LIBRARY 
 
 UNIVERSITY OF 
 
 CALIFORNIA 
 
 IRVINE
 
 HC 
 -f 7
 
 WHAT HAPPENED 
 TO EUROPE
 
 THE MACMILLAN COMPANY 
 
 NEW YORK BOSTON CHICAGO DALLAS 
 ATLANTA SAN FRANCISCO 
 
 MACMILLAN & CO., LIMITKB 
 
 LONDON BOMDAY CALCUTTA 
 MELBOURNE 
 
 THE MACMILLAN CO. OF CANADA, LTD. 
 
 TORONTO
 
 7 
 
 WHAT HAPPENED 
 TO EUROPE 
 
 FRANK A. VANDERLIP 
 
 THE MACMILLAN COMPANY 
 1919 
 
 AM rights reserved
 
 COPTBIGHT, 1919 
 
 BY THE MACMILLAN COMPANY 
 Set UE and electrotyped. Published, June, 1919
 
 FTJHIS book ia dedicated to 
 my six children, with the 
 hope that they, and their gener- 
 ation, will grow up possessed of 
 an abundant sympathy with 
 their fellows, and a sufficient 
 knowledge of economic law, to 
 enable them to make a liberal 
 and wise contribution of service 
 to society.
 
 PREFACE 
 
 THERE was never a more unpremeditated book. 
 We landed in England February 2, 1919, intending 
 to take a hurried glance at financial conditions 
 in London and on the Continent and be back in 
 New York by the first of April. Almost within a 
 few hours, I found that I had known practically noth- 
 ing of what had happened to Europe. The process 
 of learning proved so fascinating, there was such 
 wealth of opportunity on every hand, that we can- 
 celled sailing engagements on one boat after another 
 while we traveled through France, Switzerland, Italy, 
 Spain, Belgium and Holland. At last we sailed 
 homeward, leaving Southampton May 10th, 1919, on 
 the S.S. Olympic. Up to the time we waved good-by 
 at the Southampton docks, I had had no remote in- 
 tention of writing a book about European affairs. 
 
 Sitting down in quiet with the strange prospect 
 of five days of leisure after three months of intense 
 activity during which I had visited seven countries 
 and had received impressions from interviews with 
 
 hundreds of people of importance, representing at 
 
 vii
 
 viii PREFACE 
 
 least fifteen countries, for the first time it came over 
 me how much there was to tell about conditions as 
 I had seen them in Europe. I shrank from the pros- 
 pect of going over the story hastily with various peo- 
 ple who might be eager to get, in a word, my impres- 
 sions of our new world. There was such a rush of 
 observations and, indeed, not a few conclusions which 
 seemed to me important, that the thought of trying 
 to tell the story in the brief snatches of conversation 
 that I might hope to have with men at home who 
 ought to have the full advantage of all the views they 
 can obtain, made the attempt seem hopeless. And 
 so it happened that while I had not once had the idea 
 of trying to write anything for the public at the 
 time when my observations were being made, I 
 reached a sudden determination to attempt to put 
 them into a book. Knowing only too well my pov- 
 erty in leisure hours after I was once back in New 
 York, and recognizing if the book were written my 
 motto would have to be " Do it now," I started on 
 the task. 
 
 From title page to finis, every line was dictated in 
 the five days between Southampton and Halifax. 
 And so it should be taken for what it is a quick 
 review following an extremely interesting experience 
 in observing a state of affairs so novel that the whole 
 world's history has nothing comparable to offer. In
 
 PREFACE ix 
 
 no sense was the trip planned with the idea of making 
 a formal, exhaustive study of European conditions. 
 Hardly a note was made, as would have been the case 
 had there been in mind the possibility of writing 
 about the experience. I do not write this preface as 
 an apology, for I do not want what follows to be 
 taken so seriously that an apology would be neces- 
 sary either for what is said or for what is left unsaid. 
 It is rather the sort of a talk I might give to a friend 
 who cared for my impressions and if there were the 
 opportunity to converse at sufficient length. 
 
 I am quite aware that a good many Americans have 
 been in Europe during the same period that these ob- 
 servations were made who may not have seen the situ- 
 ation as I saw it. I can perfectly understand how 
 one might have traveled the same rather extensive 
 route that I followed, and have concluded the journey 
 gratified at the normal appearance of life everywhere 
 outside of the war zone. Fields are being plowed, 
 grain is being sowed and there is the same rolling 
 beauty of landscape with the same lovely rivers and 
 picturesque villages that we have seen in former years 
 from train or automobile in France. Switzerland 
 presents the same neat and carefully garnished fields 
 and dooryards in its agricultural regions that has 
 always marked it, and its hills are unchanging. 
 Italy is still the most beautiful place in all the world,
 
 x PREFACE 
 
 and viewed from a motor along still perfect moun- 
 tain roads or seen in the aspect of the medievalism of 
 the old hill towns, it seems the Italy we have known 
 before. Spain is more prosperous in its obvious as- 
 pects than has probably been the case in a century. 
 No one with open eyes could have escaped the horrid 
 marks of war in Belgium, but in Holland the cattle, 
 though in decreased numbers, grazed placidly as 
 usual and the great tracts of tulips, at the moment 
 in the height of their bloom, made one feel that the 
 world had not lost its love for flowers and beauty. 
 
 It is easy to understand how a traveler, seeing 
 these almost normal externals, might conclude that, 
 with the signing of peace, Europe was almost ready 
 to resume its old life in the old way and, given time 
 to heal the visible wounds of war along the battle- 
 front, would again be the Europe we used to know. 
 And so if there are r'e'turning travelers who have not 
 seen what has impressed me, I shall not be surprised 
 nor will I have any fault to find if they describe a 
 Europe exhibiting little change from pre-war days. 
 
 I have reached what to me are some startling con- 
 clusions. They are set forth in what follows with 
 such fullness as was possible within the limits of the 
 time. If they were only my own conclusions, there 
 are some of them that I should doubt myself. It is 
 hard to believe, when one sees what is outwardly a
 
 PREFACE xi 
 
 perfectly normal country with its people quietly mov- 
 ing about, apparently fed and clothed to a normal 
 standard, that there may be impending a catastrophe 
 for such people a catastrophe that they themselves 
 do not dream of at the moment, a catastrophe that 
 may be marching with the grim certainty that marks 
 tragedy. But this catastrophe may be averted if 
 statesmen are wise enough and if America is wise 
 enough; for America is the last hope of Europe. 
 
 America must be brought to understand what has 
 happened to Europe and be filled with sympathy but 
 not with sympathy alone, for charity alone cannot 
 save Europe. America must understand how her 
 own fortunes her own future are bound up 
 with the fate of European civilization and that Eu- 
 ropean civilization is confronted with extreme dan- 
 gers. Without America's help, the catastrophe can- 
 not be averted, I believe, but by America's help I do 
 not mean America's charity. If once we grasp the 
 full import of what the war has brought to Europe, 
 at once we see what vast responsibilities and oppor- 
 tunities the war has brought to us. I believe we will 
 place ourselves at the service of Europe as a whole 
 nation just as we threw our whole national strength 
 into the task of saving Europe and the world from 
 military domination. Europe is now to be saved 
 from a financial and industrial breakdown. There
 
 xii PREFACE 
 
 are possibilities of a cataclysm in the situation and 
 time will move very rapidly. I believe much of the 
 disaster can be averted but that can only be done if 
 America understands. 
 
 I have said that I might doubt my own conclusions 
 if I had reached them independently; certainly I 
 would not venture to put them forth on a printed 
 page if they were but my own conclusions. They 
 are, in fact, the essence of the information gained 
 in a great many interviews. In what follows I have 
 directly quoted no one. It would be unfair to do 
 that because in no case did I have a conversation 
 when I had in mind at the time publishing anything 
 regarding it, and certainly the people with whom I 
 talked could not have expected that I was interview- 
 ing them for publication. Nevertheless, I think it is 
 fair to the readers of this book that they should 
 know something of the sources of my information be- 
 cause that may help them to put a value on my con- 
 clusions and therefore I propose to give a list of some 
 of the men with whom I have had full opportunity for 
 a serious interchange of views. 
 
 I met the Finance Ministers of all the Governments 
 I visited except Holland. I also met the Finance 
 Ministers or financial representatives of Czecho-Slo- 
 vakia, Jugo-Slavonia, Rumania, Greece, Lithuania 
 and Poland.
 
 PREFACE xiii 
 
 With Mr. Austin Chamberlain, it was the renewal 
 of an acquaintance beginning some years ago. Like 
 all finance ministers, he has a staggering load upon 
 his shoulders but I found no man in England who 
 did not speak with words of high respect of his integ- 
 rity of mind, of his honest purposes and of his fine 
 character. Monsieur Delacroix, Finance Minister of 
 Belgium, is also Prime Minister. My impression of 
 him is that he is a statesman in the true sense of the 
 word, well trained, high minded, capable. I met 
 Monsieur Klotz, Finance Minister of France. Sig- 
 nor Stringer, the new Finance Minister of Italy, had 
 been an acquaintance for eighteen years. He is a 
 trained banker, having been, I do not know how much 
 longer than that period, the head of the National 
 Bank of Italy. He knows the technique of finance 
 and he has a problem that will fully test his large 
 abilities. In England, I met Sir Robert Home, Min- 
 ister of Labor, and Sir David Shackleton, Permanent 
 Secretary to the Minister of Labor, who in the Labor 
 Movement is familiarly known as " Honest David " 
 and who is regarded by the present Government as 
 one of the finest assets that the civil service pos- 
 sesses. In my whole European experience, I met no 
 one who looked facts more squarely in the face than 
 did Sir Auckland Geddes, Minister of Reconstruction, 
 who is soon to give up public life to take the head
 
 xiv PREFACE 
 
 of a Canadian university. I had an interesting talk 
 with the Right Honorable George H. Roberts, who, 
 since 1917, was Minister of Labor until he accepted 
 from the present Government the portfolio of Min- 
 ister of Food. 
 
 Among the labor people, I talked with Mr. J. H. 
 Thomas, M. P., the General Secretary of the Na- 
 tional Union of Railway Workmen, who represents a 
 union of more than 500,000 workers. He is a states- 
 man as well as a labor leader. He has twice been 
 offered cabinet positions and it would not surprise 
 me if some day he headed a labor cabinet. I talked 
 also with Mr. A. Taylor in the absence of Mr. W. A. 
 Appleton, the head of the General Federation of 
 Trade Unions. Mr. Taylor is next to Mr. Appleton 
 at the head of an organization of over half a million. 
 I found him one of the most patriotic, most moderate 
 and most sensible of men and I felt at the end of an 
 hour as if I had been listening to an elevating ser- 
 mon. If there are many such labor leaders in Eng- 
 land and if they can lead their followers, I have little 
 fear of how far the labor movement there will travel. 
 The Right Honorable Arthur Henderson and Pro- 
 fessor G. B. H. Cole represented the more radical 
 view of the men who are not at one with the present 
 social order but even they had a moderation of utter- 
 ance and such a tentative character of program as
 
 PREFACE xv 
 
 partially to disarm fears as to where they might lead 
 an active minority. 
 
 I met the two active heads of the Government's 
 employment administration Mr. J. W. Philips in 
 charge of Unemployment Insurance of the Labor Ex- 
 change, who is disbursing a million and a quarter 
 pounds a week to the unemployed, and Commander 
 J. B. Adams, R. N. R., General Manager of the Em- 
 ployment Exchange which is placing in positions 
 6,000 men a day. Commander Adams has had the 
 interesting experience of accompanying Sir Ernest 
 Shackleton to the South Pole. 
 
 Among other British statesmen with whom I dis- 
 cussed conditions were Lord Milner, Lord Leverhulme 
 (notable as a great employer of labor advocating a 
 six-hour day), Lord Revelstoke and Lord Faringdon. 
 Among the financial people in the city, I discussed 
 conditions with Sir Brien Cokayne, Governor of the 
 Bank of England, and Montague Norman, Deputy 
 Governor, Sir Edward Holden, Sir Felix Schuster, 
 Lord Inchcape, Sir Charles Addis, Sir Robert Kin- 
 dersley, head of the National War Savings movement, 
 Sir Robert Vassar-Smith and Mr. Henry Bell. 
 
 I had the pleasure of dining with the financial edi- 
 tors of London: Mr. Hugh Chisholm (The Times), 
 Mr. A. W. Kiddy (Morning Post), Mr. Ellis T. 
 Powell (Financial News), Mr. R. J. Barrett (Finan-
 
 xvi PREFACE 
 
 tier), Mr. H. Oakley (Daily Express), Mr. Walter 
 W. Wall (Daily Chronicle), Mr. F. W. Hirst (Com- 
 mon Sense), Mr. E. R. Macdermott (Railway News) 
 and including the master of lucid exposition in eco- 
 nomics, Hartley Withers. 
 
 In France, I saw various members of the present 
 Government as well as M. Briand who, many think, 
 will succeed M. Clemenceau in due course, and I had 
 several conversations with one of the ablest of French 
 statesmen, M. Raoul Peret, President of the Budget 
 Committee of the Chamber. Of course, in Paris one 
 sees now the whole world, and so besides French offi- 
 cials and many French financiers, I met the premiers 
 of all the new small nations, among them my old 
 friend, Mr. Paderewski, and a most attractive new 
 one, Mr. E. C. Venizelos of Greece. Here, too, were 
 many important men from England, Italy and the 
 Scandinavian countries and I had the opportunity of 
 comparing notes with some of our own distinguished 
 citizens, including Colonel House, General Pershing, 
 General Bliss, Mr. Baruch, Vance McCormick, 
 Thomas Lamont and H. P. Davison. 
 
 Without wanting to make any invidious compari- 
 sons, I cannot refrain from saying that of all the 
 men I met in Europe I obtained the greatest amount 
 of information, the broadest, most statesman-like 
 views, the finest analysis of social conditions from
 
 PREFACE xvii 
 
 another American citizen, Herbert C. Hoover. I 
 have known Mr. Hoover for some years but it was 
 not until I had some long, undisturbed talks with him 
 in Paris that I fully appreciated what an able man 
 he is. 
 
 This list is already growing too long and I wish 
 to make it only as an indication of my sources of 
 information. I cannot refrain, however, from add- 
 ing a few more names. In Italy, there are two that 
 stand out with great prominence, Dr. Pio Pirelli, and 
 Comm. Pio Perrone, the head of the Ansaldo Com- 
 pany. Their story is told elsewhere in this book. 
 Nor in Spain must I neglect to mention a delightful 
 hour spent with His Majesty Alphonso XIII. 
 There, too, I also met the premier, Count Romanones, 
 and other members of the Government, and perhaps 
 one of the best economic minds I met anywhere in 
 Europe, Ex-Minister Baldomero Argente. Nor, in- 
 deed, must I omit the mention of another hour with 
 the King of Montenegro in Paris and several long 
 talks with Dr. G. Vissering, President of the Na- 
 tional Bank of the Netherlands, a strong, able figure 
 in the financial life of Holland. I also had talks 
 with leading Belgian, Swedish and Norwegian bank- 
 ers and financiers. 
 
 I had the privilege of comparing notes with our 
 own Ambassador to Great Britain, Mr. Davis, our
 
 xviii PREFACE 
 
 Ambassador to Italy, Mr. Thomas Nelson Page, our 
 Ambassador to Spain, Mr. Willard, our Minister to 
 Belgium, Mr. Brand Whitlock, our Minister to Swit- 
 zerland, Mr. Stovall, our Minister to Holland, Mr. 
 Garrett, all of whom I have to thank for extreme 
 courtesy in inviting me to meet distinguished people 
 and in aiding me in every way. 
 
 The list could be much extended. I do not, of 
 course, profess that all of these people would agree 
 with all of my conclusions, but I think I can fairly 
 say that not a single statement is made in this book, 
 or a single conclusion drawn, that could not be sup- 
 ported by some among the distinguished company 
 who have been so courteous to me.
 
 CONTENTS 
 
 CHAPTER PAGE 
 
 PREFACE FRANK A. VANDERLIP . , . vii 
 
 I PARALYZED INDUSTRY 1 
 
 II TRANSPORTATION 11 
 
 III A CHAOS OP CURRENCIES 23 
 
 IV ENGLAND .31 
 
 V FRANCE 49 
 
 VI ITALY 57 
 
 VII SPAIN 68 
 
 VIII BELGIUM 80 
 
 IX THE INTERNATIONAL SCALE-PANS ... 89 
 
 X CREDIT 98 
 
 XI "COMPORT AND LIBERTY" 113 
 
 XII AN EMPLOYER'S VISION 129 
 
 XIII THE POWER OF MINORITIES 143 
 
 XIV THE WORLD'S FINANCIAL CENTER . . .158 
 XV AMERICA'S OPPORTUNITY 166 
 
 XVI AN INTERNATIONAL LOAN TO EUROPE . .177
 
 WHAT HAPPENED TO 
 EUROPE 
 
 CHAPTER I ^^ 
 
 PARALYZED INDUSTRY 
 
 I WENT abroad to learn at first hand something of 
 what the war had done to the finances of Europe. I 
 had gone but a short way in that investigation before 
 I perceived that there was something far more fun- 
 damental and important to investigate than finances. 
 
 Perhaps nothing worse than national bankruptcy, 
 with its attendant results can happen to a people. I 
 believe, however, that something more far-reaching 
 and more disastrous than mere bankruptcy has hap- 
 pened to a number of European nations. 
 
 The most profoundly significant thing that I 
 sensed in Europe is the disorganization and paralysis 
 of industrial production. The paralysis is not con- 
 fined to the war zone. It extends to the industries of 
 the neutral countries. So long as it continues, there 
 is danger of revolutionary development and of Bol- 
 shevik tendencies. Wherever unrest develops into 
 
 I
 
 2 WHAT HAPPENED TO EUROPE 
 
 Bolshevism, that new name for an old disease, anar- 
 chy, there is danger of contagion, and the disease is 
 liable to spread to adjacent territory. This makes 
 it necessary to regard Europe as a unit in any fore- 
 cast of future conditions, for no government is 
 strongly enough fortified against the inroads of this 
 microbe of social contagion to permit its future to be 
 regarded as safe when its neighbors develop this type 
 of revolution. 
 
 It is not my purpose to write any description of 
 the war front or any detailed account of what has 
 happened to industry in the devastated districts. I 
 motored as the guest of the American, French, and 
 Belgian governments, throughout the whole battle 
 front from the German border to Zeebrugge. It is 
 idle to attempt to picture that trip to any one who 
 has not seen what the desolation of war really means. 
 There is a -scar across France and Belgium along 
 which devastation is complete, villages that are just 
 dust heaps, cities in which not a building remains, 
 acres of land permanently despoiled so far as agri- 
 cultural use is concerned. 
 
 I rode for many miles along roads which had been 
 lined with magnificent avenues of -trees seventy-five or 
 one hundred years old. These had all been felled, 
 and not because the wood was needed. For over two 
 years they lay where 'the skillful German axe and saw
 
 PARALYZED INDUSTRY 3 
 
 had put them destroyed apparently in a frenzy of 
 destruction. 
 
 I saw broad orchards every tree in which had been 
 sawed off close to the ground, and they still lay there 
 as they first fell in pitiful rows, although no military 
 engagement had taken place in the vicinity to give 
 semblance of a military reason for the act. I saw 
 great factories in the occupied district of Belgium 
 that had been operating on German supplies up to a 
 few days before the armistice and which were outside 
 the range of active military operations, which were 
 systematically and completely destroyed, chimneys 
 toppled over, bombs placed in every boiler, and ma- 
 chinery wholly wrecked. If I were writing a book on 
 the war, I would devote a chapter to telling about 
 the systematic destruction of industry for solely com- 
 mercial purposes; how factories were selected that 
 were competitive to German industry and ruthlessly 
 destroyed, while others which were standing near by 
 and which were non-competitive were left unharmed. 
 
 In a sense, Germany has won one of her objects. 
 She has destroyed the industry of northern France 
 and much of the industry of Belgium, so that no 
 matter how great or in what form indemnity is se- 
 cured, these industries cannot be replaced before sim- 
 ilar German industries, and the industries of other 
 countries, may have absorbed their markets.
 
 4 WHAT HAPPENED TO EUROPE 
 
 In picturing the devastating effect of war on Eu- 
 ropean industry, however, one must not confine the 
 view to the Hindenburg line. There were great in- 
 dustries in Poland completely destroyed. In East 
 Poland there is a tract of land two hundred miles 
 broad and four hundred miles long where the Rus- 
 sian armies decided so to devastate the country that 
 the German armies could not follow them. There 
 the houses were of wood, and all were burned. The 
 Russian army endeavored to evacuate the country of 
 the whole population, and the population started to- 
 ward Russia in advance of the retreating Russian 
 army. The retreating Russian army traveled faster 
 than the refugees and marched through them. Then 
 the pursuing German army pressed on and marched 
 over these people. They were left without food, 
 clothing, or shelter. Four hundred thousand 
 starved. To-day that great territory, the size of 
 Kansas, is barren and without means of sustaining 
 life. The industry of Warsaw was systematically 
 sacked, as was that of most cities on the eastern 
 front. 
 
 As one moves further south the situation be- 
 comes little better. Few cities in Europe have had to 
 endure a more terrible fate of starvation than 
 Prague. In Hungary, Bolshevism has done what 
 Militarism failed to do. In Rumania, a purely agri-
 
 PARALYZED INDUSTRY 5 
 
 cultural country, there were left almost no cattle or 
 farm machinery. Both in Poland and in Rumania 
 not over one-third of the fields will be planted this 
 year. Rumania is one of the great sources of grain 
 exports to other countries of Europe. Her exporta- 
 tion prior to the war was 100,000,000 bushels, includ- 
 ing wheat, barley, rye, oats, corn and millet. The 
 Premier of Rumania told me that under the best of 
 crop conditions Rumania would be able to raise this 
 year only a sufficient amount of food for her own pop- 
 ulation. Serbia was utterly despoiled. There is 
 choice irony in her railroad statistics. After the 
 armistice there were nine locomotives in Serbia. 
 
 This horrible story of destruction, however, I 
 speak of only to minimize its extent by comparison. 
 Vast as has been the field of destruction, these devas- 
 tated ar^as are but scars on the face of Europe, and 
 in the main the great intricate, complicated industrial 
 machine of Europe was stimulated and expanded by 
 this war which was so truly a war of industries. 
 If it were possible to show the exact percentage of 
 the industrial life of Europe which has been sacrificed 
 with shell, bomb, and incendiary torch, it would be 
 seen that the destruction, vast as it is, bears no 
 overwhelming relation to the whole. 
 
 Why, therefore, should not these industries which 
 have been unharmed be set going at a speed they
 
 6 WHAT HAPPENED TO EUROPE 
 
 never knew before in order to meet the insistent de- 
 mand that the illimitable needs of Europe may be ex- 
 pected to create? The fact is, that in the face of 
 these illimitable needs the industry of all Europe 
 stands paralyzed. What is it that has laid its hand 
 on industry and at the moment when industry's 
 products are needed as they were never before needed 
 in the world has put out the fires, turned off the 
 power, and left industry idle? 
 
 The answer cannot be made in a sentence. There 
 is a tragic combination of difficulties that has 
 brought this about. I will try to enumerate a few 
 of these, and let any American manufacturer try to 
 imagine his plant faced with such a series of diffi- 
 culties and answer if he, too, would not have found 
 them too great quickly to surmount. Let us pass by 
 the case of these industries in the devastated dis- 
 tricts. Obviously, their situation alone makes an 
 early restoration of work quite out of the question. 
 Let us take as an example an unharmed industrial 
 plant in any place located in the interior of any one 
 of several countries. We must first recollect that 
 domestic transportation is broken down. This is 
 substantially true of all Europe. It is literally true 
 in many districts, but even where the service is best, 
 days and weeks are consumed in moving freight short 
 distances.
 
 PARALYZED INDUSTRY 7 
 
 Then the factory must have raw materials, and in 
 most cases these materials must come from outside 
 the country. Over great regions a military embargo 
 still continues and raw material could not be shipped 
 if it could be obtained. To obtain it, there must be 
 arranged in many cases ocean transportation, and 
 ocean tonnage is so scarce that ships sometimes 
 make one-half their pre-war value out of receipts of 
 a single round trip. But if tonnage can be secured 
 and military embargoes do not interfere, there is 
 then the difficulty of exchange and the practical 
 impossibility of credit. All the continental nations 
 are controlling imports with a strong hand because 
 every ton of material that is bought outside of the 
 country increases the difficulties of the government 
 in handling the foreign exchange situation. 
 
 So the manufacturer must first obtain an import 
 license, which is always a tedious process and fre- 
 quently a difficult one. After he has permission 
 to import raw material he must secure the foreign 
 funds necessary to pay for it. Suppose he has 
 done all this and has surmounted the difficulties 
 of ocean and land transportation; he is then ready 
 to start his mill. It may be, if it is located in 
 Italy, for example, that he can get no coal. In 
 any event, the price of coal and the difficulty of 
 getting it regularly, together with the difficulty of
 
 8 WHAT HAPPENED TO EUROPE 
 
 transporting it in sufficient quantities, will be a 
 serious handicap. 
 
 Then comes the labor situation, and although 
 every manufacturer is surrounded by idleness, in 
 few cases is his labor market favorable. If his 
 product is one that requires special skilled labor he 
 finds that his former labor force has drifted away 
 and is difficult to replace. Always the increased 
 cost of living and the idea which is universal, that 
 labor shall have in the future a larger share in the 
 profits of production, makes his new wage scale 
 somewhere from two to three times his pre-war scale, 
 while all over Europe the demand for a shorter day 
 is adding, at least in the opinion of many manufac- 
 turers, to the labor cost of production. 
 
 But now suppose that the manufacturer has sur- 
 mounted all these difficulties and has actually started 
 the production of his product. There then comes 
 the difficulty of his market. He again faces the 
 obstacle of broken-down transportation. If his 
 market had previously been in the Balkans, the Near 
 East, or countries along the Eastern Front, the 
 transportation problem is at present unsolvable. 
 The difficulties, even of transportation of mail, are 
 unbelievably great, and bad as the mail service is, 
 it is frequently speedier than the telegraph. This is 
 no extravagant figure of speech; it is a plain state^
 
 PARALYZED INDUSTRY 9 
 
 ment of conditions that are so widespread as to be 
 typical. 
 
