre, 343 Railways, era of expansion, 286; rates, 286, 2 9 1 ; governmental policies, 289; international regime of, 289, 290, 291 Ramlot, Paul, 148 Rapallo, Treaty of, 154 Rates, railway, 286, 291; shipping, 286; telegraph, cable, 298; postal, 307, 308 Rathenau, Walter, 145, 244 Rationalization, American gospel of, 339 Reconstruction movement, early stage, 3; I.C.C. participation in, 6; governmental impotence, 33; effect upon taxation, 33; relation of reparations to, 37, 5 1 , 52; origins, 3958; U. S. aid to, 45-48, 69; evolution in

business minds, 57; in transition from Allied to international organization, 59 ff., 74, 122, 142; debate, I.C.C. Organization Conference, 65 ff.; situation of devastated countries, 70 ff.; world cooperation reestablished, 76; international plan developed at Brussels conference, 100; Allied method, 100, 168; League method, 100, 1 0 1 , 168, 170, 184, 185, 187, 188, 195; featured at first I.C.C. congress, 123; movement materialized in Geneva protocols, 155; American business policy with regard to, 163; hearings at I.C.C. Rome congress, 169-77; resolution on, 174, 178, 1 8 1 ; history of liberals' efforts in behalf of, 335-419; doomed by forces of nationalism, 355-63; see also Danubian Valley . . . reconstruction "Reconstruction of the Devastated Regions," 76 Reconstruction supplies, committees on, 28 Redfield, William C., 23 Referendum by I.C.C., 155 Reform, and world business opinion, 374-92; Chatham House conference a movement for, 379 Registration of patents and trademarks, 273 Reparation Commission, 39, 52, 76, 138, 144, 145, 1 5 1 , 162, 165, 182; German taxpayers denied hearing on, 34; memorial to, calling for international conference, 39; at Spa, 86, 87; U. S. representation upon, 165, 166 Reparations, 39, 92, 96, 152, 336, 343, 352, 356; League barred from scene, 5; I.C.C. aid, 6; incorporated in Treaty of Versailles, 24, 49; methods of payment, 25, 27, 51, 85, 107, 108-10, 145; importance of, to Allied countries, 26 ff.; Franco-German industrial background, 28; unforeseen dangers in enforcement of, 35; relation to reconstruction, 37. 5>> 5 2 ; as dealt with in memorial calling international conference, 41; of Wilson administration opinion on setdements, 48; early efforts to reach agreement upon, 49; effect upon international negotiations, 52 ff.; relation to credits, 53, 61, 65; investigation by experts, 54; dependence of devastated countries upon, 66, 70 ff.; negotiations at Spa, 79-91; international technique of adjustment attempted, 79; London Schedule of Payments, 79, 1 2 1 , 122, 123, 136, 144; precluded from consideration by International Financial Conference, 92, 96; mentioned at Conference, 95, 96; relation to German economy, 95; settlement by Allied and German experts at Brussels conference on reparations, 103-13; conference in Paris, h i , 1 1 3 ; in Berlin ( 1 9 2 1 ) , 1 1 2 ; negotiations at Paris meeting of Allied Supreme Council,

