Chapter X
The immediate causes of the present world war and the new revolution are the failures of the victorious nations and of the Versailles system, and, in addition, of course, the fundamental reasons for such failures. These reasons were extensively discussed in the five chapters of Part II. The post-Versailles failures have been economic, diplomatic and political. They occurred mainly during the twenties while democracy and capitalism rode high, wide and handsome. They were not due to Hitler. He was due to them.
The essence of these failures was an inability to preserve the old or to create the new. Now war has come both to destroy the old and bring forth the new. That war has to do this, is an indictment of democracy and a refutation of the enlightenment. The American patriot of today deeply deplores the tragedy but marks it down as the final proof that democracy has failed. War has come to give us the new revolution simply because we, in the democracies, were unable to achieve it bloodlessly during twenty years of peace and world supremacy. No victorious alliance was ever more powerful than that headed at Paris by the two greatest liberals and ablest politicians of twentieth-century democracy, Woodrow Wilson and David Lloyd George. Over twenty million lives were sacrificed in order to give these liberal messiahs power to make the world safe for democracy and capitalism.
For the many reasons developed in Part II it would doubtless have proved impossible for any quality or type of democratic statesmanship to have averted either October 1929 or September 1939. Be that as it may, it has to be admitted that allied statesmanship did not even try intelligently to do so. This was clearly pointed out by John Maynard Keynes in a book published just after Versailles and entitled The Economic Consequences of the Peace. The performance of democracy triumphant and capitalism rampant during the twenties cannot be dismissed now with an airy, “They’ll do better next time.” The first blunder of the democracies at Versailles, of course, was an indecent refusal to show prudent moderation as was displayed by the victors at the conference of Vienna in similar circumstances a century earlier.
They wanted a peace of blood and iron enforced by words and paper. The same mass irrationality in America at the beginning of 1940 wants the destruction of Nazism but not the necessary American contribution to this end. Of course, an irrational mass mind, torn between conflicting emotions, will unquestionably, in the final analysis, be carried away by its passion rather than held back by its pusillanimity. Nothing could be more pusillanimous than the prevailing combination of American opinions that Europeans should be encouraged to fight to the bitter end for the right and the freedom of the world and that Americans should keep out of the fight. Obviously, if a nation takes the moral view of the war affected by the American mass mind under the incitation of long sustained and cleverly directed propaganda, then the only self-respecting thing that nation can do is to back up with its arms its convictions, its moral principles and what it believes to be the defense of its own freedom. Either our beliefs about the war are wrong or our staying out of the war is shortsighted and pusillanimous.
Another important inconsistency or irrationality of the victorious democracies at Versailles was that they sought on one hand to perpetuate the institutional status quo of capitalism and democracy and on the other hand to introduce the most radical innovations, such, for instance, as the creation of the successor states. In other words, they upheld at the same time the internationalist ideal of a world capitalism and the nationalist ideals of numerous petty ethnic minorities in Europe. Their hope, of course, was that the power of the international money system would prove mightier than the forces for economic disintegration generated by the myriad national systems being set up or inflated at Versailles. They regarded different nationalisms more or less as the American rich have long regarded Tammany politics or, for that matter, all American politics, something the muckers can be allowed to play with, enrich themselves with and keep the populace amused with as long as the plutocracy is able to have the really important things done or upheld by government as the plutocracy desires.
The Wilsonian idealists were politically and psychologically too naive to perceive that if militant nationalism were to be raised to a factor of the first magnitude in the postwar world, it could only transpire that the two largest racial groups in Europe, the Russians and the Germans, the former dominated by the crusading Bolshevist faith and the latter animated by a fierce defeat and humiliation-engendered hate, must sooner or later come to supreme power over most of Europe, as has since happened. The reasons were as obvious in 1919 as in 1939: The Germans were twice as numerous as the Italians or the French and three times as numerous as the next largest ethnic minority, that of the Poles, while the Russians were three and a half times as numerous as either the French or Italians. The German annual total of births greatly exceeds that of Britain and France while twice as many Russians are born every year as Americans and three times as many as Britishers and Frenchmen combined. In quality for industrial or war purposes, the Germans were and are second to no people. The Allies, of course, hoped by self-determination to place a swarm of ethnic Lilliputs over the great Germanic and Slavic Gullivers. And Mr. Wilson’s legalist mind doubtless took it for granted that factors as real as German population-and-industrial-production superiority in quantity and quality could be held in check by a few lines of contractual lawyerese set down in treaties and League covenants.
It is not merely hindsight to say that if the Allies were interested in preserving the institutional status quo of democracy and capitalism, they should never have unleashed on Europe a wave of self-determination. Doubtless that institutional status quo could not be preserved. Be that as it may, the victorious Allies made no rational attempt to preserve it. They should, instead, have used their victory and resulting power to force upon a greater rather than a smaller Germany—say the greater Germany after the treaty of Brest Litovsk—and on a reconstituted central European federal state, now supposed to be the supreme war objective—with its capital at Vienna, a free-trade regime. The Allies should then have used their monopoly of power and food supplies to force upon all the Balkan states membership in a Pan-European customs union upon which they would also have imposed extensive free trade with themselves. The chief reasons the Allies did nothing so intelligent for the attempted preservation of international capitalism and democracy as to use their power in a rational effort to create European economic unity were: First, their leaders, including Messrs. Wilson and Lloyd George, had not the slightest idea of the economics of capitalism or the mechanics of political power. They knew, of course, how to win elections and lawsuits under the democratic regime, but they did not know that these rather specialized forms of contest for power are not all there is to the struggle for political power. Second, the stage had been reached in American as well as French industrialization at which protectionist monopoly had become vitally essential to stability and profits. American and French industries were not geared to world free-trade competition and knew it. The British also were not and did not then know it. They recognized it in 1932 when they went protectionist.