 But suppose the manufacturer has at last pro- 
 duced his goods and has got in touch with his pro- 
 spective customers. If these customers are in Spain, 
 France, Holland, or the Scandinavian countries, 
 they probably have means to pay for what they want 
 to buy. If the customers are elsewhere in Europe 
 the credit questions involved will be extremely 
 serious ; and so far as Poland, Lithuania, Rumania, 
 and the Balkan countries are concerned, nothing but 
 credits will complete the transaction. The credits 
 asked are not short. They are too large and too 
 long for any manufacturer to undertake to carry 
 himself. They are not of a character which permits 
 them to be handled as banking transactions. And so 
 there is going on a chaotic scramble of the repre- 
 sentatives of all these small countries to create credits 
 in any form which will pay for goods they so urgently 
 need. Thus we see a situation where the need of 
 goods is practically without limit, but the difficulties 
 surrounding their production and marketing are so 
 great that up to the present time there is a condition 
 of idleness unprecedented in industrial history. 
 
 The picture that has been drawn of the difficulties 
 that manufacturers are facing may seem to be 
 extravagant and overdrawn. Not all manufacturers
 
 10 WHAT HAPPENED TO EUROPE 
 
 face all these difficulties, but the picture is not 
 extravagant or overdrawn if taken as a general indi- 
 cation of the state of industry in Europe to-day. 
 The great obstacles are the difficulties of obtaining 
 credits to purchase in foreign markets, the inability 
 to get ocean tonnage, the breakdown of domestic 
 transportation, labor unrest, and throughout the 
 great war area the destruction of machinery. 
 Machinery, raw materials, and railroad equipment 
 are the main things that Europe needs and must have 
 to restart the industrial processes. To secure these 
 it is necessary to obtain in the aggregate vast 
 foreign credits. 
 
 I believe there can be no secure peace until the 
 way is found to supply these credits to all industrial 
 centers. It will not do to pick out only those dis- 
 tricts or those industries which may seem to offer 
 the best security, for there will be security nowhere 
 as long as there are, here and there, plague centers 
 in which idleness, lack of production, disorganized 
 transportation, want and hunger make a breeding 
 ground for the Bolshevik microbe.
 
 CHAPTER II 
 
 TRANSPORTATION 
 
 IF there were nothing else the matter with Europe 
 except the breakdown of railway transportation, 
 most of the European nations would still be facing 
 a problem of gigantic proportions, the early settle- 
 ment of which is not only essential to the resumption 
 of industrial life, but is actually essential to main- 
 taining life itself in some of the large centers. Hun- 
 dreds of thousands of people have starved to death 
 in the last twelve months in Europe. I am not using 
 figures as it is said Lloyd George does, merely as 
 adjectives. There is competent authority for such 
 a statement. This terrible catastrophe has only in 
 part been caused by lack of food. In an import- 
 ant measure the disaster was directly traceable to 
 the breakdown in transportation, to the physical 
 inability to move stores of existing food into locali- 
 ties where people were dying of starvation. At one 
 time there were a hundred unloaded cargoes of food 
 in the harbor of Marseilles, held there because pre- 
 ceding cargoes were blocking the lines of trans- 
 portation. 
 
 11
 
 12 WHAT HAPPENED TO EUROPE 
 
 The railroads of Spain were, on the whole, in much 
 better condition than I expected to find them. In 
 France the system has wonderfully stood the test of 
 the enormous movement which has been imposed upon 
 it. But equipment is deficient, and much of it 
 unbelievably ancient. Added to that is the ineffec- 
 tual system of handling the traffic. One of our high 
 military officers described the dispatching of a freight 
 car, say from Brest to Paris, as comparable with 
 dropping a letter in a mail box. Sometime, pre- 
 sumably, the car would arrive at its destination, but 
 in the meantime there was no record of its where- 
 abouts. No matter how important it was to have it 
 reach its destination, no way existed to trace it, and 
 it might get lost on a side track for a month. The 
 situation in France or even in Belgium is by no means 
 illustrative of the situation further east. It is true 
 that in Belgium the Germans took up practically all 
 double track, even on the principal main through lines 
 and have left but a single track for all traffic. 
 Literally hundreds of masonry bridges have been 
 destroyed in Belgium and northern France. It is 
 easy to say that all this damage can be readily 
 repaired, and so it can in time. My point is that it 
 has not been repaired and at the present moment 
 the tremendous handicap resulting from an inability 
 promptly to move freight would alone be an enor-
 
 TRANSPORTATION 13 
 
 mously disorganizing factor to the industrial life of 
 these countries. 
 
 As one goes further east, however, the transporta- 
 tion system is found to be far more seriously disor- 
 ganized. It is true that there has now been estab- 
 lished some through services that might be taken to 
 indicate a return to normal railroading conditions. 
 One can travel from Paris to Warsaw, or to Belgrade, 
 Bucharest or Constantinople. When it comes to 
 transporting freight through the whole district 
 east and south of Germany and of old Austria- 
 Hungary, the situation assumes serious aspects. 
 Serbia was swept almost clean of all railway equip- 
 ment. I was told that at the date of the armistice 
 there were but nine locomotives left in Serbia. The 
 situation is bad in Greece as well as in Rumania, 
 Czecho-Slovakia, Poland and Lithuania. In Russia 
 the locomotives seem to have been run until they 
 ceased to function and then were deserted, little if 
 any effort being made at repairs, and it is here that 
 there are the most notable examples of starvation and 
 ample food supplies not distantly separated. 
 
 I have the highest possible authority for the pre- 
 diction that the food situation will be more serious 
 in the spring and summer of 1920 than it has been 
 this year, and indeed that it will be so serious that, 
 taking into account the breakdown of transportation,
 
 14 WHAT HAPPENED TO EUROPE 
 
 it will be impossible to prevent another horror of 
 starvation even if the ports of Europe are amply 
 supplied with food. I am not arguing that this 
 whole situation cannot be readily put to rights, but 
 I do say that no substantial start has yet been made 
 to do so, that even no systematic plan has yet been 
 developed, and that under the very best of conditions, 
 the task is one that will consume a great deal of 
 time. In the interval the transportation situation 
 presents a most serious obstacle to the distribution of 
 food and necessities, and makes doubly difficult the 
 restarting of industry. Among all of Europe's 
 needs, none is more poignant than the rehabilitation 
 of her railroads. 
 
 Occasionally I had an interview that was so rich 
 in material and that was given under such circum- 
 stances that I could make very brief running notes. 
 I find in my notebook, which indeed is a lamentably 
 scanty and scrappy one, the notes of an interview I 
 have had with a man who has made a great success 
 on two continents and knows thoroughly from per- 
 sonal experience the railroad conditions in America, 
 England and in Europe, and who has rendered dis- 
 tinguished service throughout the war. My talk 
 with him ranged over many subjects. Portions of 
 the interview would logically fall in various chapters 
 of this book, but perhaps it will be as interesting
 
 TRANSPORTATION 15 
 
 and readable to try to give an outline of what he had 
 to say without any attempt at logical arrangement. 
 
 " In France the railroad tariff is fixed by law. It 
 is now admittedly too low, but there has been an 
 indisposition materially to increase it, just as there 
 has been an indisposition materially to increase taxes. 
 The result is -a sad deficiency in income and a serious 
 decline in the physical condition of the rolling stock. 
 The French railroads seem never to scrap rolling 
 stock. I have seen a locomotive regularly running 
 on a French railroad that bore the date 1857 on its 
 nameplate. That locomotive would be in a museum 
 in America. Its boiler tubes were all of copper. It 
 is to-day in regular operation. The way in which 
 France has conserved its old rolling stock makes me 
 wonder if Americans have not gone mad on rebuild- 
 ing railroads. 
 
 " Economical as is the management of the French 
 lines, their income at the present too low rates is 
 not sufficient to keep up properly their physical con- 
 dition. The Allies have paid the Nord Railway three 
 million pounds on account, and that is all that has 
 kept the road going. The finances of all the French 
 roads are bad. 
 
 " In France a tremendous amount will have to be 
 spent to restore the railroads to a good physical 
 condition. The problem is by no means insurmount-
 
 16 WHAT HAPPENED TO EUROPE 
 
 able, but France will have to put up rates. Every- 
 thing that a railroad buys has gone up and there 
 must be an advance in the price of what it has to 
 sell. If the French railroad managers would only 
 introduce some kind of efficiency, if they would learn 
 to do some things in the way they have seen them 
 done under American and English direction, their 
 position would be much easier. I think after the 
 Americans and English have gone home the French 
 will introduce a better system, but they dislike to do 
 that under the eyes of the foreigners. 
 
 " In England an extraordinarily happy arrange- 
 ment was made at the very outbreak of the war. 
 The British Government took over 95 per cent, of 
 the railroad lines, guaranteeing them the same net 
 return as they made in 1913. The government 
 allows the same amount to be spent on upkeep and 
 charged to operating expenses as was spent in 1913, 
 plus 20 per cent., the 80 per cent, being allowed to 
 cover the increased cost of material and labor. 
 There was so much difficulty in getting labor that 
 one million pounds of this upkeep fund is unexpended. 
 
 " The passenger rates in England were increased 
 50 per cent., not so much to get additional revenue 
 as to prevent travel. Freight rates were not materi- 
 ally raised. Much traffic that had formerly moved 
 by water had to be moved by rail, and this made new
 
 TRANSPORTATION 17 
 
 tariffs necessary and increased the business of the 
 railroads. There was formed a Railroad Executive 
 Committee, made up of eleven or twelve managers. 
 The President of the Board of Trade was the nominal 
 head, but he was not active. No conclusion was put 
 into force without the unanimous consent of this 
 Executive Committee. They were broad-minded in 
 their attitude and did not hamper the government, 
 and the result is that there has been built up no 
 controversy between the government and the man- 
 agers. 
 
 " In an unguarded moment, the Government 
 promised the unions that it would sympathetically 
 consider an eight hour day. With the armistice the 
 unions immediately came forward and demanded an 
 eight hour day at once. Lloyd George, Sir Albert 
 Auckland, Stanley Geddes and Sir Herbert Walker 
 all made promises before election that are now diffi- 
 cult to carry out. During the war hours ranged 
 from ten to twelve a day, and sometimes there were 
 cases of men working sixteen hours a day. An eight 
 hour day would add 25,000,000 annually to the 
 operating expenses. The present increase of wages 
 over the pre-war total is 55,000,000, so that if an 
 eight hour day is granted on top of the present 
 wages, the operating costs for labor alone will be 
 80,000,000 more than prior to the war. Standard-
 
 18 WHAT HAPPENED TO EUROPE 
 
 ization, cooperation and the operation of all the 
 roads as one system will save about 15,000,000 per 
 annum, leaving 55,000,000 to be met by increased 
 rates. Railway economists agree that this cannot be 
 done. It means doubling the expense. Winston 
 Churchill before election promised nationalization. 
 His unauthorized promise was not denied until after 
 the election. Now England is to have a new Minis- 
 try of Ways and Transportation, but as yet no defi- 
 nite government policy has been announced. 
 
 " The English public is divided upon the subject 
 of nationalization. The subject, however, is not so 
 complicated as it is in America. The difference 
 between the railroad situation in the United States 
 and in England lies in the fact that there is no 
 vindictiveness in England between the Government, 
 the railways and labor. There has been no such 
 acts in England as the taking away of private cars, 
 or the reducing of salaries of managers. The 
 English public always stands for fair-play. * Is it 
 cricket ? ' is a question ever in the minds of Eng- 
 lishmen. In America the policy of legislators and 
 of the Interstate Commerce Commission has often 
 been vindictive. England will probably be slow in 
 making its final decision in regard to the railroads. 
 It is the habit there to consider public questions 
 carefully ; but in the end it will be fairly considered
 
 TRANSPORTATION 19 
 
 and the owners of railroad securities will be treated 
 fairly. 
 
 " Personally, I think the government ought to get 
 out of the railroad business. Political influences will 
 always hamper its policy of management. I doubt 
 if railroads can ever be publicly run successfully in 
 a democracy, although perhaps they can in an 
 autocracy. 
 
 " I have been spending some time in Belgium. You 
 can discount somewhat the Belgian hard luck stories. 
 The Belgian is inclined to exploit his misery. It is 
 true that certain towns were wiped out, but all were 
 not. Belgian agriculture is better than it was before 
 the war. The Belgian children have been well-fed. 
 Keep an eye on Belgium. Her industries may revive 
 first in Europe, and she has great ability in the 
 industrial field. 
 
 " Here in France industry is handicapped in many 
 ways. The Frenchman is jealous and suspicious of 
 his neighbors. He is an individualist and does not 
 like to cooperate. The genius of the French is for 
 small business. They do not want Americans or 
 English to come in to do business in France. That 
 policy is undoubtedly a mistake. They ought to 
 welcome the energy and brains of outsiders who would 
 help them to get going. There has been enough 
 altruism and amateur charity in regard to France.
 
 20 WHAT HAPPENED TO EUROPE 
 
 What France ought to do is to let capital and brains 
 flow in and give vitality to her whole industrial life. 
 She should do away with her restrictions. But, in 
 fact, she has become more Chauvinistic than ever. 
 Do not be deceived, however, by the possibility of 
 recovery in France. France has been very sick, but 
 there is nothing wrong with her constitution. 
 Foreigners can do business in France, if they will 
 only learn how to go about it. Americans par- 
 ticularly do not know how to deal with Frenchmen. 
 Americans are too direct and too blunt. No French- 
 man wants to talk business in the first interview, and 
 much of the business of France is done by indirection. 
 One must take time to find out where the lines lie 
 and in direct contact never take a Frenchman too 
 seriously. The field of industry in France would be 
 difficult for an outsider, but in the field of finance 
 there is unlimited opportunity. 
 
 " You ask what America should be doing in 
 Europe. Europe is fairly crying for brains and 
 capital. There are possibilities everywhere, and 
 there are particular possibilities in some of the 
 by-ways of Europe that capital does not think of. 
 Portugal is one. Clear-sighted engineers with a 
 business sense would find many opportunities in Por- 
 tugal, and in Spain. There are great mineral 
 resources there and an excellent climate.
 
 TRANSPORTATION 21 
 
 " One of the old regions of the world, Mesopotamia, 
 will be made to flourish like a green bay tree if a 
 little capital and some brains would get hold of the 
 situation and revive the irrigation system of ages 
 ago. In the Balkans and in the East there are coal 
 and oil to be developed. In Rumania there are 
 mineral and agricultural possibilities. The Germans 
 made no mistake in selecting the Near East as a 
 place for investment. They organized banks there, 
 and the banker did not take chances. He knew what 
 he was about. There is a banking vacuum from 
 the Adriatic east. 
 
 " If America will study these opportunities and 
 will link imagination with an actual knowledge of 
 existing conditions, she can, with her ways of dealing 
 with things, make a new world out of these backward 
 countries. The greatest export America could send 
 to those countries would be men with a knowledge 
 of construction, of finance and of management. 
 These countries have had bad government so long 
 that there is no impetus left in the native people and 
 they have made no progress, in spite of having 
 natural resources that would have supported great 
 development. The course for America to follow is, 
 first, to investigate, to prospect, then to construct, 
 retaining an interest in the junior securities, and 
 keeping the operation in their own hands. There is
 
 22 WHAT HAPPENED TO EUROPE 
 
 an enormous field for profit to Americans and for 
 service to these people." 
 
 There seems to me much sound suggestion in this 
 interview, as well as informing discussion of the Euro- 
 pean railroad situation.
 
 CHAPTER III 
 
 A CHAOS OF CURRENCIES 
 
 AN important factor contributing to the present 
 commercial disorganization of Europe is to be found 
 in the situation of the currencies of the various 
 nations. The chaos in the circulating medium is 
 enough to make Europe seem like an economic mad- 
 house. The very first days of the war saw experi- 
 ments in currencies by the greatest countries which 
 departed from all experience and disregarded in 
 many cases all sound principles. England itself in 
 the first days of the war had to resort to a fiat issue 
 by the government. Gold which was the general 
 medium of exchange aside from the Bank of Eng- 
 land notes, disappeared from circulation overnight. 
 The Bank of England had a rigidity in its circulation 
 that permitted no elasticity, and the government was 
 forced to begin the printing of fiat notes before suit- 
 able paper could be found or adequate plates 
 engraved. To-day the amount of government notes 
 outstanding in Great Britain amounts to more than 
 one and a half billion dollars. Against this there is 
 
 23
 
 24 WHAT HAPPENED TO EUROPE 
 
 held a special deposit of gold amounting to 
 28,500,000 or roughly $140,000,000. Theoret- 
 ically the notes are redeemable in gold. Practi- 
 cally the holder of either these notes or the notes 
 of the Bank of England would be so closely ques- 
 tioned in regard to the use he intended to make 
 of the gold, if he demanded their redemption in 
 gold, that their redemption quality is for the pres- 
 ent a fiction. No one is permitted to export gold 
 from England without a Government license, and 
 that license in fact is not granted. A bank deposit 
 in England is payable only in Bank of England 
 notes or the Government currency notes, and as these 
 notes will not be redeemed in gold on demand, the 
 pound sterling has ceased to represent gold. 
 
 In France the sole national issue of circulating 
 notes are those of the Bank of France. The out- 
 standing issue of these notes of the Bank of France 
 has gone up from about six billion francs before the 
 war to over thirty-four billion, with the limit of 
 authorization just raised to thirty-nine billion. The 
 notes are at present irredeemable and all gold has 
 disappeared from circulation. 
 
 It is well to -stop a moment and translate these 
 figures so that our minds can grasp their significance. 
 The circulation of the Bank of France now amounts 
 roundly to six and a half billion dollars. France
 
 A CHAOS OF CURRENCIES 25 
 
 has a population of about 39,700,000. This 
 gives an average amount of circulation per 
 capita of roundly $166. Our own circulation is 
 $5,863,288,000, or $54.64 per capita. France with 
 its 39,700,000 of people and its area less than that of 
 our South Atlantic States has three-quarters of a 
 billion dollars more circulation than we have in the 
 United States. 
 
 While the notes of the Bank of France are the only 
 national circulation and the only legal tender, there 
 has been issued by many of the towns of France 
 through the local Chambers of Commerce, circulating 
 notes of small denomination. 
 
 In Italy circulation consisted of notes of the three 
 great banks of issue, the Bank of Italy, the Bank of 
 Naples and the Bank of Sicily. Before the war the 
 Italian note circulation was 1,730,100,000 lire. 
 To-day it is 8,961,300,000 lire. 
 
 In Belgium the pre-war circulation consisted of 
 the notes of the National Bank of Belgium. When 
 the German Government came into Brussels they were 
 not in a position to command a further issue by the 
 National Bank, but they compelled the leading com- 
 mercial bank, the Societe Generale, to put out an 
 issue. The volume of this issue grew to large figures, 
 but large as it was it was supplemented by issues by 
 every town of importance in Belgium. I have seen a
 
 26 
 
 collection of these issues of Belgian and French city 
 currency which filled two large scrap books of per- 
 haps a hundred pages each, each page of which was 
 covered with an endless variety of notes. One of 
 these, for which the ingenious and patriotic artist 
 who designed it was subsequently lodged in a Ger- 
 man jail, had on the back an outline sketch of a lion 
 whose tongue protruded contemptuously. It was 
 discovered by the German authorities after many of 
 these were in circulation that the lion's body 
 embraced an outline map of Belgium and the con- 
 temptuous tongue of the lion was that bit of Belgian 
 territory that was strongly held by the Belgian 
 troops throughout the war. 
 
 In addition to the Belgian notes there was a great 
 flotation of German marks. When the German 
 troops evacuated Belgium the Government faced the 
 problem of withdrawing from circulation both Ger- 
 man marks and the forced issue of the Societe 
 Generale. It accomplished this by giving in ex- 
 change a certain amount of the notes of the National 
 Bank of Belgium and the remainder in bonds of the 
 national government. As a result of this exchange 
 it holds now more than six billion marks of German 
 currency, an amount normally equal to one billion 
 two hundred million dollars. 
 
 France had a similar problem in Alsace and
 
 A CHAOS OF CURRENCIES 27 
 
 Lorraine. With more patriotism than financial 
 judgment France exchanged French bank notes for 
 the marks at the rate of l 1 ^ francs for each mark. 
 This cost France half a billion dollars, and she now 
 holds a corresponding amount of marks. 
 
 The currency situation in Great Britain, France 
 and Belgium was simplicity itself, however, compared 
 with that in some of the nations on the Eastern 
 Front. After the armistice Poland found itself poor 
 in everything but currency. There were in circula- 
 tion there huge amounts of Russian roubles issued 
 under the old imperial regime, counterfeits issued by 
 Germany, counterfeits issued by the Bolshevists, 
 Kerensky roubles, Bolshevist roubles, German marks, 
 Polish marks, representing a forced issue which Ger- 
 many had compelled during her occupation, and per- 
 haps of the least value of all, Austrian crowns. Here 
 was a conglomeration of notes more intricate than 
 anything Mr. Paderewski had ever tried to play. 
 But he has made an attempt to straighten out the 
 complication by issuing a new Polish currency and by 
 taking in the forced Polish issue, returning half the 
 notes stamped and retaining the other half against 
 an issue of bonds, while the other currency issues are 
 being exchanged on various terms for Polish obliga- 
 tions. 
 
 Serbia, Rumania, Czecho-Slovakia had almost as
 
 28 WHAT HAPPENED TO EUROPE 
 
 complicated a currency situation and have made 
 heroic attempts to reduce the circulation by calling 
 in all existing issues, returning part of them stamped 
 and issuing funded obligations of the state to repre- 
 sent the notes retired or carried in the state's 
 treasury. 
 
 The Austrian note issue has become so compli- 
 cated and the gold reserve so slight that the gold 
 reserve represents three-eighths of one per cent, of 
 the circulation. 
 
 Another currency complication that has added 
 to the untold difficulties is found in the Bolshevik 
 attempt to counterfeit successfully sterling, francs, 
 pesetas, lire and marks. How far this has gone no 
 one knows. Counterfeits of the circulating notes of 
 the Bradford Bank, one of the few banks in England 
 that has powers of issue left, aside from the Bank 
 of England, have reached England. The Governor 
 of the Bank of England has seen no counterfeits of 
 the Bank of England note, but there is said to be a 
 plentiful supply of them in Constantinople and 
 throughout the Near East, where a greater con- 
 fidence was shown in Bank of England notes than in 
 any other form of paper currency ; and the Bolshe- 
 vists were ready to meet the demand. 
 
 This program of wholesale counterfeiting by the 
 Bolshevists is a part of their political program. In
 
 A CHAOS OF CURRENCIES 29 
 
 Bolshevist political economy there is no place for 
 money. They found it was impossible to withdraw 
 money from circulation in Russia and so they con- 
 sciously set to work to make Russian money of no 
 value by printing unlimited amounts not only of their 
 own rouble issue, but of the Czar notes and the 
 Kerensky roubles. The finest money printing estab- 
 lishment in the world, next to the Bureau of Engrav- 
 ing and Printing in Washington, was located at 
 Petrograd. The Bolshevist propaganda in other 
 nations required money, and so they set to work 
 counterfeiting the notes of other nations with the 
 double object in view of furnishing funds for the 
 immediate use of Bolshevist propagandists in other 
 countries, and for the deeper purpose of destroying 
 confidence of other peoples in their own circulation 
 by injecting perfectly executed counterfeits into the 
 circulation of other countries. No one professes 
 accurately to know how far this diabolical scheme 
 has been successful. It is regrettable that in this 
 connection the Bolshevists had the example of one 
 of the Allies, who counterfeited the mark while the 
 war was on and gave the counterfeit paper to Ger- 
 man socialists to help their propaganda in Germany. 
 In normal times of peace the great varieties of 
 currency circulating in Europe always tended to 
 hamper the freedom of commercial operations. The
 
 30 WHAT HAPPENED TO EUROPE 
 
 difficulties which flow in the train of the numerous and 
 extremely complicated issues now in circulation 
 make the currency situation on the continent a 
 serious obstacle in the way of returning to a normal 
 economic life.
 
 CHAPTER IV 
 
 ENGLAND 
 
 ENGLAND'S industrial situation and outlook are 
 enormously interesting to Americans. Since the 
 birth of modern industrialism England has been pre- 
 dominant in the international industrial field. At 
 no time prior to the war did she cease to make 
 progress, although Germany, and the United States 
 in later years, progressed on so much more rapid a 
 scale that England's premier position was being 
 endangered. 
 
 England's great industrial advantage lay in her 
 coal and her workmen. Most of her raw material 
 had to be imported. She could not feed herself, but 
 with the genius of the English for industrial organi- 
 zation, the island was turned into one huge industrial 
 settlement, and a national life has been built up 
 which is as dependent upon a continuation of outside 
 demand for products of English workshops, as would 
 be the case with a New England mill town. There 
 is a population too large to be fed by home supplies, 
 that gains its living by passing raw materials through 
 the workshops, and selling the product to foreign 
 
 31
 
 32 WHAT HAPPENED TO EUROPE 
 
 countries for the means with which to buy food and 
 more raw materials. 
 
 I think the picture of England that is in the mind 
 of the average American manufacturer who is look- 
 ing forward to international competition is that her 
 industries have greatly benefited by the war. He has 
 known English industry before the war as hampered 
 in the introduction of the latest types of labor-saving 
 machinery through a certain conservatism on the 
 part of both employers and men, while the restric- 
 tive rules and agreements of union labor limited the 
 output below the output per man in our own shops 
 under similar circumstances. Our American manu- 
 facturers believe that the war has greatly improved 
 the position of English industry through a forced 
 awakening to the possibilities of labor-saving machin- 
 ery, and through the relaxation of restrictive regula- 
 tions imposed by unions. The general belief in 
 America is, or at least was three months ago, that 
 America will encounter more intelligent and more ef- 
 fective competition from British industry than has 
 ever been the case before, and that while Great Britain 
 faces some desperate needs, the very pressure of her 
 difficulties would inspire her industry with a keener 
 intelligence in its production, and more insistent 
 pressure for output. On the whole, it was believed 
 that the war would result in a great revival in British 
 industry.
 