Index 1 1 4 - 2 1 ; replacing of bonds on American market, 134; debates and resolution of Brussels Financial Conference, 1 3 7 S., 1 4 3 ; attempts to reach a workable goal, 144; technique developed within I.C.C., 145; settlement sponsored by U. S. business, 165-67; Allied method of reconstruction by, 168; I.C.C.'s application of business principles to, 1 7 3 , 176; business solution upheld by Stresemann, 178 fl.; by Lord Curzon, 180; business settlement by Dawes and McKenna committees, 182-92; report on relationship of payments to international trade, 2 1 8 ; technical case for a settlement, 2 7 1 ; Lausanne settlement, 362 Reparations bonds, 147, 148, 1 9 s ; distinguished from Ter Meulen bonds, 1 3 ; , 1 3 7 Reparations Conference of Experts, Brussels, 4. 78, 79. 1 0 3 - 1 3 Research function of I.C.C., 264 Reynolds, George M., 39 Rhine River inquiry, 2 9 ; Rhine speeches, 104, 106 Ricci, Senator, 76 Riedl, , 342 Rist, Charles, 343, 380, 3 8 1 , 382; survey of Danubian problems, 157, 1 6 1 Rist-Layton report, 1 5 7 River law, 295-96 Road traffic, 293, 294 Rob bins, Lionel, 381 Roberts, George E., 134, 148, 18911 Robinson, H. C., 60 Robinson, Henry M., 4, 183; quoted, 247 Rome congress, I.C.C., 168-77, 275, 289, 290, 3 0 1 , 326 Rome resolution on world restoration, 6, 174, 178, 1 8 1 , 184, 1 9 1 , 2 1 7 , 219, 336, 354 Roosevelt, Franklin D., 362 Roosevelt, Theodore, 1 7 Root, Elihu, 39, 157 Rossi, , 76 Rothlisberger, Ernest, 275 Rudolf, James P., 3 1 1 Ruhr, occupation of, 84, 1 2 1 , 167, 1 7 3 , 373 Runciman, Walter, quoted, 235-37; proposal by, 249 Salter, Sir Arthur, 75«, 160, 162, 169, 1 7 1 , 173, 229, 250, 259; quoted, 187, 204, 219, 220, 2 2 1 , 222, 224, 230, 2 3 1 , 2 5 1 , 258, 370 Sandick, A. A. van, 1 3 7 , 382 San Remo, conference, 53, 56, 84 Schacht, Hjalmar, 384 Schneider, Eugène, 23, 81, 340; quoted, 3 1 , 32, 71-73 Schreiber,

, 303

4 1 7

Schroeder, Kurt, FreiherT von, 107 Schuller, , 158, 160 Schumann, , 157 Schuster, Sir Felix, 4, 1 2 7 , 147, 150, 1 7 1 , 3 1 1 Self-determination, doctrine of, 173 Serruys, D., 2 1 2 ; proposal for protection of industry, 244, 245 Seydoux, Jacques, 107, i l l , 1 1 2 , 1 1 3 Seydoux plan, 1 1 4 , 1 2 s , 352 Sforza, Count Carlo, 80, 83, 85» Shipping, German, 3 1 ; tax, 2 8 1 ; rates, 286; governmental policies, 289; bills of lading, 309-16 Shotwell, James T., 1 5 7 , 359, 380, 3 8 1 , 383, 3 8 5 ; aids Danubian reconstruction plans, 157-62 Sibley, Harper, 385 Simons, DeW., 84, 87, 89, 104, 1 1 3 Smith, Browning, 156 Smith, Sir Hubert Llewellyn, 209; quoted, 210 Smith, Jeremiah, 223 Smith, R. V. Vassar, 39» Socialist International, 3 Solvent debtor, 40 South America, arbitration, 320, 322 Southeastern Europe, Chambers of Commerce, 160 Spa, conference at, 4, 53, 56, 57, 78, 79-91 Special Assembly of the League of Nations, 360 Spender, J. A., 379 Stabilization, see Currency stabilization Stamp, Sir Josiah, 183, 2 1 8 , 2 1 9 Starvation conditions, 68, 157 Statistics, bureau of international, 64 Steamship companies, bills of lading rules, 312 Steel, 3 1 , 32; industry, 72, 81 Stimson, Henry L., 360 Stinnes, Hugo, 1 1 2 , 1 8 7 ; influence at Spa conference, 81, 84, 89 Stockholm congress, I.C.C., 250 B., 294, 296, 306 Stodola, Kovnel, 136 Strawn, Silas H., 350, 3 5 1 , 353, 354 Streat, Raymond, 321 Stresemann, Gustav, 16, 1 7 , 18, 2 5 1 , 3 4 1 ; upholds principles of international cooperation, 178, 1 8 1 ; quoted, 179, 250, 252; becomes chancellor of the Reich, 180 Supreme Council, see Allied Supreme Council Tardieu, André Pierre Gabriel Amédée, 3 6 1 , 363. 389 Tariff and trade commission proposed, 231