In financial and monetary matters the British at and just after Versailles expected to outstrip their competitors. This expectation has been rewarded with as fine a basket of dead sea fruit as any crew of international bankers ever harvested. Following the advice of the Cunliife Committee drawn up just before the armistice, the British attempted to do all the sound things for recovery such as deflating the currency and bank credit, balancing the budget, retiring the public debt and returning to the gold standard. American bankers rushed in to take part in and profit from the supposedly world-wide return to normalcy. The movement profited mainly the American bankers. The American investors who bought the now worthless foreign bonds gave the party for their bankers. British bankers could not sell so many bonds but they did reap large profits on the high money rates caused by wild German short-term borrowing and by the Wall Street speculative boom. So, while the two crazy booms lasted, a good time was had by both Wall and Threadneedle streets. But the profits of high money rates have since been largely wiped out by the losses suffered by all international lenders on the German and central European standstill agreements by which over a billion dollars of short-term loans have been liquidated on a basis of a fifty per cent and sometimes a higher discount.
Briefly, the whole attempt of the twenties to restore the pre-war money system operated from London and for London ended in complete failure, American investors being among the biggest victims. The failure was first officially acknowledged when the British struck their financial colors in September 1931 by going off gold. Our corresponding devaluation of the dollar in 1933-1934 made the abandonment of the world money system unanimous, since what Britain and America do in monetary and exchange matters has sooner or later to be done by every other nation. At the outbreak of the world war in 1914 the pound temporarily went to a premium, being quoted in some transactions as high as $5.70 as against a parity of $4.86. It was pegged until March 1919 around $4.75. Since the outbreak of the World War in 1939 the pound has been allowed to break from $4 .60 to
$3.60-$4.
The moral of the failure of international finance or the British system during the past two decades is simply this: If this system could not right the world after the victory of Versailles, why suppose that it can right the world after another Versailles victory to be won, as before, with American aid? In other words, what allied propaganda now seeks is again to enlist America to fight for the lost cause of capitalism. This time the war is more clearly than before for the preservation of international capitalism since this time the enemy is consciously and avowedly anti-capitalist. In 1914 Germany was really fighting international capitalism but did not know it until near the end of the war, and even then probably most of the German ruling classes did not understand who their real enemy was. This time the Have-nots know what the war is all about. It is easy to say that the Allies are fighting not for capitalism but for justice, righteousness, honor, truth, freedom and self-protection. Granting all this, it remains none the less true that, if they should win, the problem of organizing peace would still be one of making capitalism work as it was not found possible to do during the twenties. The Allies enthroned righteousness, truth, honor, justice, freedom, etc., etc., at Versailles and we cannot question that the military and economic supremacy of the triumphant democracies during the twenties was the rule of the high principles and ideals for which they stand. Still and all, this rule of the saints, did not work economically. Is there any reason to suppose that, with the system unchanged, it would work any better after the angels had once more triumphed over the devils?
This point also has relevancy to what may be expected of the German people if the warfare against them is intensified, in the name of righteousness, of course. Can they, in the light of the post-Versailles failures of capitalism, expect any economic improvement if they surrender on the terms of the Allies? They can see the ten million unemployed in America. They can recall the six million unemployed in Germany in 1932 before Hitler came to power under an Allies-imposed democracy from which Wall Street had shut off its lifeblood of loans from gullible American investors. They can reflect that Germany defeated or victorious would not have the wealth of the United States to mitigate with colossal relief deficits chronic unemployment such as democracy and capitalism cannot now avert. The proof that democracy cannot solve unemployment, of course, is the American record of the past ten years. War may be terrible, but stagnation as a result of defeat or surrender would be no less so. If Hitler’s war regime is a harsh dictatorship would the occupation of Germany by a French African army be any less harsh or distasteful?
Taking a realistic view of the facts of the past ten years and the continued failure of democracy to solve unemployment and balance the budget in America, it may be said that the peoples of the Have-not nations have no incentive either to keep the peace as imposed by the Haves or to accept an Allied peace which could hardly offer the German Have-nots more than it offers the underprivileged third of the American population now living at a sub-decency level.
The most insane kind of a war is one for a lost cause, the very fighting of which must help doom that cause. If the new revolution comes about through war, its coming in that way will be the fault of the Haves who were in peaceful enjoyment of a large measure of world economic power for over a decade after Versailles for not having recognized the breakdown of their system and inaugurated under peaceful circumstances, before it was too late, the inevitable new revolution.
If the new revolution has to come about through war, it will be the fault of the Haves or the defenders of capitalism and democracy for having made war the only practicable way to world reorganization. The war cry at once raised by the British in September 1939 that they were fighting only to end Hitlerism and the Nazis makes sense only if it means that the revolution begun and carried on up to date by the Nazis has to be stopped if the Allies win. Obviously, it would not make sense for the British and French to fight a modern war against Germany simply to effect a change in the leadership of a German revolution. If the new revolution goes on, it can make little practical difference to the Allies, to ourselves or the people of Germany what changes take place in the personalities of the leaders.