 ENGLAND 33 
 
 Now let us examine the facts in the light of events 
 of the first six months following the armistice. 
 Indeed, it is rather necessary to go back of that and 
 look a little more deeply into the reason why England 
 kept her industrial supremacy as well as she did. 
 Compared with the United States she was handi- 
 capped by lack of raw material. That disadvantage 
 was in a way compensated for by her ability to load 
 steamers for both the incoming and the outgoing 
 trip. Foodstuffs and raw material came in, more 
 bulky it is true, than the manufactured goods that 
 went out, but there was never a line of steamers, no 
 matter whence they might come, to which England 
 could not furnish something of a cargo outbound. 
 Her outgoing bulk was increased by her great coal 
 shipments, and so, on the whole, there was a fair 
 balance in cargoes and much of her disadvantage in 
 respect to domestic raw material was overcome. 
 Still Germany was better placed as to raw material 
 and had a greater genius for factory organization, 
 and rapidly advanced in her relative position. 
 America, rolling in a wealth of raw material, but 
 with a wage scale two to three times as great as her 
 European competitors, made her best progress in 
 those types of production where labor cost was a 
 comparatively small part of the completed value. 
 
 The struggle in the neutral markets, however, was
 
 34 WHAT HAPPENED TO EUROPE 
 
 so keen that it bore on England with increasing 
 severity. The obvious way to hold down cost, in 
 the minds of most manufacturers, was to hold down 
 wages. That was resisted by the most complete 
 union labor organization in the world. Eighty-five 
 per cent, of the industrial workers of Great Britain 
 are said to be organized in unions, and the leadership 
 has on the whole been of an extremely high order. 
 It has in the main been studious leadership, in which 
 men have recognized that there are immutable eco- 
 nomic laws and have striven to understand them and 
 conform to them. This was met by a good deal of 
 blind toryism among the employers, although on that 
 side there are examples of liberalism of thought and 
 a depth of intelligence that I do not think can be 
 matched in America. 
 
 On the whole the forces tending to keep down 
 wages proved, for twenty years prior to the war, 
 almost as strong as the forces tending to raise them, 
 and the result has been during that period that with 
 a somewhat increasing cost of living, the standard of 
 living of the laborer has certainly not much advanced 
 and I believe on the whole has retrograded. What- 
 ever the statistics of index numbers may show, at 
 least two great broad facts are evident. One of 
 these is the deterioration in physique. It may seem 
 strange to suggest a deterioration in English
 
 ENGLAND 35 
 
 manhood in the light of England's accomplishment 
 during four and one-half years in battle. Certainly 
 she is not a nation in physical decadence, for never 
 has there been shown such bull-dog tenacity or 
 greater physical courage. Nevertheless, a visit to 
 the mill towns of the cotton spinning districts, for 
 example, shows almost another race of people com- 
 pared to the well-fed Englishmen we know in London, 
 a race undersized, underfed, underdeveloped and un- 
 dereducated. Lloyd George's famous utterance that 
 you could not build an A-l nation out of a C-3 
 population has sunk deep into the English mind. 
 The statistics of physique which the military annals 
 produce show that one-third of the male population 
 of fighting age was unfit for military effort. 
 
 The other great outstanding fact indicating in 
 British industry a wage scale insufficient for what is 
 regarded as a minimum standard of living, is found 
 in the great national housing problem. The brutal 
 truth is that England's labor has been so underpaid 
 during the last generation that it has been unable 
 to keep a roof over its head, and to-day there is 
 urgent need for homes for a million working men's 
 families. This need is so great that the domestic 
 situation of labor has become a national scandal, 
 recognized by Parliament and employers, and one 
 of the most important national movements in Eng-
 
 36 WHAT HAPPENED TO EUROPE 
 
 land to-day is connected with the housing problem. 
 There is a program working through national aid, 
 toward the immediate building of five hundred thou- 
 sand houses. It is admitted on every hand that the 
 deterioration and crowding in houses has gone to a 
 shocking point has gone so far that nothing short 
 of national aid can rescue English labor from an 
 intolerable position. 
 
 I have gone into this situation rather fully because 
 I believe it leads to a conclusion of enormous impor- 
 tance in ascertaining the future position of British 
 industry in international competition. The differen- 
 tial that England has had in the last generation, 
 compared with America, and I believe hi some degree 
 with Germany, has been the differential of a wage 
 scale that averaged lower than the point at which 
 the physical efficiency of labor could be maintained. 
 In order successfully to compete in neutral markets 
 British industry has made a red ink overdraft on the 
 future, an overdraft on the physique of her citizens, 
 an overdraft that has consumed her house facilities ; 
 that overdraft must now be made good, at the ex- 
 pense of the nation. At the direct expense of indus- 
 try, a minimum wage must be paid, either voluntarily 
 or such wage will be fixed by law. Pretty much all 
 labor opinion is on the side of a legal enactment in 
 regard to a minimum wage, and a considerable body
 
 ENGLAND 87 
 
 of employers has also reached the same conclusion. 
 
 This means that the differential which British 
 industry has had is, for the most part, gone. There 
 can be no more overdrafts on the future of this char- 
 acter. If there were not hope of getting increased 
 efficiency in production, the outlook for British in- 
 dustry on this account alone would be dark, for with 
 the differential of low wages lost, England's ability 
 to compete, particularly with America, will be seri- 
 ously handicapped. 
 
 The factors which I have been discussing have their 
 roots in conditions which existed prior to the war. 
 
 There now comes another great factor, that for 
 a time at least will be of tremendous importance to 
 the British industrial situation. I have said that all 
 England was a great workshop dependent upon out- 
 side markets to consume the products of her indus- 
 tries in order that a margin might be earned to enable 
 her to buy food. The great customer of England 
 was the continent of Europe, and English life has 
 been organized in such a way that the market for 
 her industrial products in Europe is essential, if she 
 is to earn the margin that she requires to pay for her 
 food imports from other countries. There has now 
 come an almost inconceivable disorganization of her 
 European market. In another chapter I have said 
 something of continental industry, of the break-
 
 88 WHAT HAPPENED TO EUROPE 
 
 down of the continental domestic transportation sys- 
 tem, and of the chaos in currencies and credit. 
 These disorganizing factors thrown into the nicely 
 balanced commercial and industrial mechanism have 
 made a wreck which, compared with any material 
 injury directly caused by the war, makes the after- 
 war hurt more serious than the direct harm of shell 
 and bomb. 
 
 It is essential to the continuation of British in- 
 dustrial life that she regain her European market. 
 That means that the demand in these markets must 
 be made effective by giving buyers the credits that 
 they must have to restart the commercial cycle. 
 That cannot be effectively done until the industries 
 of Europe are themselves restarted and idle hands 
 put to work so that Europe may help itself back to a 
 normal industrial life. There can be no permanent 
 international trade unless both sides to the bargain 
 have something to sell. Europe cannot buy from 
 England unless Europe can produce something to sell 
 to the nations outside of Europe. England's ability 
 to regain European markets, therefore, hinges upon 
 the restarting of European industry. Unless that 
 can be speedily done and a Continental demand for 
 English goods reestablished, England's industrial con- 
 dition becomes critical. Indeed, one of her responsi- 
 ble ministers told me that unless her European mar-
 
 ENGLAND 39 
 
 ket can be reestablished the problem of the govern- 
 ment will be to export five or six million English cit- 
 izens to the colonies and elsewhere where they will be 
 close to the food supply, because the English indus- 
 trial machine is set up now on a basis that requires 
 something like the whole demand from the Continental 
 markets in order that enough may be earned to buy 
 the food that the English must have to live. 
 
 Our own position in international industrial mar- 
 kets will be in large measure influenced by England's 
 ability to continue successfully to compete in those 
 markets. 
 
 There are other important factors affecting the 
 future of English industry, some of which are impon- 
 derable, for they have to do with character and 
 with the way men's minds operate. The time that 
 was at my disposal to inquire into this important 
 question of the attitude of mind of labor leaders, of 
 employers and of government officials, was brief ; but 
 I encountered such marked courtesy on the part of 
 the Government, which went to great trouble to 
 arrange a series of interviews with Government 
 ministers, union labor leaders, employers and others, 
 that I was able to see many important leaders in a 
 few days. In carrying out this program of inter- 
 views there was such complete cooperation, such
 
 40 WHAT HAPPENED TO EUROPE 
 
 frank expressions of views, that I feel extraordinarily 
 indebted to the officials who arranged the interviews 
 and to the men who gave up their time to them. 
 Some of these men traveled long distances to London 
 at the request of the government to keep these ap- 
 pointments. It made me wonder if we at home 
 would be as courteous under similar circumstances to 
 an unofficial visitor of an inquiring turn of mind. 
 
 Among the people whom I met and who gave me 
 ample time for a full discussion, were the Minister 
 of Labor, Sir Robert Home ; the Minister of Recon- 
 struction, Sir Auckland Geddes; the Minister of 
 Food, the Right Honorable George H. Roberts; 
 Lord Milner; Lord Leverhulme; Mr. Rowntree; the 
 Right Honorable Arthur Henderson ; Prof. G. D. H. 
 Cole, representing the radical wing of the Labor 
 Party; the Right Honorable J. H. Whitley, author 
 of the so-called " Whitley System " of Industrial 
 Councils; Mr. A. Taylor, of the Federated Trades 
 Unions; Commander J. B. Adams, General Manager 
 of the Employment Exchanges, and many others. 
 
 After three days fully given up to conversations 
 with these men, I feel entitled to say something on the 
 subject of the English attitude toward labor ques- 
 tions, even though one might smile at the assurance 
 of doing that after so brief a study, were not the 
 sources of information so distinguished.
 
 ENGLAND 41 
 
 I had had a fortnight of observation of labor con- 
 ditions beginning the first of February. At that 
 time strikes in the tube and on the district railway 
 had paralyzed the transportation system of London. 
 The streets were crowded with army lorries packed to 
 capacity with standing passengers. Coal was so 
 scarce that no fires were permitted in bedrooms and 
 we suffered through a fortnight of intolerable fog 
 and chill. The electric employees were threatening 
 to cut off the current from London and it was 
 momentarily expected that they would act, so every 
 one was furnished with candles to be ready for 
 the emergency. Strikes had become so turbulent 
 in character that military tanks had been ordered to 
 Glasgow and were ponderously patrolling the streets. 
 Five hundred thousand men, represented by the rail- 
 way and transportation workers' union> were threat- 
 ening an immediate strike unless differences concern- 
 ing hours were adjusted. The union that embraced 
 the entire labor force engaged in coal mining had 
 grown weary of waiting for an answer from the 
 government, which is operating the mines, to its 
 demand for a six-hour day at an increased daily 
 wage. The temper at that date was uncompromising 
 and hostile in the extreme. Among business and 
 financial men I encountered but one opinion, and that 
 Was that England was in for such a fight with labor
 
 42 WHAT HAPPENED TO EUROPE 
 
 as she had never known and the outcome was anything 
 but clear and had in it possibilities of revolutionary 
 import. 
 
 Returning to London on the first day of May I 
 found the situation as completely changed as it would 
 be possible to imagine. The great fundamental com- 
 mon sense of the English- people had asserted itself. 
 The intelligence of the working classes and the labor 
 attitude of the government, the public and the 
 employers, had united in at least a temporary solu- 
 tion, which apparently removes any immediate danger 
 of a violent or revolutionary movement developing. 
 During that period some substantial progress was 
 made in actual adjustments of differences, but of 
 much wider significance was the general atmosphere, 
 not so much of mere concession, as of a common 
 recognition on all sides of certain fundamental prin- 
 ciples. This was accomplished in the face of, or 
 perhaps because of, a rapidly growing army of unem- 
 ployed which was increasing directly as the demobili- 
 zation of the army proceeded. That army reached 
 by May 1st a number in excess of a million, who were 
 receiving weekly grants from the government of 29s 
 per man, with additional grants for dependent chil- 
 dren, and costing the government treasury above a 
 million and a quarter pounds a week. This had 
 already brought the total paid in unemployment toll*
 
 ENGLAND 43 
 
 since the armistice to above fifteen million pounds. 
 In the three months that had intervened since my 
 earlier observations the strike on the tubes and the 
 district railway had been settled by the granting of 
 shorter hours. The difference with railway em- 
 ployees had been, for the time being, composed. 
 The government partially meets the views of labor. 
 A hurried inquiry into the conditions of the coal 
 mining industry had presented an unanswerable case 
 for the coal miners, and their hours were cut to seven, 
 from pitmouth to pitmouth, with a promise of further 
 reduction to six if that seemed feasible after some 
 experience with the first reduction. Sporadic strikes 
 in the engineering trades had been settled and an 
 inquiry of the deepest significance was in progress 
 bearing on the question of the nationalization of the 
 coal mines. The inquiry, conducted on behalf of the 
 miners, by Mr. Robert Smilie, the head of the miners' 
 union, had partaken somewhat of the sporting char- 
 acter of a Pujo or Stanley inquiry, but it was strik- 
 ing at the very roots of the economic theory of prop- 
 erty rights. Land owners whose title dated back to 
 royal grants made in the 14th century were being 
 distressingly grilled in public as to why a royal dis- 
 pensation in the thirteen hundreds entitled them to 
 levy tribute on every ton of coal to-day, when human 
 beings who happened to be miners were left with a
 
 44 WHAT HAPPENED TO EUROPE 
 
 division that gave them a share in the profits of an 
 extremely profitable business which would not main- 
 tain a standard of living under present conditions. 
 
 I regretted that this examination did not bring out 
 as it might the true reason whj land titles should be 
 protected. The reason is not because those titles 
 were granted some centuries ago. It is because in the 
 main it has been well demonstrated that it is better 
 for society that land titles should be protected. 
 Every communistic experiment in holding land has in 
 the end led to deterioration of the .land and to less 
 efficient cultivation. It is not for the benefit of the 
 individual land-holder that land should be protected. 
 It is because the weight of evidence indicates that it 
 is better for society itself. It must be admitted in 
 the case of the English coal lands, however, that the 
 action of the owners had certainly obscured this 
 point. 
 
 The labor leaders with whom I talked impressed 
 me profoundly. They were men who had come up 
 from the ranks, but they were not agitators. They 
 were patriotic Englishmen with a great love for their 
 country and with hope for its future. Some of them 
 were men with no great amount of culture, but with 
 wide knowledge. They had an understanding of 
 economics that could only have been obtained by 
 men who recognized that these laws were of tran-
 
 ENGLAND 45 
 
 scendent importance and that the principles of action 
 under which they led unions embracing half a million 
 men must be formulated in accordance with sound 
 economic principles or the leadership would go 
 astray. In the main these leaders wanted no 
 socialistic state and believed that the best future of 
 English labor and of the British state lay in a main- 
 tenance of the present social order. Some of them, 
 notably Mr. Arthur Henderson and Professor Cole, 
 did not agree with this view and looked forward to 
 an ultimate socialized state. But they presented 
 their views with a saneness and moderation of pro- 
 gram, which, to say the least, entitled them to a re- 
 spectful hearing. 
 
 All agreed that the wing of the labor party which 
 believed that it was desirable ultimately to overthrow 
 the present order of the capitalistic state and to 
 substitute for it a communistic society did not repre- 
 sent over ten to fifteen per cent, of the organized 
 laborers, but it was agreed that this minority was 
 led with great skill ; that it understood the power of 
 propaganda, while the more conservative majority 
 was phlegmatic and lacked assertion. It was agreed, 
 too, that while the radical minority was at present 
 small, its ranks would be potentially increased if liv- 
 ing conditions became more seriously difficult. 
 
 The great employers of labor whom I met were
 
 46 WHAT HAPPENED TO EUROPE 
 
 probably representative of the most advanced and 
 liberal thinking employers. Lord Leverhulme, for 
 example, is the open advocate of a six-hour day, 
 having reached that conclusion not because he believes 
 labor will accomplish as much in six hours as in a 
 longer working period, but lie thinks industry must 
 use its machinery to a greater advantage than keep- 
 ing it employed for one-third of the twenty-four 
 hours. He therefore concludes that two shifts of 
 six hours a day present the ultimate solution. 
 
 I cannot but believe that there is still a great mass 
 of Tory thought in the employing classes. It is 
 certain that, broadly speaking, employers are 
 thoroughly awake to the necessity for concessions 
 to labor. There is an awakened consciousness 
 of responsibility for unemployment. The industrial 
 theory that labor is a commodity to be bought when 
 wanted on the best terms that the bargain can be 
 made, is disappearing. The idea that there should 
 be a genuine minimum wage, varying with different 
 localities and conditions, but applicable to every one, 
 is gaining ground. Employers' minds are beginning 
 to wonder if industry has not been shortsighted in 
 leaving labor always in a state of apprehension in 
 regard to the stability of its position and at least to 
 question, if not fully to admit, that industry would 
 gain in efficiency under a system of unemployment
 
 ENGLAND 47 
 
 insurance. The aspirations of labor for a larger 
 voice in the management of industry is being listened 
 to with attention, and on every hand there is recogni- 
 tion that in the future labor will have, and in justice 
 should have, a larger division of profits of industry 
 either in the form of profit sharing or, what seems 
 more practical for the present at least, maximum 
 wages above minimum standards. So far as the gov- 
 ernment officials are concerned, they seemed intelli- 
 gently 'and keenly awake to the various questions 
 involved in the labor problem, but like all govern- 
 ments, move slowly in positive action. 
 
 Perhaps the most significant thing that I got out 
 of these interviews was the sense of a sort of dogged 
 optimism in the minds of all classes and a belief in 
 the power and intelligence of England and English- 
 men, a more or less conscious impression, that they 
 would work out eventually a relationship between 
 labor and capital in which all apparent sacrifices that 
 capital might have to make would be more than com- 
 pensated for by the increased efficiency which would 
 come from a body of satisfied workmen. Every one 
 admits that the days prior to the war when industry 
 was hampered by a chaotic network of union and 
 labor restrictions on output have passed and will 
 never return. There are instances current at the 
 moment of blind restrictive rules being again imposed
 
 48 WHAT HAPPENED TO EUROPE 
 
 by union labor, but I think those instances are 
 sporadic and not indicative of labor's mind. If the 
 hope which was clearly expressed by some employers 
 that a satisfied body of workmen putting their brains 
 into the job, will in the end produce on a scale which 
 will make the present scale of production seem indica- 
 tive of a period of the dark ages in industrialism 
 I say, if that hope is realized, the future of England's 
 industry is brought beyond anything ever dreamed of.
 
 CHAPTER V 
 
 FRANCE 
 
 FRANCE thrills one with admiration that there was 
 in the world a nation of such superb valor, but one 
 sighs if he studies the present position of that gal- 
 lant nation. France never stopped to count the 
 price in courage and manhood that she must pay, to 
 defend herself from the Hun. There was never any 
 reckoning as to what the future had in store. All 
 things were possible to that patriotism which is un- 
 surpassed. And no more did France count the finan- 
 cial cost. Indeed I think the French mind grows 
 bewildered when the unit of a billion is reached. 
 They call it a milliard and after you have annexed 
 nine ciphers to a figure, the French mind no longer 
 follows. It got to be all the same when the debt of 
 France piled up to a hundred milliards and then two 
 hundred, and when engagements were made that will 
 take it far beyond that figure. It got to be like 
 figures in astronomy that are so great that they are 
 represented by conventional symbols. 
 
 With some capacity for adding two and two, the 
 first thing that struck me in France was the disparity 
 
 49
 
 50 WHAT HAPPENED TO EUROPE 
 
 between budget requirements and anything that taxa- 
 tion ha's yet yielded. I talked with ministers, legis- 
 lators and bankers^ but none of them shared my 
 anxiety. All of them, in the month of February, 
 still felt confident that the national financial position 
 was to be made right by the payment of indemnity. 
 They were hazy on how that indemnity was to be 
 paid, in just what form the payments were to be 
 made. But of one thing they were very certain; it 
 would be a deadly danger to France if German 
 industry were allowed to recover before French 
 indus-try was on its feet, and France in the future 
 be flooded with German goods. 
 
 A Dutch banker in talking with me one day threw 
 up his hands in despair over the French mind. 
 " They want to milk the cow and cut its throat at 
 the same time," he said. 
 
 Cutting a cow's throat while you milk her interferes 
 with that maternal quietude of mind which is con- 
 ducive to a generous down-giving of milk. Whatever 
 the French mind is, it is usually logical. It can be 
 forgiven in this case, however, for utterly neglecting 
 logic, for it must be remembered that triumphant as 
 France stands, she is still in abject terror of the 
 future, if that future holds a military Germany. 
 
 France's loss of man power is one of the obvious 
 things. Six months after the armistice there were
 
 FRANCE 51 
 
 women conductors upon the street cars ; women work- 
 ing about the railroad yards ; women everywhere in 
 the fields. 
 
 France had a visible aspect of having been bled 
 white. Men far along in the forties could be seen in 
 soldier uniform and everywhere there seemed an 
 actual shortage of human power. It is sad to remem- 
 ber that during the war the population of France, 
 quite aside from all military losses, showed a decrease 
 of eight hundred thousand, eight hundred thousand 
 more deaths than births. 
 
 I traversed the whole distance of the French front. 
 The pathos of that devastated territory is beyond 
 words the all but homeless people camping in 
 wrecked buildings with windows screened with paper. 
 Patient peasants toiling northward with scanty 
 furnishings for the home they hoped to return to, 
 were poignant sights, when one had come fresh from 
 the regions toward which they were going and knew 
 that no roof stood in all the land. 
 
 But in trying to get some estimate of the future of 
 France I wanted, so far as possible, to get the awful 
 picture of the battle front out of my mind, and 
 remember that south of that terrible scar still lies 
 unharmed one of the most beautiful countries in all 
 the world. The devastating hand of war has only 
 blighted, after all, a comparatively small area, even
 
 52 WHAT HAPPENED TO EUROPE 
 
 though that area held an important proportion of 
 the total of all French industry. Still, facts must 
 be looked in the face, although perhaps less than 
 any other nation involved in the war has France been 
 disposed so to look facts in the face. It must be re- 
 membered that her pre-war debt was about one hun- 
 dred and sixty dollars per capita ; that the balancing 
 of her pre-war budget was difficult, and that no recent 
 government had felt strong enough to carry out the 
 pressing and necessary funding of her floating debt. 
 To-day her bonded debt is about twenty-six billion 
 dollars, or about six hundred and fifty dollars per 
 capita; there are thirty-three billion francs of short 
 term unfounded obligations. The Government owes 
 the Bank of France twenty billions. If she makes the 
 payments that she expects to make immediately in 
 grants to families of her dead, to her wounded, and to 
 aid in the rehabilitation of the devastated area, her 
 total obligations will be about two hundred billion 
 francs. 
 
 Her immediate necessity is to provide income for a 
 budget that foots over twenty-three billions. Her 
 income from taxation before the war was over three 
 and one-half billions (1913) and, of course, a large 
 area in which taxes were gathered then can contribute 
 nothing to the national treasury for several years. 
 Her new territory will, perhaps, compensate this loss.
 
 FRANCE 53 
 
 The estimated national wealth of France before the 
 war was four hundred billion francs. If the present 
 wealth of France were to be calculated in a depreci- 
 ated currency it might, without any increase over the 
 true value before the war, reach a figure very much 
 higher than four hundred billion. Conceivably the 
 currency might depreciate so that the measure of the 
 wealth would be so great in francs, that with a debt 
 of, say two hundred fifty billion francs, it would be 
 only one-third or one-fourth of the total national 
 wealth instead of, as it now appears to be, five-eighths 
 or three-fourths of the total national wealth. How- 
 ever, it must be remembered that inability to collect 
 taxes from certain districts is equivalent to an 
 increase in the total debt. To comment on what 
 these figures mean would be brutal. 
 
 Let us pass by in silence the engagements of France 
 to her own people. That is her affair. We may be 
 sympathetic but we need not be critical. There is a 
 phase, however, in which the outside world cannot but 
 be deeply interested and, unpleasant as it is, one 
 must refer to some of the salient facts of international 
 balances. Before the war France was helped to meet 
 that trade balance by a huge income from foreign 
 securities owned by her people. These foreign 
 securities included an investment of twenty billion 
 francs in Russian government bonds; five billion
 
 54 WHAT HAPPENED TO EUROPE 
 
 francs in Russian industries ; five billion francs 
 in Turkish obligations and a substantial amount in 
 Greek and Balkan securities. Here was at least a 
 billion and a half francs coming in annually in the 
 form of interest payments and it was this income 
 that balanced her international account. For a time 
 the government took up from French investors the 
 dishonored Russian coupons, but it has announced 
 that it can do that no longer. 
 
 The depletion of her income from outside the 
 nation is only half the story, however. Before the 
 war French investors held all the obligations of their 
 own government. To-day France owes England 
 434,490,000 and America $2,802,477,000. At the 
 moderate rate of five per cent, she needs new exports 
 amounting to $245,000,000 in value to meet that in- 
 terest engagement alone. With her outside income 
 decreased by a billion and a half francs, with a new 
 obligation of $240,000,000 to meet the interest on 
 her foreign indebtedness, and with her capacity for 
 merchandise export cruelly depleted, the problem of 
 balancing her international account is one that calls 
 for the wisest financial minds that ever engaged them- 
 selves with a desperate cause. 
 
 By the time I returned to Paris after visiting 
 Switzerland, Italy and Spain I found considerable 
 change in the atmosphere. Men in authority were
 
 FRANCE 55 
 
 beginning to realize something of the inexorable logic 
 of the figures and to wonder what was to be done. 
 With pathetic unanimity their mind turned toward 
 America's assuming part of France's debt. It was 
 not usually put so directly as that, but one could 
 not talk to an important Frenchman for five minutes 
 that he did not bring forward a plan, logical in con- 
 struction, plausible in appearance, but always leading 
 up to America's dividing with the Allies the war 
 burden. 
 
 The government has borrowed over twenty-three 
 billions of francs from the Bank of France. I was 
 told that the great Paris banks had eighty per cent, 
 of their fortfolios in government obligations. 
 
 France has not raised taxes as England and 
 America have. The politicians fear the antipathy of 
 the French towards increased taxes. Probably any 
 government that attempts seriously to raise taxes will 
 fall. The gap is so great between present income 
 and the budget demands that it would need a truly 
 (heroic Finance Minister who will propose a tax 
 scheme that will close that gap. 
 