4 i 8

Index

Tariffs, Peace Conference program, 1 9 g ; U. S. policy, 1 9 9 , 339, 344. 35». 353; League study of, 202; approach to, by customs conference, 215, 216; by I.C.C. Brussels congress, 220, 2 2 ; ; by World Economic Conference, 227 ff.; struggle between industrialists and advocates of reform, 237 ff., 339. 342; endorsed at I.C.C. congress, 2 5 1 ; hesitant attitude of League Council, 253; international drive for, under League leadership, 253 ff.; increase in, 254 ff.; HawleySmoot Act, 257, 258, 259; Hull policy of reform, 259, 384, 385, 390; I.C.C. policy, 269, 2 7 1 ; technical case against, 271; affecting maritime ports, 290; Davis-Shotwell plan, 359; I.C.C. report to Monetary and Economic Conference, 366-69; Cobden treaties, 386 Taxation, burden of postwar reconstruction, 33, 41, 42; double, 62, 279-83; an international problem, 280; League survey, 282 Taxation of Foreign and National Enterprises, 282 Technical Preparatory Committee, 227, 229, 238 Technical work of I.C.C., 264, 268 ff. Telegraph service, 297-99 Telephone service, 296, 297-301; intercontinental, 299; statistics, 299 Ter Meulen, C. E., 39», 99, 150 Ter Meulen bonds, 99, 131, 132-36, 143, 147, 1 9 ; ; distinction between reparations bonds and, 135, 137 Ter Meulen scheme, 99-101, 126, 130-36, 1 5 1 ; attitude of U. S., 150, 152, 154; see also Danubian Valley . . . reconstruction Theunis, Georges, 254, 342, 350, 352 Thomas, Elbert D., 315 Thomas, J. H., 39« Thys, William, 4, 60, 128, 148, 150; quoted, 65, 66 Times, London, 80; excerpts, 42, 81, 83, 104, 10;, 106, i n Times, New York, 354 Tirman, Albert, 23, 28 Trade, discussions of Allies re ex-enemy trade, 29 ff.; program of I.C.C. Organization Conference, 62, 63; terms, 64, 294; evolution of international policy, 195-200; report on relationship to reparations payments, 218; international drive against trade barriers, 253 ff.; shift of I.C.C. emphasis to, 2 7 1 ; I.C.C. report to Monetary and Economic Conference, 366-70; see also Customs; Tariffs Trade Barriers Committee, 227-49 passim, 269, 293

Trade Conference, Atlantic City, see International Trade Conference Trademarks, 273, 274, 278 Traders and their goods, Tariff practices, 3 1 4 Transfer problem in reparations settlement, 185, 187-89, 234, 343 Transportation, 270, 284-308; resolutions on, 64, 289; obstructions to, 230; League provision for freedom of, 285; rights of inland states, 287; fundamental law of nations, 291; I.C.C. committees and functions, 293 ff.; road traffic, 293, 294; international law of, 294; bills of lading, 309-16; I.C.C. study of, 369; see also Air transportation; Railways; Waterways Treaties, curbing double taxation, 279; postwar pacts, 341, 344 Treaty of London, 183, 189 Treaty of Rapallo, 154 Treaty of Versailles, see Versailles, Treaty of Trendelenburg, Ernst, 381 Tripartite Monetary Declaration, 382, 384 Trocquer, le, , 167 Unfair competition, protection against, 274, 277 Union for the Protection of Industrial Property, 273 ff. United States, Allied need of postwar credit, 26, 27, 30, 34; bids for cooperation of, against German interests, 30, 3 1 ; banker's role in reconstruction, 35; number and role of investors, 36; memorial to, calling for international conference, 39; Treasury opinion on relation to European reconstruction, 45-48, 196; a factor in debt situation, 55; financial situation, 68, 70; government aid to Europe, 69; danger in position as greatest creditor nation and importer, 97; stand on war debt settlements, 119, 336, 344, 348, 350 f., 362; at first I.C.C. congress, 124, 129; opposition to reparation bonds, 134; participation of, in European affairs, 149, 151, 152; failure to release liens against Austria, i ; o , 154; business plan for settlement of reparations, 165-67, 182-92; representation on Reparation Commission, 165, 166; influence of delegation at I.C.C. Rome congress, 169, 171, 175-77; cancellation of Allied indebtedness, 175; response of investors to reparations settlement, growth in bank loans, 191; tariff policy, 199, 256 ff., 339, 344, 352, 353; Hawley-Smoot Act, 257, 258, 259; Hull tariff policy, 259, 384, 385, 390; delays in bill of lading legislation, 310, 314, 315; commercial arbitration, 320, 322; disarma-

