Economics and the Public Welfare. Benjamin M. Anderson

away from the mills and transportation from the railroads which would have brought the grain to Minneapolis and would have taken the flour for export to the seaboard. And there was complaint too on the Montana border that cattlemen on the

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      Montana ranges were prevented by the tariff on Canadian cattle from bringing in the lean Canadian cattle to feed on the Montana ranges.

      The Seeds of Death Planted. But the great harm came from the Fordney bill of 1922. This imposed a grave barrier against European industrial revival, and it imposed a deadly handicap on the export trade of the American farmer whose market was primarily in Europe—an export trade which amounted to sixty percent of the cotton produced, forty percent of the lard, more than twenty percent of the wheat, forty percent of the tobacco. The seeds of death were introduced into our industrial revival when this tariff bill was passed.

      The high protective tariff of 1922 was one of three major mistakes in international policy which the United States contributed to the evil days that were to come. The two others were (a) our rejection of the League of Nations, and (b) our mishandling of the problem of the inter-Allied debts, the debt created by the approximately $10 billion which our government loaned to Allied governments during the war and in the post-Armistice period down to June 30, 1919.

      Woodrow Wilson and the League of Nations. Woodrow Wilson had certain personal qualities which irritated and antagonized to an extraordinary degree those people who did not like him. But he was the greatest man, the most upright man, and the most far-seeing man who has held great public office anywhere in the world within the memory of men now living.⁵

      Wilson doubtless erred in going in person to Paris. He doubtless erred in not taking with him important Republican leaders. He doubtless erred in taking too uncompromising a stand against amendments proposed to the League of Nations by honest opponents in the American Senate—among whom we should emphatically not include Henry Cabot Lodge. But Wilson’s failure to accomplish his great purposes primarily arose from a different sort of weakness—he had a grave sickness, probably his first apoplectic stroke, in the midst of the peace negotiations in Paris. This was not publicly known at the time. A few people knew it. One man closely associated with President Wilson in Paris said in 1920 that in the early part of his stay there Wilson was alert, flexible, resourceful, eager for information, open-minded to suggestions. Then for a prolonged period nobody saw him. When he could be seen again he was aloof, remote, inflexible, uninterested in new ideas, dogmatic in his insistence on fixed purposes. This man was sure that Wilson had had his first stroke in that interval. Subsequent confirmation of a grave and disturbing sickness in Paris has come from two sources. Mrs. Wilson in her My Memoirs⁶ gives a brief account of this sickness. The second confirmation comes in a series of

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      Saturday Evening Post articles⁷ by former President Hoover. Had Woodrow Wilson had his full energies we should have entered the League of Nations.

      The young student of economics, sociology, and history is easily impressed with the doctrine that history is made by impersonal social forces, irresistible in character. When one sees history being made from the inside it is impossible to avoid the conclusion that a vast deal depends upon the strengths and weaknesses of the leading participants. As this book proceeds, a good many such cases will be cited. The failure of the League of Nations was the failure of Woodrow Wilson’s health, just as the passage of the tariff of 1922 traced primarily to Warren G. Harding’s abysmal economic ignorance.

      Ruinous Effect of Our Staying out of League. Our absence from the League of Nations left that organization with inadequate strength, and, above all, left it unduly weighted by France.

      The peace treaties contained many dangerous and impossible provisions. They split the Austro-Hungarian Empire, which had been a great free trade area, into a large number of small succession states which, hating one another and fearing one another, erected high tariff barriers against one another. Instead of having one currency system, they had a large number of fluctuating currencies which each tried to protect, not merely by orthodox currency measures, but also by shifting restrictions on international payments and on the free movements of funds as well as commodities. Eastern Europe was Balkanized.

      Austria, cut off from the great region of which she had been the governmental, financial, and trading center, found herself with an immense problem of readjustment. For many years she was incapable of solving the problem, and to a considerable extent lived on international charity. After ten years she appeared to have worked it out by a great reduction in the population of the city of Vienna, as city activities diminished, and by an increase in the proportion of her agricultural activities as her people moved from the valleys up the mountain sides to thinner land where meager crops could be obtained.

      The heart of the problem left by the Treaty of Versailles centered about the relations between France and Germany, and the problem, above all, of reparations payments by Germany to France.

      The problem of reparations was one which could be solved only if a very realistic economic policy were adopted. But French policy was primarily political. France still feared a stricken and beaten Germany. She was much more concerned about keeping Germany politically weak than she was about getting real reparations out of Germany. Real reparations from Germany could come only from a Germany which was economically strong.

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      It is not easy to assert that these French fears were foolish fears in the light of developments since 1936, or for that matter since early 1933. Similar fears were clearly shared by Denmark, which refused to take full advantage of the Treaty of Versailles. The treaty restored to Denmark Schleswig-Holstein, which Bismarck had wrested from her in 1864. Denmark, looking forward twenty years, sought to avoid German resentment by holding a plebiscite, leaving the people of Schleswig-Holstein themselves to decide whether they wished to stay with Germany or to return to Denmark, with the result that only the northern part returned to Denmark.

      The two significant points from the standpoint of the American participation in the League of Nations are: (1) if we had been wholeheartedly in the League of Nations, France would have had much less fear regarding her future security, and (2) if we had been active and powerful in the League of Nations, we and the British, acting together, could have controlled League of Nations policy, and could have forced upon France a much more reasonable attitude toward the question of reparations and the question of Germany’s industrial revival than England alone was able to do.

      As will be seen later, the democratic Germany of the Weimar Constitution, the Germany of Ebert, of Wirth, of Stresemann, and of Bruening, was a Germany with which the world could have lived at peace, and was a Germany which could have endured, had outside pressure, and above all, French pressure, been less remorseless.

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13

       Germany, 1918-24

      Germany a Hollow Shell at End of War. Germany at the end of the war was economically a hollow shell. Germany’s war economic policy had been extraordinarily efficient in sucking out of the people all their resources and all their vitality to put guns and food into the hands of the soldiers at the front. She had not been invaded, but invaders could hardly have done a more efficient job of denuding her of resources than her own war government. Her government, moreover, had been financially a gambler, counting on winning the war, counting on bolstering the weakness of her internal finances with requisitions on a conquered France, and had overloaded the Reichsbank with government paper. Germany had, at the end of the war, a system of public finance and currency vulnerable in the extreme.

      Unrealistic Reparations Demands of Versailles Treaty. To call upon Germany suddenly for great reparations payments in a situation of this sort was natural enough, perhaps inevitable, in the temper of the times, but it was certainly economically unrealistic. Whatever she paid under those conditions could only be at the expense of further economic