 The great anchor of France, so far as its internal 
 political safety is concerned, lies in the fact that 
 there are six million landowners, and that the whole 
 nation is made up of small investors. In some of 
 the industrial centers, such as Lyons and St. Etienne
 
 56 WHAT HAPPENED TO EUROPE 
 
 there is plenty of latent Bolshevism. There is, of 
 course, an active socialist party, but France would 
 not seem good soil in which to propagate the ideals 
 of Bolshevik Communism.
 
 CHAPTER VI 
 
 ITALY 
 
 WHEN one comes to see the importance of looking 
 at a nation in the light of its power of self-sustenance, 
 he will distinguish sharply between domestic wealth 
 and a national ability to command and pay for 
 necessities of foreign origin. No matter how rich a 
 nation may be within itself, if it is deficient in some 
 essential that must be imported, it must also have 
 some commodity of equal value that the world out- 
 side wants and will pay for. In attempting to 
 gauge the future of the different European nations 
 one must at the very beginning include an examina- 
 tion of the international commodity balances neces- 
 sary to the life of each nation. 
 
 Take Italy, for example. She is wonderfully rich 
 in man power, moderately well-to-do in agricultural 
 resources. She has partly developed her great 
 potential resources of water power, but she has not a 
 pound of good native coal, little mineral of any kind, 
 and none of the great staple raw materials. She 
 raises silk which she unwinds from the cocoons onto 
 the bobbins and spins into skeins, and then, in the 
 
 67
 
 58 WHAT HAPPENED TO EUROPE 
 
 main, exports it to the looms of France and Switzer- 
 land, and formerly to Austria, to be woven. 
 
 It is absolutely essential to her life to import about 
 a million tons of coal a month, all of her cotton, much 
 of her wool and some of her food. She exports the 
 lovely skeins of yellow silk; her looms convert 
 American cotton with a great deal of skill into cheap 
 fabrics for the Near East. She exports olive oil 
 and a few special food products of small value in the 
 aggregate, such as macaroni, cheese and a certain 
 amount of wine. In the present stage of her indus- 
 trial development she has, comparatively speaking, 
 little to export and an absolutely insistent need for 
 very considerable imports. 
 
 For many years, therefore, Italy's foreign trade 
 has been out of balance. She could not sell the world 
 goods equal in value to the amount of goods she must 
 have from the world. She did have, however, two 
 special and unusual sources of annual income. To 
 tourists Italy has for centuries been " the garden 
 spot of all the world." The loveliness of nature, the 
 deep historical interest of the cities and the monu- 
 mental remains of her wonderful history, the 
 unequaled collection of the art treasures of all time, 
 have for centuries made Italy the spending ground 
 for the savings of tourists. The aggregate from 
 that source reached very large figures in recent years,
 
 ITALY 59 
 
 figures so important that thrown into the scale pans 
 along with her deficient exports they did much to cor- 
 rect the balance. 
 
 She had another important source of annual 
 income, reaching indeed in recent years to upwards 
 of a hundred million dollars, and that was the savings 
 her emigrant sons sent home. This has been a con- 
 stant and a growing fund which yearly contributed 
 in an important degree toward equalizing the inter- 
 national balance. For several years prior to the 
 war, and in spite of a deficient volume of exports, 
 Italy was able fully to balance her international 
 account without making foreign loans, through the 
 aid of these two great sources of annual income 
 the expenditure by tourists and the remittance from 
 her emigrants. 
 
 The war has wholly changed this satisfactory posi- 
 tion. During the war Italy incurred foreign obliga- 
 tions amounting to $3,100,000,000, the annual 
 interest charge on which is say, $155,000,000. This 
 alone would have thrown her international account se- 
 verely out of balance and would have been extremely 
 serious because she has no way by which it is feasible 
 promptly to increase her exports. But the incurring 
 of the foreign obligation with its annual interest 
 requirements is only a part of her present difficulties. 
 The embargo on travel all through the war and a
 
 60 WHAT HAPPENED TO EUROPE 
 
 certain continuance of that embargo for a further 
 year or two costs Italy in her international account 
 not less than $200,000,000 a year, while her other 
 source of annual income, the remittance from emi- 
 grants, has necessarily been greatly curtailed because 
 of the return to the colors of a great number of her 
 industrious sons. These emigrant remittances have 
 continued in remarkable volume, but still there is a 
 deficiency there from pre-war figures that is impor- 
 tant in view of the extreme need for something to 
 counter-balance the absolutely necessary payments 
 that Italy must make abroad. 
 
 Two of her important exports, raw silk and cheap 
 manufactured cotton goods, have had their market 
 seriously interfered with. The markets for the raw 
 silk were France, Austria, Germany and Switzerland. 
 The market in the Central Powers was wholly cut off 
 and in France badly disorganized. 
 
 The raising of the cocoon is an essential part of 
 the agricultural industry of Italy. The cocoons are 
 sold to the silk mills in June and throughout the rest 
 of the year the mills are busy winding the half mile 
 or more of fiber that each cocoon is said to contain 
 into yellow skeins of raw silk that in the main go to 
 foreign looms to be dyed and woven. The cocoons 
 are paid for by the silk mills in June. The mills in 
 turn receive their payment for the raw silk month by
 
 ITALY 61 
 
 month throughout the year. Here was where the 
 fluctuation in exchange made a serious difficulty. 
 The silk mills having paid for the cocoons a definite 
 amount of lire found when they came to dispose of 
 the raw silk some months later that the currencies 
 were so depreciated that the raw silk could not be 
 sold for enough to reimburse them for what they 
 had paid for their cocoons. 
 
 In this trying situation the Government came to 
 the rescue and made a fixed price at which it would 
 buy raw silk. It was forced to do this ; otherwise 
 the silk mills, in the face of a wildly fluctuating ex- 
 change market, would have had no secure ground to 
 stand upon in buying the next crop of cocoons and 
 the whole silk-raising industry would have become 
 disorganized in the very seat of production, the peas- 
 ant homestead. Under the working of this arrange- 
 ment the Italian Government has accumulated $75,- 
 000,000 worth of raw silk and has created a situa- 
 tion in the silk market which is perhaps economically 
 unsound but humanly necessary. At least it was 
 necessary in some way to keep the industry of silk 
 production alive. The difficulties of the situation 
 were so great that without government intervention 
 the silk mills would not have taken the risk of pur- 
 chasing a year's crop of cocoons with the hazards of 
 a disorganized market and wildly-fluctuating ex-
 
 62 WHAT HAPPENED TO EUROPE 
 
 change rate throughout the year during which they 
 must dispose of the spun silk. 
 
 The production of cheap cotton fabrics for the 
 Near East has also been disorganized. During the 
 war it was not possible to produce them, nor would it 
 have been possible to export them if the production 
 could have been kept up. Now, there is an unlimited 
 demand in the Near East, but it is not an effective de- 
 mand because there is no means for payment. If 
 Italy could secure the foreign credits with which to 
 buy the raw cotton, she has the mills and the skilled 
 hands to convert it into suitable fabrics for the 
 Balkan countries, Asia Minor, and points further 
 east. But she lacks the credit with which to buy the 
 cotton, while these old markets in which she has shown 
 much skill are closed because they too lack the credit 
 with which to buy the goods which they so much need. 
 
 In recent years there has been developed in North- 
 ern Italy, particularly at Turin, Milan and Genoa, 
 a number of great, efficient industrial organizations. 
 The story of one of these is as splendid a romance of 
 industrialism as will be found anywhere. There was 
 one man in the industrial life of Italy who resisted 
 the " peaceful penetration " of German capital. He 
 had large industrial works in Genoa. There was in- 
 grained in him a distrust of the Teuton, and as Ger- 
 man capital penetrated to other industries he not
 
 ITALY 63 
 
 only resisted any advance made by that capital for 
 an interest in his business but he instilled into his 
 two sons what became almost a religion of chauvinism 
 so far as this great establishment was concerned. 
 When the father died the two sons, with a touch of 
 Italian romanticism, stood at the bier and made a 
 stern compact one with the other that they would 
 never admit German capital into their great indus- 
 trial inheritance. In these two men there certainly 
 must have been some of the blood of the Caesars, for 
 they had an audacity, an imagination, a vision for 
 great accomplishment such as the men who ruled 
 early Rome must have had. Theirs was the one great 
 industry in Genoa. They developed it in many direc- 
 tions. At the outbreak of the war it and various 
 subsidiaries had become stock companies, the whole 
 group being generally known as the Ansaldo Com- 
 pany, and it had great and varied industrial capac- 
 ity, running through shipbuilding, the making of tur- 
 bines, the construction of locomotives and the build- 
 ing of electrical machinery. 
 
 With Italy's entrance into the war these two men 
 had the imagination to realize that the Great War 
 was a war of industrial capacity. A speech which 
 Kaiser Wilhelm made in which he told his own people 
 that the war would be won in the workshops of Ger- 
 many brought to them a revelation regarding the
 
 64. WHAT HAPPENED TO EUROPE 
 
 character of the war, and they felt that they had in 
 their hands, in the great industrial establishment that 
 they controlled, an instrument essential to Italy if 
 she were to play her part in the struggle which she 
 had entered. Their clear-eyed view of German na- 
 tional characteristics, their hatred of German domi- 
 nation, made them see, as few men in Italy saw, what 
 the struggle meant to Italy and what means must be 
 employed if Italy was not to be vanquished. 
 
 They offered at once to turn their establishment 
 into the making of large guns for the army. Per- 
 haps, as they believed, there was German influence 
 still in seats of power in the Italian Government. 
 Perhaps there was only a lack of vision, but in any 
 event they got no orders for guns. Lack of orders, 
 however, did not daunt them. They believed they 
 could see more clearly than the Government saw. 
 They secured from Italy's Allies the designs of the 
 most efficient French guns and without a single order 
 from the Government and in the very first days of the 
 war they started to convert their plant into an ord- 
 nance establishment. Before they received an order 
 for a single gun they had completed 2,000 pieces of 
 ordnance. Then came the Caperetto disaster. And 
 not until that awful defeat did the Italian Govern- 
 ment turn to them with cries for guns. When the 
 first order was placed, the officials were confounded
 
 ITALY 65 
 
 on being told that the guns were ready for immediate 
 delivery. These two thousand guns were at once put 
 in the field to take the place of the vast losses which 
 the Italian army had sustained, and performed a feat, 
 in stopping the advance of the Austrians the value 
 of which can hardly be measured. The Ansaldo 
 Company could now get orders, but through some in- 
 fluence, or perhaps only through financial inability, 
 they could not get pay. The orders were unceasing. 
 The pay continued elusive. The great works, how- 
 ever, were operated to their utmost capacity, and 
 performed a feat that those in America will marvel 
 at, who know by experience the difficulties of ord- 
 nance production. 
 
 Works that employed one hundred thousand men 
 were created and ten thousand guns were put in the 
 field. At one time the Italian Government owed the 
 Ansaldo organization 700,000,000 lire. 
 
 The matter of financing the situation required gen- 
 ius, daring and substantial strength. The capital of 
 the company was increased to 500,000,000 lire and 
 the public generously subscribed to the stock. A 
 great combination of banks was created in order that 
 the organization might control and be aided by a 
 bank of great financial strength. 
 
 In a struggle balanced to such a nicety as was the 
 Great War, when Paris was saved and perhaps the
 
 66 WHAT HAPPENED TO EUROPE 
 
 whole cause saved by the opportune arrival of a hand- 
 ful of Americans at Chateau-Thierry, it can be justly 
 said of each of many factors that the war could not 
 have been won without this or that particular contri- 
 bution. In that sense it seems to me it can truly be 
 said that without the contribution of the Perroni 
 Brothers and of their industrial organization of a 
 hundred thousand men that they brought together 
 in the Ansaldo works the Great War could not have 
 been won. For Italy's cause would have been lost 
 and with that loss might have come the downfall of 
 the great cause. But now what of the future of this 
 and other great industrial establishments that the 
 war developed in Italy? 
 
 In many ways Italy struck me as being richer in 
 human material than any other European country 
 that I visited. These Northern Italians seem to 
 have a genius for industrial organization. One of 
 the great industrial plants of the world is the Fiat 
 works at Turin; and there are a goodly number of 
 well-planned, well-equipped industrial establishments 
 in Northern Italy that have at hand an efficient, 
 skilled and more than ample labor supply. But they 
 must have coal and to get that must somehow, and 
 at once, have the power to pay either in goods or in 
 dollars or pounds sterling. It is not a matter of the 
 individual credit of these industries. It is not at all
 
 ITALY 67 
 
 a question of the domestic wealth of these concerns. 
 It is a question of Italian national position with 
 respect to the international exchanges. 
 
 Italy as a national unit must be able to sell to the 
 world a sufficient amount of her own products to pay 
 for the coal, and the cotton, the wool, the petroleum 
 products, the rubber and the other raw materials 
 which she must have. If for the time being she can- 
 not do that, and cannot make up the balance from 
 emigrants' remittances and tourists' expenditures, 
 she must have credits or her industries must in part 
 close down. It all amounts to the inevitable logic 
 of two plus two. There is no getting away from the 
 few fundamental factors that are involved in interna- 
 tional trade. To buy anything abroad Italy must 
 sell her own products or make loans to counteract 
 the lack of balance. If she cannot make those loans, 
 things essential to her industrial life cannot be im- 
 ported. Her industrial life must halt, production 
 cease, workmen stand in idleness and face want. But 
 that usually spells (whether the hungry man is an 
 Italian, a Russian, an Englishman, or God forbid, 
 an American, the result is apt to be the same), revo- 
 lutionary outbreaks, a disorganization of the social 
 order, industrial chaos.
 
 CHAPTER VII 
 
 SPAIN 
 
 THERE is a corner of Europe, cut off by the 
 Pyrennes from a mixture of race or close intercourse 
 with other peoples, which has been wholly outside most 
 of the baleful effects of the war, and which stands 
 to-day in a unique situation, a position quite unlike 
 that of any other European nation. For a century, 
 Spain has lived her life much to herself. Her great 
 world ambitions were long ago forgotten. The brief 
 sway of Napoleonic influence made no lasting im- 
 press and gradually she has relinquished her unhappy 
 grasp of far flung colonial possessions. 
 
 The Great War brought to Spain almost nothing 
 but profit. She had an unlimited market at very 
 high prices for everything that she could spare. 
 She was outside the iron ring that closed in with 
 crushing pressure on Holland and the Scandinavian 
 countries at the same time that it shut in the Central 
 Powers. The result has been an era of material 
 prosperity such as has had no counterpart in Span- 
 ish history in the last century. With much to sell 
 and comparatively little that it was possible for her 
 
 68
 
 SPAIN 69 
 
 to buy because of lack of supplies and particularly 
 because of lack of transportation for those supplies, 
 she has been frugal in spite of herself, while the war- 
 ring nations have poured into her lap golden treasure 
 in exchange for what she could give them. The re- 
 sult is that there lie in the vaults of the Bank of Spain 
 in Madrid great pyramids of bricks of gold and long 
 rows of sacked sovereigns and eagles. There is now 
 piled in that vault gold to a value of $440,000,000, 
 more gold probably than Spain had within her boun- 
 daries even in the days when Spanish enterprise ven- 
 tured forth to the Eldorado of the newly found west- 
 ern hemisphere. 
 
 In passing, it might be interesting to note that this 
 great store of gold does not lie within doors of armor 
 plate, guarded by time locks such as are commonly 
 used to guard comparatively trifling reserves in many 
 an American bank building. I was taken down to 
 the bullion vaults of the Bank of Spain accompanied 
 by four elderly guardians, each carrying a massive 
 key. These four keys were simultaneously inserted 
 through the ancient escutcheons and a door which 
 would amuse some of my Sing Sing neighbors if they 
 could note the ease with which they might, unaided 
 by any keys, pass through it, was thrown open on a 
 view of these piled masses of gold. 
 
 The period of prosperity which the War has
 
 70 WHAT HAPPENED TO EUROPE 
 
 brought to Spain has already been long enough to 
 stamp a visible impress upon the whole country. 
 Fields have been brought into agricultural activity 
 that had long lain fallow. One sees miles of new olive 
 orchards planted with baby trees now two or three 
 years old, interspersed between groves of olives, 
 grown so old that their youth runs back to the time 
 when Napoleon's ambitions for world domination 
 were shattered. 
 
 More new building is going on in any one of half 
 a dozen cities in Spain than elsewhere on the whole 
 continent of Europe. Easily the finest hotel in Eur- 
 ope is in Madrid. Social life at the Spanish capital 
 is more brilliant than at any other court in Europe. 
 The shops of the cities contain everything for which 
 there hasbeen room on over-laden ocean tonnage to 
 bring. 
 
 There are some fundamental defects that stand out 
 sharply to any one making a study of Spanish condi- 
 tions. Many of the problems that other nations have 
 in part, at least, long ago solved are fresh and acute 
 in Spain to-day. The Government in some particu- 
 lars is bad and in many ways is inefficient. There 
 still exists a privileged class of nobles, living for 
 pleasure and blind to the responsibilities of their posi- 
 tion. Great land holdings leave large sections of 
 agricultural population little better than old time
 
 SPAIN 71 
 
 serfs. The level of wages is the lowest wage scale 
 existing in any country in Europe that I visited. 
 The common laborer in the cities receives about 3^ 
 pesetas a day, about seventy cents. The wages of 
 agricultural laborers are still lower, while the indus- 
 trial wage scale is such that grave industrial unrest is 
 inevitable. 
 
 Spanish industry in the main is confined to Bar- 
 celona and Bilbao. Barcelona is historically turbu- 
 lent. The Province of Catalonia of which Barcelona 
 is the capital is inhabited by a race that has ethnolog- 
 ical variation from the general Spanish type. These 
 people speak a language of their own and think and 
 act differently from the other people of Spain. Po- 
 litically, Barcelona presents to Spain something of 
 the same problem that Ireland does to Great Britain. 
 Their aspiration is for at least a modified home rule 
 and the answer of the Cortez to that invariably has 
 been measures of stern repression. 
 
 So there is a political foundation for unrest in 
 Catalonia that is not found in any other province, 
 but there is also a social phenomenon there far more 
 interesting and significant than anything that has its 
 root in political differences. Barcelona is the great 
 manufacturing center of Spain for almost every- 
 thing except iron and a great percentage of its pop- 
 ulation is made up of wage-workers. The provincial
 
 72 WHAT HAPPENED TO EUROPE 
 
 characteristics of the Catalonians, their independ- 
 ence, their disregard for authority, their progressive- 
 ness, have all found play in creating what to me was 
 the most menacing, the most extraordinary, the most 
 terrifying organization with which I have ever come 
 in contact. This population of workers is dominated 
 by Syndicalists and in Barcelona I learned for the 
 first time what Syndicalism really is. 
 
 As there exemplified, Syndicalism proposes no com- 
 promise with the present order of society. It is Bol- 
 shevik in its aspirations and its methods. It refuses 
 to accept the present capitalistic organization of 
 society and is determined to overthrow the present 
 social order completely in order that it may build 
 a socialistic state on the ruins of the capitalistic 
 state. 
 
 Its method of accomplishing this is through the 
 agency of a Syndicate, an organization which might 
 be described in one sense as a universal trade union, 
 embracing the workers of all trades. Unlike a trade 
 union, however, the directing force is shadowed in 
 complete mystery. No one knows who directs the 
 Syndicalist movement and when I say " no one," I 
 mean almost literally that even ; the workers who are 
 members of the Syndicate know quite as little as do 
 the outsiders. The organization partakes of the se- 
 crecy of the Molly Maguires and of the terrorism of
 
 SPAIN 73 
 
 an Italian Mafia. Somewhere back in it there is pre- 
 sumably a head or a committee but who composes 
 that directing force is kept a secret from even the 
 active workers in the organization. The method of 
 communication is all by groups of twos. Starting 
 with the central organization, whatever it is, it is 
 presumed that each member has direct relationship 
 with two other members in the organization. In 
 turn, each of these other members have direct contact 
 with two additional members and so on in arithmetical 
 progression. This series has been traced back by 
 secret agents of the Government through fourteen 
 different strata and still the real leaders have not 
 been reached. General strikes are called merely as 
 a sort of organization gymnastics, without any de- 
 mands being made and with no one put forward with 
 whom negotiation might be made to end the strike. 
 Such a strike may last a day or a week and as sud- 
 denly and mysteriously as work stopped, it will be 
 resumed. All this is done to impress the public and 
 to train the organization. 
 
 One of the latest phases has been the censorship 
 of newspapers. The newspapers were told they must 
 submit all proofs before publication and that if they 
 published anything unauthorized, they would be fined. 
 Two papers were fined 5,000 pesetas each for print- 
 ing official orders issued by the Government. If they
 
 74 WHAT HAPPENED TO EUROPE 
 
 did not pay the fine so levied, they were told that their 
 presses would be mysteriously destroyed. Even if 
 they did pay the fine, as happened in one case, there 
 still was no relinquishing of the severity of the cen- 
 sorship. The result was that every paper in Bar- 
 celona ceased publication and for fifteen days prior 
 to the time I was there, not a single paper had been 
 printed and the only news of the world which the 
 town had came twenty-four hours old in the Madrid 
 papers. Those papers, on the other hand, were 
 Government censored, and as a news center, Barce- 
 lona did not present a brilliant front. 
 
 The essence of the Syndicalist methods as exhibited 
 in Barcelona is assassination. Up to the time I was 
 there, there had been 72 employers or industrial fore- 
 men mysteriously slain. Not a single conviction had 
 followed this great number of murders. Usually, 
 even no arrests were made. If they were, witnesses 
 and juries were terrorized, judges were threatened 
 and justice totally miscarried. 
 
 There was clear evidence that the Syndicate was 
 receiving monetary aid from Russian Bolshevists and 
 from German Socialists. The head of a great indus- 
 trial organization, an American who had formerly 
 been a resident in Mexico, told me that in Mexico he 
 had known a German who was there a man of wealth 
 and an organizer of enterprises, particularly of one
 
 SPAIN 75 
 
 which for a time cut a large figure in New York spec- 
 ulative circles. My American friend discovered this 
 German acquaintance in over-alls at work in a ma- 
 chine shop in Barcelona, obviously there for the sole 
 purpose of disseminating German propaganda of 
 unrest. 
 
 Five Russians had recently landed at Barcelona 
 saying they had been shipwrecked and presenting 
 every appearance of extreme poverty and distress. 
 It was discovered that they had under their clothing 
 a complete lining of Spanish pesetas. I was told the 
 examination of a branch of a German bank located 
 in Barcelona disclosed payments of 300,000 pesetas 
 to the Syndicalist representatives and at the time I 
 was there, the manager of this bank was presumed to 
 be in Government custody. 
 
 The day after I left, the civil governor, obedient to 
 threats of assassination within twelve hours, threw 
 up his post and went to Madrid. One of the results 
 was the fall of the Romanones Ministry. The day 
 before that, I had had a long talk with the governor 
 and he had impressed me as a man of great force of 
 character, with sound, though perhaps not very 
 liberal, views regarding social conditions. 
 
 Opposed to this mysterious organization of work- 
 men, there is growing up what we would term a Vigi- 
 lantes but what is called in Catalonia a Somatan.
 
 76 WHAT HAPPENED TO EUROPE 
 
 This is now said to embrace 40,000 citizens who are 
 banded together to fight the sort of domination the 
 Syndicate stands for. 
 
 In Bilbao, the great industrial iron center, there 
 has been no outward evidence of much progress in the 
 sort of organization which has grown up in Barce- 
 lona. In some of the agricultural districts, the Syn- 
 dicalists' program has been propagated and there 
 have been some strikes timed for critical moments in 
 the agricultural seasons. But on the whole the agri- 
 cultural phase of the Syndicalist movement did not 
 appear to be far enough advanced to cause much ap- 
 prehension. 
 
 In all of Spain outside of Catalonia, there is an 
 enormously potent influence for conservatism in the 
 Church. Visiting a Spanish cathedral, compared 
 with a visit to cathedrals in other countries, showed 
 an interesting difference. The Spanish cathedral 
 was in every case what might be termed an active, 
 going concern. The deep hold which the Church has 
 on the people could be seen here. Nowhere did the 
 churches seem merely monuments to something in the 
 past but rather the superb housing of a living, active, 
 potent influence. 
 
 Europe nowhere presented a more interesting field 
 than Spain, to watch the play of modern forces in 
 their reaction upon old world conditions. Spain is a
 
 SPAIN 77 
 
 store-house of natural riches. I have so often had 
 travelers tell me that Spain was but a poverty- 
 stricken country offering but the meagerest returns 
 from a poor soil to a hard-working, ignorant 
 peasant population. I cannot believe that such ob- 
 servers have seen the true facts and when one finds 
 that there were cities of vast population in Roman 
 days where now there are but villages, it is evident 
 that the land and the mines yielded so amply that 
 Spain might well have been looked upon, as it was, 
 as the favorite post of tax gathering consuls. 
 
 I was told by authorities whom I am bound to be- 
 lieve that Spain has the richest undeveloped resources 
 to be found anywhere in Europe ; and it was obvious 
 that better agricultural methods would further in- 
 crease what is already a very large agricultural pro- 
 duction. The conservatism of the Church on the 
 one hand and the rapacity of the nobles on the other 
 have held back the modernizing of Spain so that out- 
 side of the principal cities, one feels as if he had been 
 transported back into the social atmosphere of a 
 century or two ago. 
 
 Spain has been blessed with an intelligent monarch. 
 Everywhere I heard good words said of Alphonso 
 XIII. I had the interesting experience of an hour's 
 conversation with him, a conversation hampered by 
 no ceremonies of royal dignity. We talked over
 
 78 WHAT HAPPENED TO EUROPE 
 
 Spanish and European conditions with the same free- 
 dom that one might have talked with any intelligent 
 statesman or, I think I would rather say, with an 
 intelligent business man, for His Majesty showed a 
 knowledge of business conditions, indeed a technical 
 grasp of questions of exchange and an understanding 
 of the principles of foreign trade such as a good 
 many statesmen would be quite innocent of. The 
 King is immensely popular with the army but has to 
 handle one of the most chaotic and turbulent complex 
 of political parties to be found anywhere. 
 