Index ment, 348, 351; influence at I.C.C. Washington congress, 351-54; first years of the New Deal, 362 United States Chamber of Commerce, 15, 22, 56, 149, 150, 151, 155, 320, 321; memorial to, calling for international conference, 39, 40; lead in organization of I.C.C., 56; consideration of relations between U. S. and Europe, 152; aids development of U. S. business policy re Europe, 163, 165; report on "Tenth Annual Meeting," 163-6;; Committee on Commercial Arbitration, 190 United States Grain Corporation, 69 "United States of Europe," Briand's plan, 241, 258, 342, 346, 348; German idea, 35; United Sutes Shipping Board, 312 University professors, relief for, 157 Van Den Ven, Paul, 23 Vanderlip, Frank A., 39 Van Vlissingen, F. H. Fentener, 7 Varaigne, Major, 23; quoted, 28 Ventimiglia, Guglielmo, 76 Versailles treaty, 53, 109, 110, 165, 173, 348; spirit underlying, 24, 2$; reparations clauses, 24, 25, 26, 35, 37; terms protected by Germans, 49; Protocol, 50, 52; Article 235, 52, 85; German failure to fulfill, 61; disarmament and war criminals, 79; unfair competition clause, 274, 277 Verwilghen, Raphael, 136, 137, 138 Veverka, Ferdinand, 222 Victory Loan of 1919, 69, 74 Vienna, suffering in university circles, 157; statement of trade balance of; an asset to Austria, 161; reconstruction experiment in, 170; bank crash, 356 Vienna congress, I.C.C., 305, 364 Viner, Jacob, 381 Vissering, G., 39n, 188; quoted, 96; on currency reform, 97-98 Viviani, Rene, quoted, 106 Wadsworth, Eliot, 385 Wallenberg, K. A., 4, 390, 17: Wallenberg, Marcus, 39» Wall Street crash, 345, 346 War, start of, 378 War Burdens Commission, German, 86 Warburg, Paul M., 39 War criminals, 79 War Debt Funding Commission, 336, 337 War debts, see Debts; Reparations War Finance Corporation, 36 War History, 157

419

War investments, 36 Warsaw conference on air law, 303 Washington congress, I.C.C., 271, 343, 350-54 Washington Disarmament Conference, 145, 149, 150» >5'. ' 7 2 Waterways, transportation, 284-96; navigation laws, 284, 291, 29$; inland, 286, 295; of international concern, 287; bill of lading rules, 309-16 Watson, Thomas J., 7, 380, 384, 385 Watts, F. O., 128, 129, 135, 141, 148, 189»; quoted, 130 Watts-Roberts Memorandum, 189 Webb-Pomerene A « , 58 Westerman, W., 171 Wheeler, Harry A., quoted, 15, 16 Wieniawski, , 212 Wilson, Sir Henry, 84 Wilson, Woodrow, 25, 48; quoted, 3, 197; correspondence with Lloyd George, 89, 90; Fourteen Points, 198, 200 Wimmcr, August, 305 Withers, Hartley, 228 Wolff, , 105 World community, significance of idea of, 17 World Court, 164, 291; decision against Germany, 357 World Economic Conference, 1927, Geneva, 6, 9, 329, 341, 372; proposal for, preparation, 217-26, 227-35; Guide to the Documents . . . , 229, 231; debates, speeches, results, 235-49, 338; emphasis upon barriers to trade, 247 f., 269, 341; report of, adopted by I.C.C., 251; given lukewarm blessing by League, 251-53; campaign in support of program of, 253; on suppression of unfair commercial practices, 277 World economic parliament, continuously functioning, 389 World Monetary and Economic Conference (1933, London), 305, 364-73, 388; l.C.C. report to, 364-70; hearing denied to business, 370; nationalism the cause of failure, 37' World Restoration, Committee on, 227 World Trade, 8, 266, 268 "Wound in the West, The," 104 Young, Owen D., 4, 57, 148, 183, 186, 190, 310, 324; quoted, 251; plan of commercial arbitration, 321-25 Young committee, 344, 372 Young plan, 337. 357 Zuccoli, Giuseppe, 136, 147