 The fall of a ministry in Spain is but a summer's 
 day event but now the process of forming coalition 
 ministries has reached the limit of even Alphonso's 
 astuteness. When Maura, who was called upon to 
 form a ministry following the fall of the Romanones 
 Government, was unable successfully to do this, a 
 general election was ordered to be held early in June. 
 
 To-day Spain is not only rich in natural resources 
 but rich in available liquid capital; but her capital- 
 ists are not adventurous. They do not care to take 
 the chance of business or industrial investments, 
 knowing perhaps too well the difficulties that enter- 
 prise must encounter with Government circles on one 
 side and under-paid, dissatisfied labor on the other. 
 There are in Spain the resources of people, of agri- 
 culture and of minerals to make the country blossom
 
 SPAIN 79 
 
 with an era of great internal development and pros- 
 perity. 
 
 I have indicated a little of what some of the things 
 are that will hamper such development. What the 
 result of the reaction of these forces may be I would 
 not attempt to guess, but of one thing I am certain. 
 To the observer of social business conditions there is 
 no more interesting field in Europe. It is worth 
 while observing that friendliness on the part of the 
 United States toward Spain will encounter striking 
 friendliness in Spain toward America. All bitterness 
 of '98 seems to have vanished and Spain looks to the 
 United States with respect and admiration. It needs 
 our capital less than any other country in Europe, 
 but Spaniards are quite frank in saying they need our 
 industrial leadership. Men of high character and 
 broad capacity will find a congenial atmosphere in 
 Spain if they go there to study on sound lines the 
 great business opportunities that exist.
 
 CHAPTER VIII 
 
 BELGIUM 
 
 BELGIUM is the most thickly populated country in 
 Europe. Its low-lying fertile fields are cultivated 
 like gardens, its country roads dotted with houses un- 
 til they look like village streets, and over a large sec- 
 tion of the country one is never out of sight of a 
 village or a city. 
 
 The Germans did horrible material harm to Bel- 
 gium, harm that went beyond all military necessity, 
 some of it seemingly done in madness in the early 
 days when Liege, Louvain and Dinant were destroyed. 
 Toward the end of the war theirs was a destruction 
 of Machiavellian cunning, a destruction designed 
 purely to prevent what might be left of Belgian in- 
 dustries from coming into early competition with 
 German production. 
 
 The harm that was done in Belgium was by no 
 means entirely material; a harm was done to the 
 moral fiber of her people. Four and a half years of 
 life in a territory occupied by such an enemy, an 
 enemy so ruthless in the early days of the war, was 
 designed to strike terror into every Belgian heart. 
 
 BO
 
 BELGIUM 81 
 
 Four and a half years under such occupation, with 
 the whole normal industrial life disorganized, when 
 the question of securing somehow one's daily bread 
 was the paramount question, and the bread was not 
 to be secured in the sweat of the brow but only by 
 doles and distributions when that situation has 
 been borne by a people for so long a time, an im- 
 pression of it will be left that no terms that could 
 be written into an armistice will remove. So it is 
 not surprising to find an abnormal social situation 
 in Belgium. And still an observer who looked only 
 at the surface of things would see well tilled fields, 
 and cities presenting a normal external appearance. 
 One could visit Brussels, Ghent, Bruges or Antwerp 
 and be pardoned if he left Belgium convinced that the 
 war had left no mark and the country was ready to 
 go on with its national life from the point where it 
 was interrupted in 1914. That being so, Americans 
 must be warned against accepting reports of their 
 countrymen indicating a normal state of affairs in 
 Europe, even though a man may say he believes what 
 he sees with his own eyes, and the things that his own 
 eyes actually see are apparently normal occurrences 
 of ordinary life. 
 
 Belgium has a population of 7,500,000. I do not 
 know what statistics would give as the number of 
 industrial workers prior to the war, but at a guess,
 
 82 WHAT HAPPENED TO EUROPE 
 
 out of this population, the industrial workers would 
 not have numbered much over one million. To-day 
 the Government of Belgium is paying weekly unem- 
 ployment doles to more than 800,000 workers. This 
 is a fair indication of what has happened to one 
 of the most industrious peoples in the world. But I 
 do not think that this tells the whole story. Out- 
 side of the few cotton mills in Ghent, broadly speak- 
 ing, one might say that the industry of Belgium has 
 ceased. Furthermore the destruction has been so 
 complete that it will be impossible to restart industry 
 in anything like its full momentum for at least three 
 years, if there were not a single financial or political 
 obstacle in the way. Buildings in many cases must 
 first be torn down that they may be rebuilt, for they 
 are shattered beyond usefulness and encumber the 
 ground. Machinery is in every state of wreckage. 
 A very large part of it is either completely wrecked 
 or has disappeared into German factories. Practi- 
 cally none of this stolen machinery is worth re-trans- 
 porting for it has been none too carefully used, and 
 by the time it is reinstalled it would be in such a con- 
 dition that the factory equipped with it would be 
 hopelessly handicapped from the first blowing of its 
 whistle. 
 
 Prior to the war, Belgium, to an even greater de- 
 gree than England, existed as a great factory com-
 
 BELGIUM 83 
 
 munity, importing most of its raw material, export- 
 ing great amounts of finished goods, and paying for 
 imported food by the earnings of its industries. Bel- 
 gian imports of foodstuffs had an average value of 
 $200,000,000 per year during the years directly pre- 
 ceding the war. The same amount of food would 
 probably now cost nearly double that sum in dollars, 
 while the dollar which costs approximately five francs 
 in the international exchanges of the normal pre-war 
 days, now costs about six francs and a half. The 
 future relation of the franc to the dollar no one would 
 quite venture to predict. That relation marks the 
 inability to balance import needs with export capac- 
 ity. The future of the franc is not bright. 
 
 An easy optimism is apt to answer to this and to 
 similar cases all over Europe that it will all come 
 right in time, that eventually the factories will be re- 
 stored, the flow of exports resumed, that the con- 
 sumptive demands of the people, for the time being 
 curtailed, some temporary credits found to ease the 
 immediate lack in the unbalanced foreign trade, and 
 that in the end we will witness the remarkable power 
 of recovery which an industrious people can show. 
 There is a great deal in that view, and it is a hopeful 
 and sane way of looking at the situation; but it 
 leaves out one extremely important and essential con- 
 sideration. A normal man needs three meals a day.
 
 84 WHAT HAPPENED TO EUROPE 
 
 That need is immediate and he cannot *wait for an 
 adjustment which will come " in the long run." It is 
 in the insistence of the human stomach that the pos- 
 sible tragedy to European civilization lies. The hu- 
 man stomach cannot wait. 
 
 People must be fed or they die, and the truth is 
 they are dying, dying in some parts of Europe en 
 masse. The figures which show the actual deaths 
 from starvation would appall America, would shock 
 her into awakening to America's responsibility if they 
 could but be comprehended. Somehow distance dulls 
 the significance of facts. We are told about whole 
 regions starving, but the picture is so unreal viewed 
 from our land of plenty that the horrible truth does 
 not grip us. If agricultural America could but vis- 
 ualize agricultural Russia, a great grain producing 
 nation which exported half the wheat that was 
 shipped into Europe, now reduced to a point where 
 several hundred thousand people are dying from star- 
 vation each month my warrant for the figures is 
 the greatest food authority in the world then our 
 people might begin to apprehend the fact that there 
 is something of considerable significance the matter 
 with Europe, something of such far-reaching and 
 fundamental importance, that the whole fabric of 
 European civilization is in danger. The disorganiza- 
 tion of industry, of transportation and of production
 
 BELGIUM 85 
 
 has so thrown out of balance the intricate machinery 
 of civilization that there is safety nowhere. Every 
 community is depending upon another community, 
 every country is depending upon another country, 
 in this modern mechanism of life which has been so 
 completely thrown out of gear. 
 
 Visualize any piece of great, modern machinery 
 an automobile taking a smooth road at thirty miles 
 an hour, a printing press turning out the nicely 
 folded sheets of a great daily paper at the rate of 
 twenty-five papers per second, or an electric plant 
 sending energy and power and light through a great 
 city. Disconnect a single important mechanical fea- 
 ture and this whole mechanism ceases to function un- 
 til the mal-adjustment is corrected. The automobile 
 halts with a weary stretch of road ahead. All the 
 cable and telegraph wires which have brought the 
 essence of the world's news to the point of dissemina- 
 tion, for the moment become useless. A whole city 
 can be thrown into darkness by an accident to a single 
 lever on the switchboard. But how simple are these 
 mechanisms compared with the mechanism of modern 
 society, and how slight is the mechanical misplace- 
 ment as compared to the wrecking of the essential 
 features of the great industrial, commercial and 
 financial machinery which was the life of modern 
 Europe.
 
 86 WHAT HAPPENED TO EUROPE 
 
 Coming back to the consideration of Belgium, I 
 will again emphasize the harm which has been done 
 to the moral fabric of her industrial population. 
 For four and a half years they 'have lived a dis- 
 organized life of semi-idleness. We all know how 
 hard it is to go back to the routine of work after a 
 two weeks' vacation, but it is not easy to picture what 
 happens to a whole people who for more than four 
 years have lived an abnormal social existence. It has 
 been said with a good deal of bitterness that there are 
 Belgians who have lived so long on charity that they 
 have ceased to care for work. Perhaps that is true, 
 and so- far as it is true it is in no wise surprising. 
 The character of these people has borne a great 
 strain, their normal lives have been disorganized for 
 a distressingly long period. Some of them have come 
 to look upon the Government treasury as a bottom- 
 less purse, and to think they have discovered by ex- 
 perience that legislative enactments rather than work 
 can support a people. 
 
 It seems to me that the greatest injury that Bel- 
 gium has suffered, and God knows the total list is an 
 unparalleled one, is in the deterioration of the moral 
 fiber of her common people. How quickly that can 
 be rebuilt no one can say. The inherent desire to 
 right wrong tendencies in humanity is unmeasurable.
 
 BELGIUM 87 
 
 For the moment the human problem is one of the 
 greatest factors in the rehabilitation of Belgium. 
 
 The situation in Belgium is by no means all black, 
 however. If by a brief contact with officials one may 
 be permitted to make comparative estimates, I would 
 say that the Government of Belgium is in strong, cap- 
 able, patriotic hands. To the modesty, seriousness 
 and ability of the Belgian monarch half the world has 
 done tribute. The present Prime Minister and Min- 
 ister of Finance, M. Delacroix, struck me as the peer 
 of any continental statesman I met. M. Jaspar, 
 Minister of Economic Affairs, is a man of deep un- 
 derstanding and patriotic determination, with a 
 weariness in his tired eyes that tells of national service 
 the personal cost of which was not counted. 
 
 Belgium has a further great asset in her business 
 men. Some of them have gone far afield to create 
 markets for Belgian industries. In times past the 
 securities on the Belgian stock exchange indicated the 
 investment of Belgian funds and the use of Belgian 
 machinery and products in enterprises that are lo- 
 cated around the world. It struck me that Belgium 
 offered an opportunity for partnership with Amer- 
 ica that would be profitable to both partners ; Amer- 
 ica to furnish capital, machinery and some supple- 
 mentary mechanical methods, while Belgium furnished
 
 88 WHAT HAPPENED TO EUROPE 
 
 a knowledge of international industrial affairs and 
 practical experience in many foreign fields and a 
 trained intelligence in international business with 
 which we are but scantily supplied.
 
 CHAPTER IX 
 
 THE INTERNATIONAL SCALE-PANS 
 
 COMMERCIAL life is confronted with a new factor 
 with which it must cope, the fluctuation of In- 
 ternational Exchange. The fluctuation of exchange, 
 of course, is nothing new in itself ; but when the value 
 of the currency of one country measured in the cur- 
 rency of another goes through such a wide range as 
 is experienced in current quotations, the effect is felt 
 throughout the farthest reaches of commerce. Meas- 
 ured in terms of our money there has been a fluctua- 
 tion during the war period in the value of the pound 
 from $7.00 to $4.50, of the franc from 33%f* to 15$, 
 of the lira from 25^ to 11^, of the peseta from 30^ 
 to 18^, and of the guilder from 52%^ to 39%^, and 
 all this to say nothing of the fluctuation of the mark, 
 which has been from 26^ to 17^, and of the kroner, 
 which has been from 47%^ to 24%^f. 
 
 Take a nation like Italy, for example, which must 
 import every ton of coal that runs its locomotives 
 or feeds its factory boilers, and which must provide 
 foreign exchange to pay for all its raw materials, 
 
 nearly all of which is bought in other countries. A 
 
 89
 
 90 WHAT HAPPENED TO EUROPE 
 
 fluctuation in the value of the lira, measured in dol- 
 lars, becomes a matter that affects every peasant and 
 every industrial worker. A fall in the value of the 
 lira must immediately be reflected in the rising price 
 of everything imported and indirectly in rising prices 
 of domestically produced articles that have some re- 
 lation to the cost of imports. 
 
 So the question of " The Exchange " has gone be- 
 yond the minds of bank employees who are accus- 
 tomed to looking at the financial centers of the world 
 as so many squares on a chess-board and transferring 
 balances from this center to that with an infinitesimal 
 s'hade of profit in the transaction. These were for- 
 merly the men chiefly interested in foreign exchange, 
 and all that the public knew about fluctuation had to 
 be learned from a little paragraph at the end of the 
 financial article giving in fine type the leading quota- 
 tions, never looked at by the ordinary reader. To- 
 day " The Exchanges " affect the immediate condi- 
 tions of the daily life of everybody in Europe who 
 has to buy in some form commodities purchased in 
 foreign countries. 
 
 In large measure the urgent demands of Europe 
 to-day are for purchases to be made in America. To 
 make these purchases the buyer must have dollar ex- 
 change. That is to say, he must be able to make the 
 payment in current funds in the United States either
 
 THE INTERNATIONAL SCALE-PANS 91 
 
 directly as an importer or indirectly by way of giv- 
 ing funds into the hands of the importer to pay for 
 his importations. As the dollar rises in value be- 
 cause there is a demand for it not counter-balanced 
 by a demand for pounds or francs or lire, there 
 comes into the minds of the people who have not 
 ordinarily dealt in the subject of exchange the feel- 
 ing that the Americans are charging too much for 
 their dollars. There is a lack of clearness of think- 
 ing surrounding the factors of this exchange prob- 
 lem that runs all the way from workmen to finance 
 ministers, and more than one finance minister has 
 spoken to me in complaining tones in regard to our 
 greediness as exhibited in the high rate of dollar ex- 
 change. I have had finance ministers tell me that the 
 American banks ought to get together in some way 
 and supply dollars so that the exchange rate would 
 not be so adverse to the harassed countries who 
 want to buy our goods. 
 
 This attitude of mind looks no further into the 
 subject than that of the man who found himself in- 
 convenienced by extremes of weather, and inveighed 
 against the thermometer. A thermometer measures 
 the temperature. It does not create it, and stoking 
 the furnace is obviously the thing that must be done 
 rather than to spend time grumbling about the ther- 
 mometer. Just so with the exchanges. The quota-
 
 92 WHAT HAPPENED TO EUROPE 
 
 tion of exchange registers the direction and the ex- 
 tent by which the total importations and exportations 
 of a country are out of balance. It is no more a 
 matter that can be corrected by bankers, who hap- 
 pen to be the men who hold the visible gauge that 
 marks the fluctuations of the exchanges, than the 
 temperature could be regulated by some attempt to 
 control the movements of the mercury in the bulb 
 of the thermometer by other means than altering 
 the general temperature that surrounds that instru- 
 ment. 
 
 One might compare the foreign trade movement of 
 a country to a set of balances. Put in one pan of 
 the balance a weight representing the value of all 
 the exports from a country. Put in the other pan 
 a weight representing the value of all the imports 
 into the country. Now if the scales are out of bal- 
 ance how can they be adjusted? The direction and 
 the amount by which they are out of balance will be 
 indicated by the pointer on the scale ; but that pointer 
 is not to blame if it points to a figure that means a 
 serious handicap for those who wish to buy in for- 
 eign markets. The correction must be made by the 
 weights in the balance pans. The ways in which 
 these weights may be varied are few and they may be 
 easily comprehended if one will but think of the fun- 
 damental factors involved. In the main the correc-
 
 THE INTERNATIONAL SCALE-PANS 93 
 
 tion must be made by cutting down the weight repre- 
 senting imports or adding to the weight representing 
 exports. When the deficiency of exports was slight, 
 and the financial mechanism of the world normal, the 
 correction was made by shipments of gold. The 
 shipment of gold tended directly to correct the bal- 
 ance, first, from its own weight, but in a much more 
 important measure, from its indirect effect. When 
 gold was shipped out of a country interest rates 
 tended to rise and prices to fall. The markets of 
 that country became more favorable to buy in than 
 to sell in, and the country's exports increased while 
 its imports decreased. Thus the balance was 
 brought back toward the normal. Now, however, we 
 have a situation where that form of correction can 
 not be applied or can only be applied in a compara- 
 tively small degree and in an ineffective way. What 
 else can be done to adjust the weights in the pans so 
 as to hold in check that tendency of exchange rates 
 further to fluctuate from the normal? A nation that 
 faces an imperative need for imports and that has, 
 for the time being at least, an insufficient amount of 
 exports to counter-balance its imports, may throw 
 into the pan with its exports one other weight, the 
 weight of its credit. If such a nation can make an 
 external loan, the proceeds of that loan have the same 
 effect in tending to bring back toward the normal the
 
 94 WHAT HAPPENED TO EUROPE 
 
 exchange rate as would an amount of merchandise 
 exports of the same value as the loan. 
 
 If the out-of-balance condition is only a temporary 
 one that needs but the progress of a season to cor- 
 rect, then the loan may take the form of bank credits ; 
 and the function of international bank credits is 
 usually that of correcting temporary out-of-balance 
 conditions. But Europe faces a situation in which 
 its demands for foreign goods must exceed its ability 
 to supply merchandise for export for a good while to 
 come, certainly for a longer period than it would 
 be safe or wise or possible to create bank credits of 
 sufficient volume to counter-balance the deficiency of 
 exports. There must exist, therefore, for a consid- 
 erable period a? situation in which most of the coun- 
 tries of Europe must effect term loans in volume suf- 
 ficient to make up the deficit between the utmost these 
 countries can export and the minimum of imports 
 upon which they can exist. These loans must have a 
 term that takes them out of the category of bank 
 credits and puts them in the form of investment se- 
 curities. 
 
 Here then is one reason why America must be- 
 come an investor in foreign securities. Such a re- 
 sult is an absolutely inevitable consequence of the 
 situation in which Europe finds itself to-day. Cer- 
 tain imports of raw material Europe must have to
 
 THE INTERNATIONAL SCALE-PANS 95 
 
 continue its normal life. For the time being Europe 
 has little or no goods to offer in exchange for the 
 essential raw material which must be had to start and 
 feed her industries ; and so she must fill into the pan 
 of the scale along with her deficient exports addi- 
 tional weight representing foreign credits. 
 
 It seems to me that the foregoing indicates the 
 true factors that influence foreign exchange. There 
 is no legerdermain of finance of which I am aware 
 that can change these fundamental factors, and any- 
 thing that appears to change them will, I believe, 
 upon analysis be found to fall within the principles 
 that have been here suggested. We have had the 
 phenomenon of " Pegged Exchange " which might 
 seem to offer the ground for belief that there is some 
 way of controlling the temperature by controlling the 
 thermometer. For a long period the pound sterling 
 was " pegged." That is to say, the price of dollars 
 in the London market or the price of pounds in 
 the New York market was from day to day the 
 same and the quotation was " pegged " at a fixed 
 figure through some power exercised by the British 
 Government. What was that power? It was 
 merely this in its ultimate analysis: The British 
 Government stood prepared through its agents to 
 buy all the exchange offered and to sell all the ex- 
 change demanded. It, in a measure, controlled the
 
 96 WHAT HAPPENED TO EUROPE 
 
 amount of dollar exchange that its own traders de- 
 manded by limiting the imports of goods into Eng- 
 land and thereby limiting the demand for dollars to 
 pay for imported goods, but as the two pans of the 
 scale were thrown out-of-balance by an excess of im- 
 ports into England above the total value of her ex- 
 ports, she had to maintain the balance by creating 
 government credits in dollars. This was done first 
 by appealing to our investment market and later by 
 contracting loans directly from our Government. 
 
 England's effort to " peg " exchange first resulted 
 in the necessity of exporting to us $1,300,000,000 
 of gold. So that in the first instance the deficiency 
 of commodity exports was made up by an export 
 of gold. This export of gold had a double pur- 
 pose: first, to pay a deficient balance, second, and 
 quite as important a purpose, to flood our market 
 with gold, keep down the interest rate and to make 
 possible the subsequent borrowing that the English 
 Government knew would have to be done in order to 
 continue to keep the scales balanced and the price of 
 sterling " pegged." When the flow of gold was ex- 
 hausted Great Britain went to our investment market 
 and secured about $1,500,000,000 of credit to throw 
 into the deficient pan. Later, after war was declared 
 by America, our Government made huge loans to the 
 British Government, and these loans week by week
 
 THE INTERNATIONAL SCALE-PANS 97 
 
 were dropped into the pan of the balance along with 
 Great Britain's total exports in just sufficient 
 amounts to hold the pointer on the scale at 4.76%, as 
 the weight in the other pan was increased by her con- 
 stantly growing imports. 
 
 That is the way the sterling rate was pegged. 
 The rate was maintained at 4.76% only because 
 Great Britain continued to have borrowing ability 
 sufficient to create a credit equal to balancing her 
 deficiency of exports. The moment that borrowing 
 ability shall cease or is not further exercised, any 
 discrepancy between the total exports and total im- 
 ports will make itself manifest through the pointer on 
 the scale. That is to say, the rate will be no longer 
 " P e gg e( V but will fluctuate as the pans of the scale 
 are put out-of-balance.
 
 CHAPTER X 
 
 CREDIT 
 
 CREDIT is so delicate a thing that it is dangerous to 
 talk about it. If a credit is to be weighed and ana- 
 lyzed, and the chance of its failing to be repaid ap- 
 praised, the not unusual course of the conservative 
 financier or investor is to say that he wants nothing 
 to do with it. 
 
 There is not a credit in Europe to-day that does 
 not need to be weighed and its chance of repayment 
 carefully appraised, but it will not do for America to 
 say that she will keep her dollars at home hence- 
 forth and get into no further entangling foreign 
 financial alliances. One American financier in Eu- 
 rope summed up his view of the situation by saying 
 that he would advise his partners henceforth to keep 
 very close to shore. My reply was that keeping 
 close to the shore might result in having a hole stove 
 in his boat. America cannot keep close to the shore. 
 We are launched, whether we like it or not, in the 
 world's currents. We have moral responsibilities 
 that should and will appeal to us ; but if we only look 
 at the situation on the narrowest of material grounds, 
 
 98
 
 CREDIT 99 
 
 and look with clear vision, we will understand how 
 involved is our civilization with the civilization of 
 Europe, and we will comprehend what it will mean 
 if by failing Europe in her hour of great need we 
 permanently injure the fabric of civilization 
 there. 
 
 The British Chancellor of the Exchequer looks for- 
 ward to British taxpayers facing an annual budget, 
 after the extraordinary expenses of demobilization 
 have been met, of 766,000,000, which is 114,000,- 
 000 more than he can foresee as likely to come into 
 the Treasury from the present rate of taxation. The 
 cost of the war after demobilization will astound the 
 world. From April 1, 1918, to the day of the 
 armistice Great Britain's war expenditures were 
 7,442,000 per day. From the armistice to March 
 31, 1919, they have averaged 6,476,000 per day. 
 From the armistice to April 1, 1919, England paid 
 out 52,000,000 in gratuities to the members of the 
 forces who were demobilized, and unemployment doles 
 absorbed 13,000,000, that figure, of course, being 
 since much increased, as it grows by one million and 
 a quarter pounds a week. 
 
 England set an example in taxation to all nations. 
 In the year ending April 1, 1919, 34^/2 per cent, of 
 her total expenditures were provided by taxes, and 
 for the five years of the war ending April 1, 1919,
 
 100 WHAT HAPPENED TO EUROPE 
 
 per cent, of the total war cost was provided 
 from revenue. 
 
 At the outbreak of the war the British national 
 debt was 645,000,000. On March 31, 1919, it was 
 7,435,000,000, of which 6,085,000,000 was inter- 
 nal and 1,350,000,000 external. The forecast for 
 the year ending March 31, 1920, indicates an ex- 
 penditure of 1,435,000,000, and a revenue of 1,- 
 160,000,000 with a deficit to be met by borrowing of 
 275,000,000, although the Chancellor prefers to 
 make a safer estimate and put the new loans neces- 
 sary as totaling three hundred million pounds. 
 
 That does not measure the borrowing the Treas- 
 ury faces, however. The floating debt on March 31st 
 amounted to 1,412,000,000. Most of this is in 
 three months Treasury Bills, and constant appeals 
 to the market must be made to renew these floating 
 obligations. On top of this are the national cur- 
 rency notes, demand obligations of the Government 
 in the form of circulating notes which, on April 23, 
 1919, stood at 349,000,000, and were supported by 
 a gold reserve of 28,500,000. Their amount is 
 steadily rising. The aggregate amount of legal ten- 
 der money of England, which at the beginning of the 
 war was 214,000,000, is now more than 540,- 
 000,000. 
 
 These figures take no account of the obligations
 
 CREDIT 101 
 
 owed to England by her Allies and dominions. These 
 obligations on March 31, 1919, amounted to 1,739,- 
 000,000. 
 
 As Mr. Chamberlain wisely observes, the hard, 
 inexorable economic fajcts of Great Britain's financial 
 position are obscured by a fictitious appearance of 
 wealth. There is between two and three times as 
 much legal tender money in circulation as there was 
 before the war. The deposits of the joint stock 
 banks have more than doubled. Almost all of their 
 additional deposits are represented in their port- 
 folios by short dated government securities. The 
 average figures indicate that about 46 per cent, of 
 British bank portfolios are in government obliga- 
 tions. The great French banks by comparison show 
 about 80 per cent, of their portfolios in government 
 paper. 
 
 I am not going to burden these pages with any 
 statistical analysis of the financial position of the 
 various governments. The position of every one of 
 them that was directly involved in the war may be 
 frankly accepted as critical. To England one might 
 perhaps better apply the word " difficult " than 
 " critical," but as for the rest, the position of the 
 domestic bondholder gives promise of unpleasant 
 eventualities either in the way of scaled obligations 
 or depreciation of the currency in which the debt is
 
 102 WHAT HAPPENED TO EUROPE 
 
 measured, or of such a direct tax as the voters of 
 Switzerland have just imposed. M. Klotz, the Fi- 
 nance Minister of France, without, one fears, a clear 
 economic understanding of the problem proposed a 
 capital tax in France. The proposition met with 
 such a roar of opposition that it was dropped almost 
 as soon as it was proposed. 
 
 In the chapter on France, I have given some indi- 
 cation of the national financial burdens. In Italy 
 the national debt is less, but its crushing weight is 
 proportionately as great, particularly in view of 
 Italy's comparative poverty in natural resources. 
 When we turn our attention to Poland, Lithuania, 
 Czecho-Slovakia, Jugo-Slavonia, and Greece, to say 
 nothing of Germany, Austria and Turkey, the situa- 
 tion presented in each case is desperate. Just how 
 desperate no one could measure, because to-day no 
 one knows what is the debt of any of those countries. 
 They have been made up by a re-drawing of na- 
 tional lines, but it was found easier to draw national 
 lines, infinitely difficult as that task is, than it was to 
 re-apportion to the new nations with a just allocation 
 that part of the old debt of the nations from which 
 the new countries have been made. 
 
 Anything like a discussion of the national finances 
 of most of these new nations with a view to definite 
 action is wholly impossible until the governments
 
 CREDIT 103 
 
 which they have temporarily set up have been for- 
 mally recognized by the great powers, and that rec- 
 ognition, up to the moment when this is written, has 
 not been definitely given. Such nations as Poland, 
 Lithuania and Czecho-Slovakia might conceivably 
 go to their own nationals in America and raise a cer- 
 tain amount of credits without having the basis of 
 those credits very closely scanned, but even that is 
 impossible until the United States has officially rec- 
 ognized those governments. Rumania has a better 
 foundation for national credit than the other smaller 
 nations mentioned because her existing debt is not 
 overwhelming and her resources in oil and agriculture 
 are very great indeed. But even so, she is not at 
 the moment in a position to command even a part of 
 the credit that she vitally needs. 
 
 In any consideration of credits in Europe, whether 
 they be national or individual, whether they be se- 
 cured by claims upon the German indemnity as col- 
 lateral or offered by corporations or individuals of 
 wealth, they are all open to one vital objection. 
 There is no political safety in Europe anywhere so 
 long as there is left any country unable to command 
 a sufficient amount of credit at least to make the 
 beginning of an attempt to restart its idle industries. 
 I have said elsewhere, but it cannot too often be re- 
 peated, or too clearly kept in mind, that paralyzed
 
 104 WHAT HAPPENED TO EUROPE 
 
 industry, idle workmen, stoppage in the flow of manu- 
 factured things, and the want and hunger which 
 must follow as a consequence, all of which is empha- 
 sized by the breakdown of domestic transportation, 
 speh 1 Bolshevism. 
 
 If the foregoing is a correct view, then Europe 
 must be looked at as a unit and one must cease trying 
 to find a nation here or there, or a loan of one char- 
 acter or another that in itself is thought to offer a 
 fair basis of security. There cannot be security in 
 an atmosphere where Bolshevism is contagious, and 
 where an outbreak in one center is almost certain to 
 be communicated to adjacent regions. Any attempt 
 to grant credit facilities for the rehabilitation of 
 Europe must, I believe, be so comprehensive in its 
 character as to embrace at least a serious effort to 
 restart the industrial cycle in all the European coun- 
 tries. I did not include Russia in that category be- 
 cause, for the time being, Russia is outside the pale 
 of capitalistic consideration, for there is no govern- 
 ment with which capital can contract. Bolshevist 
 Russia must, for the present, be economically iso- 
 lated as a patient too dangerously involved with con- 
 tagion to permit any financial intercourse. 
 
 Are we then to give up the task as hopeless and 
 mark the whole field as too dangerous for timid dol- 
 lars to enter? My answer would be that under no
 
 CREDIT 105 
 
 circumstances should we do that. It would be 
 morally cowardly, and financially more dangerous 
 than would be an intelligent attempt to grapple com- 
 prehensively with the whole problem. 
 
 How, then, shall we take hold of it? If we can- 
 not let the usual principles of credit govern our 
 financial decisions, if all Europe is so knit together 
 that we must be guided by her necessities rather than 
 by the security that individual countries can offer, 
 how can we make a beginning? 
 
 In the first place, to put it frankly, Europe is in 
 a situation where to my mind she must needs give 
 receiver's certificates for the credit to get her going 
 again. By receiver's certificates I mean national ob- 
 ligations having a prior lien upon the national in- 
 come. It would perhaps be impossible to get any one 
 of several nations to offer such security, if ap- 
 proached individually, but I believe if an identical 
 formula were presented to each nation, and if all 
 were alike asked for a prior lien, the difficulties of 
 national pride would be more easily overcome. 
 
 I will not here go into the details of a plan which 
 has been suggested to our own government and to 
 leading European officials and financiers. Perhaps 
 before these pages are printed that plan, or some 
 modification of it, or some other plan that recognizes 
 the principle of dealing with Europe as an entity
 
 106 WHAT HAPPENED TO EUROPE 
 
 in the first instance of granting credit, will have 
 been agreed to. In any case, events are traveling 
 too fast to make the pages of a book a suitable place 
 for such a current discussion. I will merely pre- 
 sume that some way is to be found to grant the first 
 credits that are so vitally essential to provide each 
 of these nations with a certain amount of machinery, 
 raw material and railroad equipment to permit a be- 
 ginning in the direction of restarting the industrial 
 cycle, and I will pass to some consideration of what 
 the next step may be. 
 
 Let no one think that Europe is lacking in a sound 
 basis for obtaining all the credits that the lending 
 nations can possibly extend, provided Europe gets 
 fairly started back on a return to normal economic 
 life. Not only is Europe enormously rich, but there 
 is inherent in the present situation a power of rapid 
 recovery, if the tangle can only be straightened out, 
 which will set the continent in the direction of re- 
 covery. If industry is not promptly restarted the 
 possibilities involved are too black to picture, but if 
 all these nations can be faced in the right direction 
 it would be possible to wipe out most of the scars of 
 war in an amazingly short time. 
 
 If I read the situation aright, there is to be a new 
 type of financial relationship. Europe lacks credit, 
 but it has something that America lacks. It has ex-
 
 CREDIT 107 
 
 perience and an understanding of international in- 
 dustrial business which goes, in many instances far 
 beyond our own experience. It seems to me that this 
 should be the best of grounds for a partnership in 
 commercial and industrial affairs. We would bring 
 to the partnership capital and a certain amount of 
 imagination and vigor, while the Europeans would 
 bring an industrial plant and a commercial organiza- 
 tion thoroughly experienced in fields where we have 
 not adventured. 
 
 The cotton mills of Italy give an outlook into the 
 Near East, and I believe it would be greatly to the 
 advantage of cotton interests ambitious to extend 
 markets in that direction, to work with Italian cotton 
 mill interests. The Italians have been extremely 
 clever of late years in the production of cheap goods 
 for the Near East. They have an abundance of 
 labor. They lie on a route between our cotton fields 
 and the ultimate market, and they know the market. 
 
 Belgium has done successful industrial engineering 
 quite around the world. She has strong men with 
 practical experience of construction and installa- 
 tion over the widest territory. They have a great 
 number of plants of one sort and another operating 
 in almost every important country, and they have 
 many projects in hand that have been studied, some 
 of which are ripe for execution. There could be a
 
 partnership of American capital and industry 
 formed with Belgian experience in industry which 
 might play a great international role. 
 
 There is no more dreadful error to be made by 
 America than narrowly to conclude that foreign 
 trade means merely selling our products, and to close 
 our minds to the idea of helping rehabilitate and 
 making future markets for the product of European 
 industry. Some may hold the opinion that a loan 
 of credit to rehabilitate industry in Europe would 
 be merely a loan to help our industrial competitors 
 more quickly to get back to a position where they 
 can outstrip us in competitive markets, and there- 
 fore we had best keep our credits at home and push 
 our present commercial advantage. It seems to me 
 that this conception is as seriously wrong as possi- 
 ble. Foreign trade is interchange, and distinctly 
 not to be conceived of as merely selling by one coun- 
 try to other countries. As European industry is 
 rehabilitated, and as surplus products are made that 
 can be exchanged for the surplus products of other 
 countries, the world will get back to something like a 
 normal life. 
 
 For the moment, the world has no conception of 
 how disorganized its affairs are as a result of this 
 disorganization of European industry, because for 
 the moment there are effective demands that pretty
 
 CREDIT 109 
 
 well take up any slack there is in productive capac- 
 ity anywhere. The credits will be quickly exhausted 
 upon which much of the purchasing has been 
 done in international markets in the first six months 
 since the armistice, and the new credit may be slow 
 of creation. For a time international trade must be 
 moved by credits, because Europe is in no position 
 to produce exportable surpluses of anything in ap- 
 preciable amounts and therefore will not have nor- 
 mal amounts of goods to exchange for other goods 
 until the industrial processes and the former reac- 
 tions in demand of one industry upon another have 
 been set in motion. 
 
 Of course, banking credits will ultimately come 
 into the picture, but there are great misconceptions 
 in the minds of government officials, of business men, 
 and I would even venture to say in the minds of some 
 bankers, as to the proper function of bank credit 
 in such a situation as the present one. I have always 
 felt that it was salutory to look at a bank, not as an 
 inexhaustible fountain of credit, but rather as the 
 greatest debtor in the commercial world. We are 
 apt to speak of the resources of a bank instead of 
 that exactly counter-balancing figure, its liabilities ; 
 and borrowers at least do not keep clearly in mind 
 that the banks are the greatest borrowers of all, and 
 that they owe all of their resources, except the mod-
 
 110 WHAT HAPPENED TO EUROPE 
 
 est percentage that represents their capital; and, 
 more than that, stand committed to the repayment 
 of their debt on demand. All this means that wise 
 bankers will not tie up in long term credits the funds 
 that they owe to depositors on demand. The credit 
 that represents goods in transit, raw material in 
 process of manufacture, products moving directly 
 into consumption is the ideal form of credit for bank 
 loans. All credits that inherently have in them the 
 power of self-liquidation, is the proper use for bank 
 resources. 
 
 When a bank begins to loan against a commodity 
 in transit, and further agrees to renew those loans 
 for a period of a year or two after the commodity 
 that formed the original basis of the loan has passed 
 into consumption, the bank has engaged in financing 
 rather than banking. If it takes on much of this 
 character of business it is on dangerous ground. 
 Personally, I believe one of the few serious errors, 
 in disregard of the sound principles of banking, 
 which the Federal Reserve Board has made, has been 
 to permit the rediscounting of bills that have been 
 drawn under agreements to renew. Such bills cease 
 to have any self-liquidating character, after the 
 goods against which they were drawn passed into 
 consumption while the payment of the original bill is 
 extended.
 
 CREDIT 111 
 
 The role that American banks can play in the 
 credit situation in Europe is of vast importance, and 
 if they will hold firmly to the lines of sound commer- 
 cial banking it is a role which they can play with se- 
 curity and profit. Never was there greater need, 
 however, for a firm grip by bankers on the funda- 
 mental principles of sound banking. There will be 
 presented most attractive opportunities to make bank 
 loans under conditions and for terms that will take 
 the loan out of the category of proper banking and 
 put it into the form of financing. If bankers are 
 firm in adhering to principles they will leave such 
 loans to be worked out in other ways and will per- 
 form their true function by making loans that have 
 within themselves the inherent power of self-liquida- 
 tion. 
 
 I am quite aware that great and apparently suc- 
 cessful systems of banking have been built up on 
 the continent in apparent disregard of the princi- 
 ples which I have here been emphasizing. The Ger- 
 man banks were deeply interested in German indus- 
 try. The same is true in a measure of Italian banks 
 to-day. In France too little encouragement has 
 been given to industry by the banks and too much 
 emphasis has been laid upon the profits made by 
 floating securities. If some of the billions of French 
 capital, which under the stimulation of banking
 
 112 WHAT HAPPENED TO EUROPE 
 
 propaganda, found its way into Russian and Turkish 
 loans, had been invested in French industry, the pres- 
 ent position of France would be less unhappy. In 
 England the sound traditions of commercial banking 
 have been much more closely adhered to than on the 
 continent, but England is now off the gold basis and 
 her banks are encountering obstacles in the field of 
 world-banking which seemed very difficult to sur- 
 mount. 
 
 American bankers have an opportunity in the 
 field of world-banking brilliant beyond any concep- 
 tion which they have heretofore had. If they will 
 rise above the provincialism in which they have been 
 trained and still hold firmly to the principles of 
 sound commercial banking, the role which they will 
 play in the future world of finance has no limit that 
 I can see.
 
 CHAPTER XI 
 
 " COMFOET AND IJBEETY " 
 
 THE motto of the chief Syndicalist organization of 
 to-day, the Confederation Generale du Travail of 
 France, consists of two words " Comfort and Lib- 
 erty." Here is the key to an understanding of the 
 greatest problem of the age, the labor problem. If 
 one will grasp in their significance what these two 
 words connote in the mind of labor, he will have 
 pretty much the whole story of labor's aspirations. 
 By comfort is meant a larger share in the earnings 
 of industry; by liberty is meant a less subordinate 
 position in industrial surroundings and social status. 
 It has been keenly observed that the aspirations em- 
 bodied in these claims have been ripened by the war, 
 which has quickened the consciousness of merit in 
 the laboring classes. 
 
 A man who has had enormous experience during 
 the war in handling the English labor situation, Sir 
 Lynden Maccassey, sums up the essentials to peace 
 in industry under the three headings of Contentment, 
 Cooperation, and Production. 
 
 The factors on which contentment depends, he 
 113
 
 114 WHAT HAPPENED TO EUROPE 
 
 says, are in their respective order of importance: 
 
 1. Security of employment. 
 
 2. A voice in fixing conditions of employment. 
 
 3. Remuneration and a fair division of profits. 
 
 4. Working hours. 
 
 5. Prevention of profiteering. 
 
 6. Housing. 
 
 7. Economic education. 
 
 8. Opportunity to rise. 
 
 The factors on which cooperation turn depend on : 
 
 1. Elimination of suspicion. 
 
 2. Creation of confidence between employer and 
 
 employee. 
 
 3. Recognition of their mutual community of 
 
 interest. 
 
 4. Machinery for facilitating cooperation. 
 
 The final factors upon which production primarily 
 depends are: 
 
 1. Economic education. 
 
 2. Modernization of their methods by employers. 
 
 3. Repudiation by labor of limitation of out- 
 
 put and of demarcation restrictions. 
 
 The significance in this catalog is the arrange- 
 ment in respect to the order of importance of the 
 different factors. Only preceded by the factor of 
 the security of employment is the weight given to
 
 " COMFORT AND LIBERTY " 115 
 
 having a voice in fixing the conditions of employment. 
 That I believe is giving its just weight to this aspira- 
 tion of labor. I found the situation the same in 
 every labor community where I had the opportunity 
 to observe conditions. There is a determination on 
 the part of labor to have more to say about conditions 
 of its job. No matter in what country one studies 
 this all important matter he will find the wage ques- 
 tion is subordinate to the question of the workers' 
 status. There is a determination to have a larger 
 share in the profits of industry, but there is even a 
 stronger determination to see to it that society no 
 longer regards labor as a mere commodity, and, in- 
 stead of that, that society shall grant to labor, not 
 as a concession but as a right, a voice in determining 
 immediate industrial surroundings, rules and regu- 
 lations under which labor will work. 
 
 There is to-day nothing short of chaos in Euro- 
 pean industry. One phase of it is manifest in the 
 enormous unemployment encountered in every coun- 
 try except Spain. In England one million workers 
 receive a million and a quarter pounds a week in 
 " unemployment wages," and in addition England is 
 subsidizing wheat by selling it for less than it cost, 
 so that this form of contribution is costing the na- 
 tion fifty million pounds per annum. The present 
 unemployment figures it is thought are certain to in-
 
 116 WHAT HAPPENED TO EUROPE 
 
 crease. In Belgium the percentage of unemployment 
 is far more serious with 800,000 in that compara- 
 tively small community receiving " unemployment 
 wages." The situation in France and Italy is little 
 better. The effect on the industrial life of the na- 
 tion of this system of unemployment doles would 
 make in itself the basis of an illuminating study. No 
 matter how serious consequences one may trace as 
 likely to follow these vast national disbursements, it 
 may as well be admitted on the start that they were 
 absolutely necessary. If the war industry had 
 ceased and armies had been demobilized to return to 
 hunger and idleness, the foundation of the capitalistic 
 order would have crumbled. There is perhaps a 
 question as to the wisdom of paying the unemployed 
 without exacting anything in return, although the 
 difficulties of organizing any national work that 
 would have absorbed this labor in a way that would 
 not have been too obviously making a man perform a 
 useless task, would have been it must be admitted 
 very great. 
 
 In England the weekly unemployment dole is 29s 
 to men and 25s to women, with an additional amount 
 for each dependent child. This is a sum certainly 
 none too large to maintain a self-respecting stand- 
 ard of living, although it is larger than were the 
 wages for a full week's labor in many lines prior to
 
 "COMFORT AND LIBERTY" 117 
 
 the war. It is admitted by every one that the sys- 
 tem is being abused, that men are declining to work 
 because they would rather loaf and draw the dole. 
 
 Under the rules of administering this unemploy- 
 ment fund, the Government must present to a man 
 an opportunity to labor at his particular trade be- 
 fore it may cut off his claim to the unemployment 
 gratuity. There is in England an extraordinary 
 immobility of labor as between the various trades, 
 and an extremely sharp line of demarcation in re- 
 spect to which trade a certain kind of work falls. 
 It naturally follows that there are many stories re- 
 lated of how men decline to work at this job or that 
 because such job does not fall exactly within the 
 defined limits of their particular trade, and the men 
 sit idly consuming Government charity while useful 
 tasks remain unperformed. 
 
 A man of very high position in the financial world 
 of the city told me this story. A man had been in 
 his employ as a gardener, but left that work to be- 
 come a repairer of roads. Municipal economies 
 stopped road repairing and the laborer began to 
 draw his unemployment wage. Having a large fam- 
 ily his weekly income from the Government amounted 
 to 36s. My friend met his former employee and of- 
 fered him 35s to resume work in his garden. This 
 he hotly declined as he said he was receiving 36s for
 
 118 WHAT HAPPENED TO EUROPE 
 
 doing nothing. My friend then appealed to the au- 
 thorities and charged them with wasting the tax- 
 payers' money, but they replied that this man was 
 registered as a road repairer, and they were bound 
 to find him a position as a road repairer and pay 
 him unemployment wages until they succeeded. 
 
 This tale was told to me for the purpose of throw- 
 ing light on the abuses that were going on under the 
 unemployment act. As a matter of fact, while the 
 story may be useful for the purpose intended, it is 
 even more illuminating because of the light that it 
 throws on the attitude of employers. A man of 
 wealth owning an extensive country place and at- 
 tempting to command the labor of a man who had a 
 large family to support by offering him 35s a week 
 with the present cost of living in England taken into 
 account, was trying to get his gardening done at a 
 wage that must have meant the barest subsistence to 
 the worker. There are easily two points of view 
 from which to regard the employee's refusal to give 
 up his 36s a week of unemployment dole in order that 
 he might earn in .the sweat of his brow a wage below a 
 point that would support his family at a minimum 
 standard of existence. 
 
 Another difficulty that is encountered in the ad- 
 ministration of the unemployment fund is met in the 
 large number of women who were formerly in domes-
 
 " COMFORT AND LIBERTY " 119 
 
 tic service, but who entered industry during the pres- 
 sure for war production. They register as machin- 
 ists or at least as skilled industrial hands; they de- 
 cline again to accept domestic service, and the Gov- 
 ernment finds itself in the position of supporting 
 them while the English mistress is in despair because 
 of her inability to get servants. 
 
 The effect on moral character of these huge Gov- 
 ernment disbursements to the unemployed raises ex- 
 tremely serious considerations. There has been an 
 awakening consciousness in regard to society's re- 
 sponsibility for unemployment and there is little like- 
 lihood of European industry returning to its pre- 
 war situation in which the lack of security for labor 
 was always uppermost in labor's mind. The unem- 
 ployment doles are in no sense regarded by their re- 
 cipients as charity, but rather as a human right 
 which should be one of the first charges on the public 
 purse. Economic ignorance leads men to think that 
 the public purse is bottomless, and that their Gov- 
 ernment, if not the world, owes them a living. They 
 feel that they are not necessarily bound to do any 
 work in order to collect the debt. 
 
 Employers generally admit the necessity and the 
 justice of a national unemployment scheme, but they 
 universally feel that the plan should be contributory, 
 and that employers and employees and the nation
 
 120 WHAT HAPPENED TO EUROPE 
 
 should each bear a part of the burden. There are 
 some trade unionists who strongly object to a con- 
 tributory system and even declare the present system 
 is unjustly administered, their aspiration being for 
 grants from the government in case of unemploy- 
 ment, the grants to be made direct to the labor 
 unions and to be distributed by them. 
 
 It seemed to me that the most important thing for 
 American employers to grasp is the significance at- 
 tached by workingmen to bettering their social status 
 in industry. At home I try never to miss an oppor- 
 tunity to gain enlightenment on the workmen's point 
 of view, and I have been increasingly impressed with 
 their desire for a larger voice in management. They 
 do not want a voice either in the management or the 
 responsibility of the business office, but they do want 
 more to say about the immediate industrial conditions 
 in which they work. I am thoroughly convinced that 
 that aspiration is now world-wide and that America 
 will feel the demand as strongly as it is now being 
 felt in Europe. I believe ft is a demand that Ameri- 
 can employers should heed, and that it should be met 
 not merely by forced and grudging concessions but 
 rather from the point of view which is now held by 
 many English employers. It is declared that what 
 the men want is to be treated as intelligent partici- 
 pators in industry, to be consulted and to have things
 
 " COMFORT AND LIBERTY " 121 
 
 explained to them. It is a reasonable and logical 
 claim, and employers themselves believe they will have 
 to concede it. 
 
 English- employers believe that production hinges 
 on contentment, that contentment cannot be secured 
 merely by wages, and that if labor is given a larger 
 voice in the management of the purely industrial con- 
 ditions of the shop, there will be not only a growth 
 in contentment, but there will be a cooperative spirit 
 in which men will bring their brains as well as their 
 muscles to the task of production. They feel that 
 from capital's point of view every such concession 
 made will be far more than compensated in the in- 
 creased production secured. 
 
 The war resulted in the relinquishment by union 
 labor of many of its rules which have in a steadily 
 increasing degree hampered industry. There is still 
 a widespread economic fallacy in labor circles, how- 
 ever. Labor believes that a restriction of output is 
 beneficial to the worker. The effect of that fallacy 
 is again coming sharply into evidence. There is a 
 widespread belief among workers that industry can be 
 carried on with much shorter hours, that men may 
 receive still higher pay for the shorter day, and that 
 all this can be accomplished without any detriment 
 to industry, purely as a result of a more just division 
 of the profits of industry.
 
 WHAT HAPPENED TO EUROPE 
 
 That view has certainly been upheld by the re- 
 sults of the Coal Inquiry in England. In the light 
 of the facts brought out by that inquiry, there could 
 have been no other decision than that labor was en- 
 titled to shorter hours and much higher pay. Of 
 course, the condition is not parallel in other lines of 
 industry, and there is probably grave danger in ap- 
 plying that view to those industries whose life is de- 
 pendent upon ability to compete in neutral markets. 
 Of course, a higher price for coal will affect Eng- 
 land's ability to compete in all international lines of 
 industry. 
 
 There is a tendency for labor to lose its faith in 
 the efficacy of higher wages. Debased currency and 
 deficient supplies have so steadily advanced the cost 
 of living that higher wages have frequently brought 
 no 'additional comforts of life. It is in this fact that 
 there is the most dangerous ground for propagating 
 dissatisfaction with the entire capitalistic order of 
 society. Everywhere in Europe there is a substan- 
 tial minority in the labor world ready for a revolu- 
 tion to establish a Communistic State. I have dis- 
 cussed this phase in the chapter on " The Power of 
 Minorities." 
 
 Labor's position in Europe is going to be tre- 
 mendously strengthened by the loss of man-power re- 
 sulting from the casualties of war. These figures
 
 123 
 
 reach an enormous total and have an immediate ef- 
 fect. But of still greater portent is the loss of popu- 
 lation resulting from the decreased normal birth rate. 
 A sound authority estimates that the belligerent 
 countries are poorer by twelve million lives because of 
 the separation of husbands and wives during the war. 
 
 A profound effect upon the character of the in- 
 dustrial skill of European labor has been produced 
 by the war. The whole normal course of apprentice- 
 ship and training of young men has been interfered 
 with. Not only have apprentices been withdrawn 
 from shops to the colors, but the absorption of in- 
 dustry for five years in vast scale production where 
 the amount of repetitive work in which no skill is 
 required, except for a single operation, has been very 
 large, has made these years in a measure, blank in 
 the training they have given in all-round craftsman- 
 ship to the rising generation. 
 
 As against this loss of skill there have been sub- 
 stantial gains from the labor of women in industry. 
 Women have been found in many cases surprisingly 
 efficient. There is also the permanent gain so far as 
 efficient and cheap production goes from the intro- 
 duction of automatic machines whose use the con- 
 servative employer had been slow to rightly appraise, 
 and whose introduction was steadily opposed before 
 the war by labor.
 
 124 WHAT HAPPENED TO EUROPE 
 
 I suppose the most significant thing in the whole 
 European labor situation is the quickened conscious- 
 ness in the minds of labor, which has come from the 
 whole war experience, of labor's own power, and the 
 keener comprehension of labor's claims in a democ- 
 racy to a greater equality of opportunity and re- 
 ward. The attitude of social classes throughout Eu- 
 rope has been profoundly affected by the democracy 
 of the war experience. This experience has broken 
 down many old class barriers. That fact is star- 
 tlingly exemplified, not alone in the new demands of 
 labor, but in universally a more liberal attitude by 
 employers. Nowhere in Europe is there any longer 
 any substantial resistance on the part of employers 
 to an eight hour day. 
 
 Perhaps there is no single mental effect of the 
 war that is more significant than the changed atti- 
 tude of European employers to the whole labor ques- 
 tion. There is a disposition to examine the very 
 fundamentals of labor's dissatisfaction and to accept 
 as not only necessary, but probably as desirable, a 
 quite new status of the workers, particularly in rela- 
 tion to giving them a really effective voice in the 
 management of industry. 
 
 This does not mean any tendency toward anarchy 
 in industry. A larger voice in industrial manage- 
 ment on the part of labor is not translated either
 
 " COMFORT AND LIBERTY " 125 
 
 by labor or employers to mean a voice that extends 
 to commercial policy. More than anything else it 
 seems to me to mean that labor shall be taken into the 
 confidence of employers, shall be informed in regard 
 to aims, advised with in respect to difficulties, listened 
 to when it wishes to make suggestions in regard to 
 shop practice, and conferred with about shop condi- 
 tions, and particularly about shop foremen. In a 
 word, labor wants to be led instead of driven, and it 
 wants its leaders so to take it into their confidence 
 that labor will have some intelligent view of the task 
 to be accomplished. 
 
 All this may sound very revolutionary to an em- 
 ployer who has counted labor costs as he has counted 
 the cost of copper or steel or cotton. There has been 
 a great awakening in Europe, however, to the differ- 
 ence between buying the raw material commodities 
 and the buying of the labor element that, combined 
 with them, makes the finished product. 
 
 Employers have begun to distrust their old point 
 of view and to take a new and a far more human atti- 
 tude toward the whole labor problem. There is an 
 underlying optimism in their minds that has led many 
 of them to believe that perhaps after all these de- 
 mands of labor were not merely concessions to be 
 wrung from capital and to be resisted at every step, 
 but rather that it is possible that in the direction of
 
 126 WHAT HAPPENED TO EUROPE 
 
 these demands lies the basis of a new understanding 
 and a true cooperation between capital and labor. 
 The employers' attitude in this respect is undoubtedly 
 quickened by the fear that if labor now encountered 
 a Tory obstinacy on the part of employers, there 
 would be danger that their part of the world at least 
 would be launched on a vast and frightfully danger- 
 ous experiment in one type or another of " national- 
 ism " or " communism," the generic term for which in 
 everybody's mind is now " Bolshevism." 
 
 I would not iiave any one infer that I believe there 
 is a millennium at hand in the European industrial 
 world, nor would I wish it thought that I have a con- 
 ception of European or particularly of British labor 
 that is Utopian. There is ignorance of economic 
 law, there is class selfishness, there is stupid adher- 
 ence to unsound tradition that any plan for perma- 
 nently composing the differences between capital and 
 labor will have to overcome. Opposed to that, 
 however, is one of the most inspiriting things that I 
 encountered in Europe. That was the quality of 
 mind in certain Englishmen who have come up from 
 the ranks of labor. Some of them are cabinet min- 
 isters, some of them now hold noble titles, some of 
 them still are rendering services to their fellows as 
 union officials. 
 
 There is truly a new intellectual aristocracy grow-
 
 " COMFORT AND LIBERTY " 127 
 
 ing up in England, fed from the ranks of labor 
 and having an outlook, an understanding, a sympa- 
 thy, and withal a grip on the economic verities that 
 marks the most promising and significant develop- 
 ment. 
 
 In the great war America achieved the freeing of 
 herself from the incubus of militarism at the cost of 
 a sacrifice which, compared with the sacrifice made 
 by the nations associated with her, has been small 
 indeed. She faced a world situation in which mili- 
 tary power seemed likely to be set up as the pre- 
 dominant force. With all the rest of the world she 
 is now free, it is to be hoped, from that terrible ca- 
 tastrophe; and she has fortunately secured freedom 
 at no crushing cost. 
 
 I believe that it lies within the power of American 
 employers and of American capitalists similarly to 
 make a short cut without great sacrifice to a future 
 of industrial peace, and to escape what might be a 
 conflict that would be as dangerous to her national 
 life and prosperity as was the conflict we have so 
 happily passed through. That short cut may be 
 reached if these interests will now with one accord 
 come to the point of view that has already been 
 reached by European employers and capital. That 
 will require a true vision, a development of human 
 sympathy, a grasp of economic principles, a conces-
 
 128 WHAT HAPPENED TO EUROPE 
 
 sion in time- rooted prejudices and a quickened under- 
 standing of the aspirations and the point of view of 
 labor. Is it too much to hope for? 
 
 I am convinced that it is along these lines that in- 
 dustrial peace lies. I have come to feel profoundly 
 that a liberalizing of the views of employers and 
 capitalists in respect to labor will be followed by a 
 gain to both sides, the value of which could hardly 
 be measured. In that direction lies the hope that 
 America may make the same sort of short cut to in- 
 dustrial peace that she made in freeing herself from 
 ft life of apprehension of military domination. It 
 seems to me clear as crystal that along this road there 
 lies not only great moral satisfaction, but side by 
 side with that lies the greatest material prosperity.
 
 CHAPTER XII 
 AN EMPLOYEE'S VISION 
 
 THE changed and liberalized attitude of employ- 
 ers in England struck me as most significant. Per- 
 haps I could in no better way illustrate that than 
 by reproducing, as well as I can remember, an inter- 
 view I had with an employer of first importance. 
 This gentleman has had a wide experience through- 
 out his life with large bodies of work people. His 
 view of the labor question seemed to me extremely 
 interesting. This is what he had to say : 
 
 " No one foresaw what the war was going to mean. 
 Least of all, perhaps, did any one foresee that it was 
 going to mean a social revolution, a revolution in 
 the way men's minds work and a change in the point 
 of view from which they regarded relationships with 
 one another. We are just becoming aware that we 
 are going to emerge from the war with an industrial 
 revolution already accomplished. 
 
 " I would sum up my own view in regard to so- 
 ciety's relation to labor in about this way: There 
 are five great principles that we must accept. The 
 
 first of these is a minimum wage. When we see that 
 
 129
 
 130 WHAT HAPPENED TO EUROPE 
 
 labor is not a commodity, that it is no longer to be 
 treated as a commodity, we will come to see the jus- 
 tice in national laws formulating a reasonable mini- 
 mum wage. This means a wage to all normal men 
 that will permit them to marry, to bring up a family, 
 and have left a reasonable margin for unusual emer- 
 gencies. I believe there should be established trade 
 boards in every industry. I think that that may rea- 
 sonably be done in the next five years. To work it 
 out in detail must be a matter of experiment and ex- 
 perience, but within that time, although we' may not 
 have it worked out in figures, we should have laid the 
 principles and be on the road where we can logically 
 apply those principles to all the varying conditions 
 of industrial life and eventually arrive at the definite 
 minimum wage that every normal man, ready -in his 
 capacity to do his part, may count upon. 
 
 " After we have reached an understanding as to 
 what the basic wage must be we must regard that 
 really as a minimum and not as the general wage scale. 
 I think we can reasonably leave to the haggling of the 
 market what will be the reward for exceptional skill 
 or exceptional industry. It would be a profound 
 mistake to aim to fix a maximum wage. That would 
 discourage all attempt at improvement. There 
 should be left freedom for employers to pay more 
 than this basic wage in order to secure men with spe-
 
 AN EMPLOYER'S VISION 131 
 
 cial skill, energy, or industry. I am engaged in a 
 food products business. In my works the present 
 minimum for men is fifty-five shillings per week. 
 
 " It may be argued that it will be found that there 
 are industries which, on account of the foreign com- 
 petition or other reasons, will find it impossible to pay 
 the minimum wage. If, after a fair trial, that is 
 found to be so, the answer should be, ' scrap the 
 industry.' If an industry is found to be on such 
 an economic basis that it cannot exist and pay a 
 wage scale equal to what is found to be the basic 
 necessity for the standard of life as I have outlined 
 it then the country is better off if that industry goes 
 out of existence. 
 
 " The second important point is that of hours. 
 My own belief is that forty-eight hours a week will 
 probably be found to be right. At the present time 
 in the industry in which I am interested we have a 
 forty-four hour week. We -have left it to the work- 
 men to decide how the hours shall be divided, and they 
 have decided to work nine hours a day for four days 
 and eight hours for one day, and to have Saturday en- 
 tirely free. I think that decision is wrong. We 
 lose the advantage of the short day's work and all 
 the better production that would probably follow 
 the short day's work. I think the arrangement 
 should be five days of eight hours, with four hours
 
 132 WHAT HAPPENED TO EUROPE 
 
 on Saturday. However, our employees felt other- 
 wise and we are making the experiment, although we 
 do not agree with the plan of letting them do the full 
 week's work during five days. 
 
 " Third, labor should be given security against un- 
 employment. That should be accomplished, not as 
 we are doing in England now, but by means of an 
 insurance fund to which the workmen, the employers 
 and the State should all contribute. Conditions in 
 England in one respect are quite different from condi- 
 tions in the United States. Here we have nominally 
 no large turn-over of labor. In our works, for ex- 
 ample, we employ three thousand girls. Our average 
 loss of these employees is under three hundred a year. 
 Our experience is that our employees come to us when 
 they first begin to work and the women remain with 
 us until they marry. 
 
 " Conditions in regard to unemployment vary with 
 different industries, and may vary widely in the 
 same industry at different times. That leads me 
 to believe that while a proper insurance fund should 
 mainly be created by the employees and the employ- 
 ers in each industry, there should be cooperation be- 
 tween the industry and the State so as to spread the 
 liability and not make each industry wholly respon- 
 sible for all of the unemployment in that industry. 
 The present unemployment payments are not large
 
 AN EMPLOYER'S VISION 133 
 
 enough, but they are larger than can be borne per- 
 haps if there is not contribution to the fund by both 
 the workers and the employers. 
 
 " We are all greatly concerned at the present time 
 because of the number of unemployed, but that num- 
 ber is after all not remarkably large. What has 
 happened is that the conscience of the nation has 
 been awakened to its responsibility to the individual 
 in a period of enforced unemployment, and in the 
 light of that consciousness of responsibility the fig- 
 ures for the first time stand out clearly in our minds 
 in regard to the number of unemployed. We have 
 nearly always had unemployment but we have not 
 been aware of its extent, not feeling a national re- 
 sponsibility toward those who are out of work. For 
 a number of years prior to the war there was an 
 average unemployment of five per cent, of the work- 
 ing population, and the greater part of this unem- 
 ployment was owing to exigencies over which the 
 employees had no control. A state of unemployment 
 where no provision is made for the unemployed re- 
 acts on the whole situation in a way we have not be- 
 fore clearly understood. With five per cent, of the 
 working population unemployed, and no means pro- 
 vided for their support, all industry feels the lack of 
 their consumptive demand. If there was a sound 
 general unemployment insurance the unemployed per-
 
 134. WHAT HAPPENED TO EUROPE 
 
 centage of the community would still be in a position 
 to exercise an effective demand for the products of 
 industry, and it is apparent, therefore, that an ade- 
 quate unemployment insurance scheme would reduce 
 the actual unemployment. The best study which has 
 been made of this whole subject will be found in Sir 
 William Beveridge's book on * Unemployment.' If 
 the workers, the employers, and the State each con- 
 tribute six pence a week for each worker it is calcu- 
 lated that this would provide at least twenty-five 
 shillings a week for unemployment insurance for 
 everybody. 
 
 " I believe some most important results will flow 
 from a sound unemployment insurance scheme. 
 When we discover that properly looking after the 
 unemployed is costing us a lot of money we will do 
 a great deal to regulate unemployment. 
 
 " Fourth, a larger control of industry by the work- 
 ers. This should be the next step. The workers of 
 this country have made up their minds that they do 
 not intend to continue as wage slaves. They want 
 a voice in the administration of the industrial part 
 of the business in which they are engaged, and 
 they want that not as an act of grace, but as a 
 right. 
 
 " I have been very anxious to know just what was in 
 the minds of our workers in regard to what they want
 
 AN EMPLOYER'S VISION 135 
 
 in their relation to industry. You cannot find that 
 out merely by sitting on the opposite side of a table 
 during an acute stage of a labor controversy. I 
 have therefore taken a great deal of pains to get into 
 touch, not only with the men in my own industry, but 
 with employees generally. I have had representative 
 workmen spend week-ends with me and talk the sub- 
 ject over as man to man, and I have had meetings of 
 representative workmen drawn from various indus- 
 tries to discuss the subject. These meetings were 
 not so brief and formal that we failed to get at the 
 heart of the question, but were conferences where we 
 got into such relations with the men that we were 
 enabled to bring out what was really in their minds. 
 I would take a country hotel and bring together for 
 a week-end conference large groups of representa- 
 tive workmen and the result has been most enlighten- 
 ing. 
 
 " Fifth, the final step is to give labor a real interest 
 in the profits of the business, and this is the lowest 
 price at which the capitalistic regime can buy itself 
 off from the danger of revolution. There is a great 
 deal of preaching to the effect that the interests of 
 labor and capital are identical. That is all bosh. 
 The interests of labor and capital are not identical. 
 It is labor's aim, and its proper aim, to obtain in 
 the division between capital and labor all that it
 
 136 WHAT HAPPENED TO EUROPE 
 
 can, just as it is the aim of capital in its division 
 of the results of capital and labor to obtain all it 
 can. Up to the point of an industry going to smash 
 the interests of labor are opposed to the interests of 
 capital. How to make this division of the results of 
 industry between labor and capital is the mbst dif- 
 ficult of all problems. 
 
 " In my own opinion we should look at it in this 
 way: There should first be two definite charges 
 against the net profits of industry, (1) a living wage 
 to labor, and (2) a minimum return to capital. Then 
 after labor has received a basic wage and capital has 
 received a minimum return, all that is earned should 
 be divided between capital and labor, and in my opin- 
 ion it should be divided equally. 
 
 " I am so certain that we must reach some working 
 plan along these lines, if the present system of so- 
 ciety is to be saved, that I am having the subject 
 carefully studied. One of the difficulties in this whole 
 field of an adjustment between capital and labor is 
 that the owners and managers of industry are so en- 
 grossed with their daily business problems that they 
 have no time for a really scientific study of the sub- 
 ject. Realizing that, I have employed one of the 
 ablest men I know, a lawyer of broad experience and 
 keen intelligence, and he is now giving his whole time
 
 AN EMPLOYER'S VISION 137 
 
 to a study of this particular problem in our own 
 work. 
 
 " I am thoroughly convinced that if we are to save 
 the present order of society we must make such thor- 
 ough-going concessions as I have here indicated. I 
 have had a talk recently with Sir Robert Home and 
 I said to him, * Are you out for mustard plasters ? 
 If you are out for mustard plasters only, if you are 
 looking for mere palliatives, you are going to fail. 
 My recommendation to you is to appoint the strong- 
 est royal commission that can be brought together 
 and have them consider these last two points, that is, 
 the part that workers should play in the control of 
 industry and the methods by which labor can be given 
 a real interest in the profits of the business. I would 
 have that commission composed of the strongest pos- 
 sible representatives of both capital and labor and 
 I would make the decision of the commission law.' 
 
 " In working out a scheme for giving the conces- 
 sions I have indicated to labor we must be careful to 
 guard the freedom of labor. It is a great asset to 
 the laborer that he can move freely from one indus- 
 try to another and from one employment to another. 
 
 " I found that their complaint lay not so much 
 against the managers of industry as against the 
 foremen. They felt that foremen frequently were
 
 138 WHAT HAPPENED TO EUROPE 
 
 naggers, that these foremen were badly selected, that 
 they were drawn from men who did not know how to 
 lead, and instead of leading they tried to get results 
 by driving. I have been so impressed with the jus- 
 tice of this view that in the industry in which I am 
 interested we never appoint a foreman without first 
 submitting his name to the Works Council ; that is, 
 to the representatives of the workers. We submit 
 the name of the proposed foreman and we hear what 
 the representatives of the men have to say and listen 
 to their suggestions. The final selection must al- 
 ways lie with us, but we pay a great deal of attention 
 to the voice of the workmen themselves. 
 
 " What the workmen want is something that goes 
 very much further than the * Whitley Committees.' 
 They want a real control of the technical conditions 
 of the industry and they want that control as equals 
 with the owners. 
 
 " A friend' of mine, who is deeply interested in these 
 social questions and who knows well my inclination 
 and desire to meet fairly the claims of labor, recently 
 visited my plant. After a pretty thorough study 
 of conditions there my friend expressed surprise at 
 the amount of unrest among the workers in the plant. 
 My friend undertook to make some analysis of the 
 cause of this unrest and finally summed the trouble 
 up all in one word * Overseers.'
 
 AN EMPLOYER'S VISION 139 
 
 " No matter how liberal were the views of the real 
 owners of the industry, no matter how desirous they 
 were of creating conditions which were satisfactory 
 to all labor, we found we were being blocked by the 
 hardness of our foremen. So we set about trying to 
 correct that situation. We started courses of lec- 
 tures for our foremen. We arranged a week-end 
 school for one hundred and twenty foremen and gave 
 them lectures on many phases of the situation. 
 Some of them told us they had learned more of the 
 art of management at one of these meetings than 
 they had in twenty years of shop experience. We 
 got representatives of workers from other industries, 
 drawing them from other industries so that they 
 would feel free to speak frankly, and we had them 
 give talks on oversight from the workers' point of 
 view. The result of all that has been a distinct im- 
 provement of the attitude of our foremen and this 
 is followed by improvement in the attitude of our 
 workers. But we are keeping the management, we 
 believe, along practical lines. We are not making 
 the mistake of giving too great weight to the wishes 
 of the workers. There can be no anarchy in indus- 
 try. Our workers may well be mistaken in their 
 own point of view. But we find this, that if our men 
 feel that they have a voice in the industrial conditions 
 with which they are concerned they will themselves
 
 140 WHAT HAPPENED TO EUROPE 
 
 evolve a system of regulations that is more effective 
 than any that could possibly be imposed upon them. 
 Men will accept conditions of control from Democ- 
 racy that they would not tolerate from Autocracy. 
 
 " As matters stand to-day the owners of industry 
 do not dare to be frank with their men in regard to 
 the net results they are obtaining. There are times 
 when a frank statement of the financial situation of an 
 industry, if it were believed by the workers, would 
 result in their cooperation either in the way of re- 
 duced wages or increased industry. Take, for ex- 
 ample, the jute industry at Dundee. As conditions 
 were prior to the war, jute could be produced at six 
 pounds per ton dearer than the cost of production in 
 India. To-day it costs eighteen pounds per ton 
 more to turn out the product in Dundee than in 
 India, and the result is that forty-five thousand men 
 have gone into unemployment in this industry alone. 
 If they clearly understood the financial position of 
 the industry their cooperation could be had to save 
 it. The trouble is that men have repeatedly been 
 told when they struck for higher wages that if such 
 an increase as they demanded were conceded the in- 
 dustry would have to close its doors. And then, 
 through the strike weapon, they have forced the in- 
 crease, and the industry went on as usual. It is not 
 unnatural, therefore, that they will always answer
 
 AN EMPLOYER'S VISION 141 
 
 any statement in regard to inability of an industry 
 to pay an increased wage by the statement that " you 
 have said that before, but we got the raise and you 
 went on as usual." 
 
 " One claim that is frequently made is that if the 
 workers force a better division the result will be 
 that capital will leave the country. Many people 
 thought that if such a plan as I have in mind for the 
 division of profits were to be enforced capital would 
 emigrate and leave industry prostrate. I do not 
 believe that is so. Let us take, for example, an in- 
 dustry that is now earning fourteen per cent. Sup- 
 pose an arrangement were made with the workers so 
 there was paid to the capital invested six per cent., 
 and the remainder divided between capital and la- 
 bor. Under that arrangement capital would receive 
 ten per cent., but I believe it would receive ten per 
 cent, only for a short time, that eventually it would 
 be found that it was earning, not the fourteen per 
 cent, it had before, but twenty per cent., which would 
 be its share of a division with satisfied workers. 
 
 " To-day the brains of the country are being 
 wasted. In a factory employing, say seven thousand 
 people, the work is directed by the brains of perhaps 
 not over a hundred. If such an adjustment could be 
 made that the brains of the whole seven thousand were 
 engaged with the problems of that industry, if all the
 
 142 WHAT HAPPENED TO EUROPE 
 
 workers had an intelligent grasp of at least some 
 part of those problems, and all cheerfully applied 
 their energy and brains to the welfare of the indus- 
 try because they were satisfied with their working 
 conditions, and felt that they occupied a just rela- 
 tionship to the results obtained by the enterprise, 
 then the profits, both for capital and labor, would 
 be far beyond anything that the present system can 
 produce. The country that first arranges its in- 
 dustrial life so as to meet these conditions, the coun- 
 try that first puts the brains as well as the backs of 
 its industrial population into the work that is being 
 done, will forge so far ahead of other nations that 
 men will wonder that society could ever have endured 
 the present system. 
 
 " There cannot be full production in industry so 
 long as there is dissatisfaction on the part of the 
 workers. The water flows deeper than anything that 
 is touched by these * Whitley Committees.' Tap 
 the brains of the whole nation. Get men to work 
 with the industry which goes with a satisfaction with 
 working conditions, and we will have a revolution in 
 industry indeed, but one which will bring such bene- 
 ficial results as have never before been obtained."
 
 CHAPTER XIII 
 
 THE POWER OF MINORITIES 
 
 WHOEVER has hope for humanity, whoever be- 
 lieves in democracy, is convinced that the great mass 
 of the people is right-minded, well intentioned and, 
 despite local aberrations, that the voice of the great 
 majority is a wise voice. One comes to a comfort- 
 able optimism that things will work out well in the 
 end if the majority rules. 
 
 One of the most startling impressions which I have 
 received in Europe is that the majority do not rule 
 and that sometimes minorities, apparently almost in- 
 consequentially small, may grasp power and wield 
 it in amazing fashion. If this is so we cannot rest 
 comfortably in the assurance that majorities are 
 right-minded and that rightmindedness will control 
 destinies where majorities have the ostensible politi- 
 cal power. 
 
 Perhaps the most awful illustration of all time of 
 the terrible power of a minority is to be found in 
 the starting of the Great War itself. The power of 
 
 that numerically insignificant party of Prussian mili- 
 
 143
 
 144 WHAT HAPPENED TO EUROPE 
 
 tarists to throw a whole world into a cataclysm has 
 no parallel. But here it may be stated there was no 
 free play of the voice of democracy and that a great 
 people had no volition, but had to follow where they 
 were led. 
 
 Let us take another illustration. Perhaps 100,- 
 000,000 people of the 175,000,000 that once consti- 
 tuted Russia have passed under the sway of a Bolshe- 
 vik regime, although the true adherents to that po- 
 litical theory probably numbered less than 5 per cent, 
 of the population involved. The most centralized 
 and autocratic government in modern times has 
 sprung up in Russia, although 95 per cent, of the 
 people involved did not adhere to the political 
 theories and would repudiate the authority if they 
 could. 
 
 Perhaps it would be as appropriate a place as any 
 to give a picture of the internal Bolshevik Russia 
 on the first of April, 1919. It is a second-hand pic- 
 ture to be sure, but it is only second hand. It is 
 made up from facts related to me by one Russian 
 and two Americans who were in Petrograd and Mos- 
 cow for the purpose of observation, who had con- 
 ferences with Lenine and Trotzky, and who must at 
 least have grasped the superficial aspects of life 
 under the Bolshevik regime. 
 
 Here are the essential features of what these men
 
 THE POWER OF MINORITIES 145 
 
 told me they saw. They entered Russia across the 
 Finnish border, taking with them a certain amount 
 of food, and came without great delay to Petrograd. 
 Their first impression was a City of Silence, but not 
 a city of destruction. Petrograd stands outwardly 
 very much as it did before the revolution. The Win- 
 ter Palace is scarred here and there from shots, and 
 there are traces of the effect of machine-guns on 
 the walls of a good many buildings. There has been 
 no wholesale destruction. Every shop in Petrograd 
 is closed and the windows shuttered. Whatever may 
 be bought must be purchased from the great gov- 
 ernment department stores. Their stocks are mea- 
 ger and there are many awkward blanks. Not over 
 one million people are left in the city. Literally, 
 starvation is a matter of daily occurrence, because 
 of the impossibility of moving food into the city over 
 the broken-down transportation system. Out of 
 26,000 locomotives that none too adequately served 
 the Bolshevik region prior to the revolution, less 
 than 5,000 are in active use. Many of these but 
 limp about their work. There is not a ton of coal 
 in all Bolshevik Russia, and locomotives must be fired 
 with wood. Starvation follows the breakdown of 
 transportation, and would continue no matter what 
 sources of food there were at the end of these broken 
 down lines of railways.
 
 146 WHAT HAPPENED TO EUROPE 
 
 I was greatly interested to learn as a passing piece 
 of information that the great art treasures of the 
 Hermitage Museum in Petrograd are unharmed. 
 My friends visited the museum, saw the pictures and 
 bore testimony that the gallery is intact. A few of 
 the most valuable pictures had been sent to Moscow 
 at a time when a raid was feared across the Finnish 
 border, but at the time of this visit arrangements 
 were being made for their return. 
 
 While Petrograd is a City of Silence, Moscow is 
 a center of chaotic activity. Being the seat of the 
 most autocratic governmental power of modern days, 
 the home of a government that has centralized its 
 authority to the highest degree, while at the same 
 time that authority has been extended to the minutest 
 control of individual lives, the whole heartbeat of 
 Bolshevik Russia was discernible there. Again 
 there was evidence that the tales of material destruc- 
 tion have been overdrawn. The stories of a de- 
 stroyed Kremlin are absolutely untrue. There was 
 no evidence of damage within the Kremlin walls, and 
 the only evidence of damage was where two pinnacles 
 on the Red Gate had been destroyed and workmen 
 were at that moment engaged in replacing them. 
 Hunger was as acute in Moscow as in Petrograd. 
 The difficulties of transportation were the same. In 
 spite of this breakdown in transportation my friends
 
 THE POWER OF MINORITIES 147 
 
 made the trip from Petrograd to Moscow in thirteen 
 hours, which is only two hours longer than the old 
 time schedule. 
 
 A revolution which started with soldiers' councils 
 voting on whether or not they should salute their 
 officers and what measures might or might not be 
 used by the doctors in controlling the spread of 
 typhus, a revolution which was marked in the begin- 
 ning by committees of workingmen deposing factory 
 managers and " democratizing industry " to the 
 limit of socialistic imagination, has passed to quite 
 another phase. There are no more Soldiers' Coun- 
 cils. Instead, there is the army dominated by a sys- 
 tem of discipline that would make a Prussian officer 
 turn green with envy. Trotzky, be it remembered, 
 is Lenine's Secretary of War. He has been as mad 
 as Nero with bloodthirst. When the peasants who 
 wanted a definite title to particular parcels of land, 
 quite in contravention to the Bolshevik theory of 
 communism, revolted, Trotzky sent an overpowering 
 military force against one village, and when its day's 
 work was done not a single man, woman or child re- 
 mained of the 2500 that were there at sunrise. This 
 was merely an example of terrorism taken perhaps 
 from the book of the Huns. 
 
 On another similar occasion, the regiments were 
 sent against a revolting village and retired defeated.
 
 148 WHAT HAPPENED TO EUROPE 
 
 Trotzky's method of discipline in this case was to 
 order the execution of every officer in the regiment 
 and every tenth man in the ranks. 
 
 Broadly speaking, however, the old days of terror 
 are over. A stern morality has taken possession of 
 the people. In their distress there is a great re- 
 vival of religious feeling and in their desperate con- 
 dition they are turning to the Church for comfort. 
 Bolshevik Russia is absolutely dry. 
 
 In their political theory of communism and with 
 the Government's complete control of the food sup- 
 plies there is but one method of averting starvation, 
 and that is to obtain bread cards. But a bread card 
 it is true does not always mean bread, and people 
 sometimes starve with bread cards in their hands. 
 But without the bread card food may not be had. 
 Those who are entitled to a full bread card are the 
 soldiers, people engaged in essential work who accept 
 the Bolshevik regime, actors, ballet dancers, and all 
 government functionaries, who now number a multi- 
 tude. Others although accepting the Bolshevik rule 
 but not engaged in what the State regards as neces- 
 sary work, receive half a bread card; while those 
 who do not work or will not accept work under Bol- 
 shevik conditions may receive a quarter bread card, 
 which if it could be converted into bread would still 
 not sustain life. Naturally, the community is Bol-
 
 THE POWER OF MINORITIES 149 
 
 shevik. Those who do not accept Bolshevism accept 
 death. 
 
 The minute ordering of the lives of people, the dead 
 level of reward and the meagerness of that reward 
 tends to make Bolshevism pall when viewed as a po- 
 litical panacea by its victims. 
 
 The governmental ordering of life, the total loss of 
 personal freedom, is building up a new party, an ex- 
 treme left of Anarchism, which bitterly resents the 
 extreme developments of the Government's control 
 of the individual which has been a necessary part of 
 communism. And so it has come that Lenine is re- 
 garded as a reactionary by this extreme left, and 
 there is growing up some of the same opposition to 
 his democracy that undermined the autocracy of the 
 Czar. 
 
 The personal picture of Lenine, with which I have 
 found no disagreement in speaking with a number 
 of people who are well informed, is that he is a man 
 of most extraordinary ability, and with some truly 
 fine characteristics. He was a Russian idealistic 
 noble and came to be a man of only one idea. He be- 
 lieved that the regime of capital meant slavery and 
 that the world would find freedom in a communistic 
 state of society. In his own mind every motive was 
 fine, every act moved by patriotic sympathy and love 
 for the people.
 
 150 WHAT HAPPENED TO EUROPE 
 
 In Lenine's War Minister, Trotzky, there seems 
 to be utterly different material, except that, like 
 Lenine, he has shown vast ability to organize. He has 
 a thirst for blood such as had mad emperors of Rome. 
 He is vindictive, cynical, cruel. His aim is to im- 
 pose Bolshevism on Europe by force of arms. Both 
 he and Lenine agree that Europe cannot stand di- 
 vided between a communistic and a capitalistic state 
 of society. One side or the other must fall. 
 Trotzky wants to bring the fall of capitalistic so- 
 ciety by force of arms. Lenine, however, believes 
 that each nation must work out in its own way and 
 by its own revolution its change from a capitalistic 
 to a communistic state. He wants to aid by propa- 
 ganda, advice and financial help the fomenting of 
 such revolution, but he would be prepared to de- 
 mobilize the Red Army if the armies of Kolchak and 
 Dinikine and those of his enemies on his northern 
 and western fronts would disband. 
 
 Already the Bolshevik Government has had to 
 make sharp compromises with its communistic theo- 
 ries. When the peasants, following the revolution, 
 got in their possession bits of land their views of com- 
 munism quickly changed. They demanded a guar- 
 anty of title to specific land holdings. It was this 
 demand that confronted the Bolshevik Government, 
 and in the end it had to be granted. Bolshevik com-
 
 THE POWER OF MINORITIES 151 
 
 munistic government to-day is giving specific land 
 titles, quite against its communistic theory, to the 
 peasant classes. 
 
 In another particular they had to compromise 
 with the theory of a common communistic wage. 
 The " democratization of industry " as exemplified 
 in Russia was not a success. It seemed to be essen- 
 tial that some of the old managers of industry should 
 be brought back, but they were not inclined to come 
 for a bread ticket. So the Government is paying 
 some very handsome salaries (in its printed paper 
 money it is true) to the trained industrial managers. 
 Thus the second compromise with economic princi- 
 ple was made. Then under the pressure for things 
 from the outside, negotiations were begun to alien- 
 ate to capitalistic use and enterprise tracts of royal 
 land in order to get capitalistic credit with which to 
 pay for capitalistic made boots and other needed 
 imported articles. 
 
 Making predictions of any kind is dangerous busi- 
 ness. To make a prediction about so vast a chaos 
 as Russia would need a quite foolishly reckless 
 prophet ; and still without making a prediction I am- 
 going to make a guess. The Bolshevik regime is a 
 passing phase. It will be succeeded by a dictator, 
 again representing an effectively powerful small mi- 
 nority. The period of dictatorship will be followed
 
 152 WHAT HAPPENED TO EUROPE 
 
 by a constitutional monarchy, for Russsia with its 
 eighty-five per cent, of illiteracy and with its unsta- 
 ble and idealistic national character, is not ready for 
 a real democracy. And then sooner or later there 
 will emerge a nation, the most solvent in Europe, 
 because it has the richest natural resources. It is 
 a nation that has more nearly the characteristics of 
 the United States than any other nation in the world, 
 and it may yet have some of the same type of marvel- 
 ous prosperity. In a sense, the obligation of Russia, 
 discredited and repudiated as it is to-day, is more 
 valuable than the obligation of some countries whose 
 obligations have hardly been questioned, because 
 there is in Russia the inherent wealth to make good 
 its obligations. 
 
 But all this is but guessing, and one man's guess 
 is worth as much as another's. While I am guess- 
 ing, however, I will make another. Russia will be 
 dominated and exploited by Germany, unless the 
 United States shows unexpected prescience, courage 
 and a disposition to take a financial adventure. Ger- 
 many lies adjacent to Russia. I am told there are 
 100,000 Germans who speak the Russian language. 
 The intelligencia of Russia has well nigh disap- 
 peared. At least 50,000 have been assassinated, and 
 at its best the intelligencia of Russia had not demon- 
 strated great powers of industrial organization.
 
 THE POWER OF MINORITIES 153 
 
 The imperial spirit of conquest has not been killed 
 in Germany. When the war started the axis of Ger- 
 man ambition pointed toward Bagdad. Now it will 
 swing around toward Moscow and the rich world be- 
 yond. There will be an escape for Germans from 
 the slavery of indemnity by migration to Russia, and 
 an almost free field for German direction, because 
 there will be few Russians left with capacity to di- 
 rect. Indeed in some quarters it is believed that 
 there has been German planning to the killing off 
 of the Russian intelligencia, which was but another 
 phase of that devilish cunning which destroyed the 
 machinery of Belgium and Northern France without 
 military necessity but only that commercial compe- 
 tition might be ended. 
 
 If America cares to grapple for a hold on this vast 
 chaotic world of Russia there is a wonderful oppor- 
 tunity. The American mind comprehends Russian 
 conditions. If our people would go there in force, 
 going with a desire for service in their hearts, rather 
 than with narrow views of immediate exploitation for 
 profit, we could give Russia a future and save her 
 from a fate that would make a wide difference in the 
 writing of the next hundred years of the world's his- 
 tory. If we keep hands off, the Russian border will 
 offer an opportunity for escape from indemnity servi- 
 tude to many Germans, and the genius for pitiless
 
 154 WHAT HAPPENED TO EUROPE 
 
 human organization, which Germany unquestionably 
 has, will -find -a wonderful field to display itself upon 
 the Russian people. 
 
 These two examples of Prussianism and Bolshevism 
 arc extreme and not particularly good examples of 
 what I mean by the " power of minorities." The 
 point that I wished to make is one that I found illus- 
 trated in many European countries, of what an active 
 minority can do pitted against a phlegmatic ma- 
 jority, and particularly a phlegmatic majority which 
 has little solidarity. 
 
 What I have seen leads me to believe that it might 
 be possible in any country to change the course of 
 government, to overturn the form of government, 
 indeed even to impress upon the people a new form 
 of social order, while the great majority of the peo- 
 ple had no desire for such a change and took no 
 active part in bringing it about. 
 
 I believe that a spread of Bolshevism in Europe 
 can come either through contact with Bolshevik coun- 
 tries or by a spontaneous outbreak of Bolshevism in 
 a community where industry has been paralyzed and 
 idleness is followed by want and hunger. There are 
 fourteen countries bordering on Bolshevik Russia, 
 and they are directly exposed to the contagion. 
 Proximity, however, would not be necessary to a de- 
 velopment in one form or another of revolutionary
 
 THE POWER OF MINORITIES 155 
 
 movements looking to the establishment of communis- 
 tic society. In every country in Europe there is a 
 minority that is profoundly suspicious of and dis- 
 satisfied with the capitalistic order. They found 
 that democracy did not bring to the proletariat what 
 it considered to be its rightful share. Then they 
 organized labor unions and the weapon of the strike 
 came into use. The organization of strikes to en- 
 force the demands for higher wages met with success, 
 so far as wages are measured in units of currency, 
 bu-t frequently met with failure to better the con- 
 dition of the workers because of advancing cost of 
 living. Men got higher wages and found themselves 
 worse off. This has contributed toward building up 
 a sentiment of suspicion of the very foundations of 
 the present social order, and everywhere, England in- 
 cluded, there is a significant minority that refuses 
 any compromise with the existing order, that looks 
 upon all concessions to labor in the form of higher 
 wages, shorter hours, unemployment insurance or 
 even profit-sharing, as a sop thrown by capital to 
 divert or confuse the working class. 
 
 This minority of extremists nowhere is large. In 
 England it was estimated, in both conservative and 
 radical quarters, as being at the minimum somewhere 
 between ten and fiften per cent, of the total organ- 
 ized mass of union labor. I fancy the proportion is
 
 156 WHAT HAPPENED TO EUROPE 
 
 not less, and I doubt if it is much more in any of the 
 European countries which. I visited. Everywhere it 
 is an active and distinctly forceful minority and 
 knows much of the power of propaganda. Within 
 the labor unions themselves the radical element has 
 a voice quite out of proportion to its numbers. The 
 unionist who is comparatively satisfied with his lot 
 and has little faith in socialistic schemes to improve 
 it is apt to keep away from the controversial dis- 
 cussions and fails to attend most of the meetings of 
 his own union. Those of his fellows who hold ex- 
 tremely radical ideas have a certain fanatical indus- 
 try. They are always busy at propaganda. They 
 are always keen to be heard, and they never fail to 
 register a radical vote whenever a vote is to be taken. 
 There is a constant struggle on the part of con- 
 servative leaders of union labor to hold in check the 
 wing of their organizations represented by the ex- 
 treme radicals, and they all admit that there is a 
 menacing danger that the minority may run away 
 with the majority. Let conditions of hardship de- 
 velop in which it was difficult for every one to see 
 means of mitigating the hardship by any of the usual 
 methods, and the radical minority might easily as- 
 sume leadership, and almost overnight find itself in 
 command of the situation. This is why it is not 
 safe to base predictions of the future course of events
 
 THE POWER OF MINORITIES 157 
 
 on any present analysis of the relative numbers of 
 radicals and conservatives. 
 
 In recognizing this element of instability in the 
 European situation it might be well if we took the 
 lesson home and became conscious of the fact that 
 our own great conservative majority is phlegmatic, 
 not unified, almost voiceless, and at the same time note 
 how efficient are the methods of active radical mi- 
 norities. We have socialist papers with a million 
 circulation. There is a steady flow of incendiary 
 pamphlets through the tenements of the East Side, 
 the authors of some of which could legally be shot for 
 treason. Socialistic speeches are made daily in Wall 
 Street, while the men in the adjacent offices give far 
 more time to scheming how to get advantage of a 
 business competitor, than they give to original think- 
 ing on economic and social questions. America is 
 the greatest of democracies, pledged to the sover- 
 eign rule of majorities; and America should beware 
 of the power of minorities.
 
 CHAPTER XIV 
 
 THE WORLD'S FINANCIAL CENTER 
 
 Is New York to become the financial center of the 
 world? That is a question which first arose in the 
 minds of boasting ignorance, but to-day it has be- 
 come a question that is entitled to be asked in serious- 
 ness, examined with care, and answered in the light 
 of new conditions. There are three important rea- 
 sons why it is difficult to remove the financial center 
 of the world from London to New York. First, there 
 are the worn channels of two centuries of interna- 
 tional commerce, channels worn so smooth that it be- 
 came easier for Chile to pay a bill in Peru by means 
 of a draft on London than to pay direct. London is 
 the established clearing house of the world, and by 
 fair treatment and, in the main, by holding tightly to 
 sound principles of banking, has maintained the 
 right to hold what she long ago established as her 
 own. 
 
 There is a fundamental requisite, however, if a 
 city is to be the financial clearing house of the world. 
 That requisite is that there should be no uncertain- 
 ties surrounding the meaning and value of a deposit 
 
 158
 
 THE WORLD'S FINANCIAL CENTER 159 
 
 balance in a bank at the clearing center. It has al- 
 ways been England's proud boast that sterling meant 
 gold, that a deposit in an English bank could under 
 any conditions, at the will of the depositor, be con- 
 verted into gold and sent by him where he would. 
 It seems to me that this is an essential that must be 
 possessed by the international clearing house of the 
 world, unless we are to substitute for the gold stand- 
 ard some other method of ultimate payment of inter- 
 national balances. There are many adroit brains 
 working on that problem to-day, and some extremely 
 interesting plans have been formulated by various 
 European bankers looking towards the creation of 
 an international currency or an international obli- 
 gation by the means of which international current 
 obligations could be settled in a world clearing house 
 without the necessity of ultimate redemption in gold. 
 If that can be done, then England perhaps can retain 
 her financial supremacy. If it cannot be done, the 
 ultimate permanence in her position will need further 
 analysis. 
 
 Any plan looking toward the payment of inter- 
 national balances in any other medium than gold 
 must have the assent of the United States, for the 
 United States is now the great creditor nation, and 
 under the working of any such plan would become 
 the holder of a vast creation of the proposed inter-
 
 160 WHAT HAPPENED TO EUROPE 
 
 national currency or clearing house credit obliga- 
 tion. Without the cooperation of the United States 
 it would be idle to plan any such scheme. And it 
 needs no deep knowledge of finance to see that every 
 plan looking toward the accomplishment of this pur- 
 pose could, when clearly analyzed, be at once trans- 
 lated into language that our laymen could under- 
 stand. The language would be that to the United 
 States was assigned the position of " holding the 
 bag." 
 
 The second point of advantage which London has 
 over New York is her geographical position. Physi- 
 cally close to all the European countries, and capable 
 of being reached from most of them direct without 
 passing through others, she has enjoyed a unique 
 advantage compared even with any continental point. 
 Distances in geography are not all to be measured 
 on a map either, but rather one must take into ac- 
 count established lines of communication. England 
 has been the Mistress of the Seas, and no point in 
 the world has had such international mail facilities as 
 London has had. This gives to London a central 
 geographical position out of all proportion to her 
 advantageous position on the map. Compared with 
 New York, under the present conditions of transport 
 and with the present routes of mail delivery, London 
 has a vast advantage. The greater part of the mail
 
 THE WORLD'S FINANCIAL CENTER 161 
 
 from the whole continent of Europe on its way to 
 New York passes through England, as is the case 
 with most of the mail from the Levant and some from 
 points further East. 
 
 In the world changes that have come about I am 
 not sure, however, but that we are even going to 
 change geography. The day I am writing this 
 there is expected to take place the first trans- 
 Atlantic flight of an aeroplane. If that marvel can 
 be accomplished at all, and there seems little reason 
 to doubt that sometime it will be, is it altogether 
 improbable that it may in time be accomplished 
 with such ease and with such speed that the globe 
 will shrink on the Atlantic side until a letter from 
 New York can be delivered on the continent almost 
 as quickly as a letter from London has been de- 
 livered? The English are showing great courage, 
 skill and national pride in forwarding a trans- 
 Atlantic flight. I am not sure that in doing so 
 they are not hastening the day when one of the 
 great advantages of financial London will disappear 
 because progress in mechanics will in effect alter 
 geography. 
 
 The first two advantages that London has over 
 New York, the advantage of long-worn tradition and 
 of geographical location, are great, but she has an- 
 other advantage that far outdistances either of
 
 162 WHAT HAPPENED TO EUROPE 
 
 those, an advantage as difficult to overcome as are 
 the advantages of time and space that are involved 
 in the first two considerations. This last is a human 
 advantage, an advantage of possessing skilled men, 
 men who have grown up through generations en- 
 gaged in international finance, men whose minds are 
 trained by practice and tradition, who have had the 
 advantage of international association, who have ac- 
 quired international understanding and who, above 
 all, have that staunch English character that com- 
 mands respect of dollars, francs, pesetas, lire or 
 kroner. Have we the men to form at least the 
 nucleus of the organization we must form if New 
 York is to take the financial palm from London, and 
 are we capable of quickly training the large number 
 of international bankers who must be developed to 
 handle the intricate business of international finance, 
 if we are to become in our turn the clearing house 
 of the world? 
 
 It is fair to say that London bankers doubt our 
 ability to create the technical organization that will 
 be necessary, if we are to try to assume the responsi- 
 bility of world financial leadership. They recognize 
 frankly their present disabilities, but they think the 
 safety of their position lies largely in our inability 
 to create a competent technical group of interna- 
 tional bankers, and back of that to educate our in-
 
 THE WORLD'S FINANCIAL CENTER 163 
 
 vesting public to a realization of the opportunities 
 and responsibilities that go with international finan- 
 cial leadership. 
 
 If the situation were one in which there was really 
 left much room for chance or choice, there would be, I 
 think, a great deal of force in the English view of 
 our disabilities. In my opinion, however, America's 
 role in the financial world in the future is practically 
 an inevitable one. The measure of success with 
 which we play it will be gauged by the ability that 
 we bring to the task, but we will have to show 
 extraordinary inaptitude in handling the opportuni- 
 ties and responsibilities of the situation if we block 
 what is almost an inevitable progress toward inter- 
 national financial leadership. America has a third 
 of the monetary gold stock in the world and has 
 it concentrated for effective use by means of what 
 is on the whole the most scientifically organized 
 banking system in the world. Our Federal Reserve 
 System is measurably better in its structure than 
 is the present English banking system. English 
 bankers freely admit that. Some of the leading 
 bankers are looking to the Federal Reserve System as 
 a model to use in the inevitable reshaping of the 
 structure of the Bank of England and the general 
 banking system in Great Britain. 
 
 A bank balance in America certainly should be
 
 164 WHAT HAPPENED TO EUROPE 
 
 the equivalent of gold under practically any cir- 
 cumstances likely to arise, and in any event a bank 
 balance there can be more certainly turned into 
 gold than can a bank balance in any other financial 
 center. That alone should make New York the 
 depository of a great part of the international bank 
 balances coming from every quarter of the world. 
 Those balances will be placed in America because of 
 the readiness with which they can be converted either 
 into bank balances elsewhere or into gold that may 
 be shipped to augment bank balances elsewhere. 
 
 There is another impressive reason why fate seems 
 to have marked New York for a position of inter- 
 national financial leadership. As a nation we are 
 already a foreign creditor to such an amount that 
 annual interest payments now run between five hun- 
 dred and six hundred million dollars. Added to that, 
 we are the greatest producers of food and raw 
 material and minerals in the world, and for years 
 to come our commodity trade balance seems likely 
 to run several hundred millions a year in our favor. 
 In what is this huge credit to be paid? It must in- 
 evitably be paid in foreign securities. We may 
 admit that our investors are not educated to foreign 
 investments, but even though that is true the in- 
 vestors, rather than the foreign investment, must 
 give way, and we must see to it, and inevitably will
 
 THE WORLD'S FINANCIAL CENTER 165 
 
 see to it, that our investors are educated to an un- 
 derstanding and appreciation of foreign invest- 
 ments. Whether we wish to or not, we must accept 
 something like a billion dollars a year of foreign 
 securities and they must be placed with our investors. 
 There is no other way to settle the favorable trade 
 balance which the next few years will inevitably 
 create. 
 
 If then, we are the one financial center where a 
 bank deposit is equivalent to gold, and we are the 
 principal country from which foreign credits must 
 be sought, and where from the very nature of the 
 situation they must be granted, then, it seems to 
 me, we have the elements necessary to financial leader- 
 ship. We must develop the ability and understand- 
 ing which will permit us to cope with the problems 
 of international finance. These considerations lead 
 me for the first time to reach the conclusion that 
 the answer to the often put question of whether 
 or not New York is to become the financial center 
 of the world is " Yes."
 
 CHAPTER XV 
 
 AMERICA'S OPPORTUNITY 
 
 SOMETHING of what the Great War has meant to 
 Europe is what I have been trying to describe in 
 the preceding chapters. We all look at even great 
 events in the light of our own personalities, and 
 what America is most keenly interested in undoubt- 
 edly is what the Great War has meant to America. 
 Many books will be written on that subject alone 
 and to attempt such an analysis in a single chapter, 
 and to attempt it before the currents set in motion 
 by the War have had time to unite in any great 
 resultant force that is clearly discernible is both 
 difficult and dangerous. Such a vision as any one 
 can have of what the Great War has meant to 
 America must at best, at the present time, be im- 
 perfect and, indeed, little more than a suggestion 
 as to possibilities. 
 
 There are some points in respect to America's 
 relative position in the world that can be defined 
 with a fair degree of assurance, however. The ad- 
 vantages of America's unique position, combining the 
 
 resources of the greatest world capitalist with the 
 
 166
 
 AMERICA'S OPPORTUNITY 167 
 
 resources of the nation richest of all others in raw 
 materials, give promise of a material prosperity 
 unparalleled. 
 
 In the industrial world, America has advantages 
 which will enable her successfully to compete with 
 other nations and at the same time, pay rewards 
 both to capital and to labor such as industry in 
 no other nation can pay. Those advantages are 
 inherent in our own position. Other nations, to a 
 greater or less degree, are workshops to which raw 
 material must be brought from more or less distant 
 places, wrought into finished products and, in part, 
 again exported so that the profit of the workshop 
 can be largely used in importing food to sustain the 
 workers. 
 
 America is almost self-contained as to raw materi- 
 als. We must import rubber, but all other rubber 
 manufacturing centers must do the same. We im- 
 port some ores that, mixed with our own inexhaustible 
 supplies, help to produce a higher quality of prod- 
 uct. Among foods, the coffee bean, tea and choco- 
 late are perhaps the only serious demands we must 
 make on other lands. Of course, we must have im- 
 ports if the world is to pay for what we export, and 
 we can consume large values of foreign fruits, tea, 
 chocolate, nuts, vegetable oils and the luxuries of silk, 
 precious gems and platinum in which to set them.
 
 168 WHAT HAPPENED TO EUROPE 
 
 But these are not fundamental necessities to our in- 
 dustrial life as are the imports of coal, cotton, wool, 
 hides, copper, mineral oils and cereals that are funda- 
 mental in the lives of the great industrial centers of 
 the world. 
 
 So much Nature has done for us but our own 
 political life has given to American industry an 
 advantage which, if we had but that alone, would 
 be an almost determining factor in giving us ulti- 
 mately industrial world leadership. The manufac- 
 turer who has, in the first instance, a domestic de- 
 mand from 105,000,000 people, rich in the purchas- 
 ing power which general prosperity gives them, sepa- 
 rated by no hampering political boundaries, with no 
 hurdles of tariff, no differences of language, with 
 no unshakable adherence to time-established local 
 differences of styles a body of 105,000,000 people 
 moving freely in their national intercourse, all keenly 
 receptive of any improved or novel design, all wear- 
 ing much the same type of hat or coat or shoes and 
 liberally adopting the best in forms of tools, in 
 means of transportation or in styles of articles of 
 luxury or entertainment, the manufacturer having 
 such a market permitting him, as it does, to reap 
 the vast advantages of mass production (no matter 
 what line of goods he produces) is almost at once 
 placed in a position so superior to that of the com-
 
 AMERICA'S OPPORTUNITY 169 
 
 petitors lacking these advantages that, for this rea- 
 son alone, he stands almost hors de concours. 
 
 Then we may add to these advantages a back- 
 ground of almost limitless agricultural capacity. 
 We have fields that produce under our methods great 
 yields with the least 'expenditure of human labor 
 found anywhere in the world, while the products of 
 those fields are moved at the lowest transportation 
 cost of any land transportation in existence. There 
 are other nations that move tonnage on inland 
 water-ways more cheaply than we do, it is true. 
 There are other acres that produce per acre a much 
 higher yield but if we compare the amount of human 
 labor expended in other fields with the amount ex- 
 pended in ours, the difference is startling. For the 
 whole of England, for example, a recent census shows 
 that the average number of agricultural employees 
 per 100 acres is 46, while in 1910, the date of the 
 last census figures, the 478,451,750 acres of our 
 improved agricultural lands consumed the labor of 
 but 12,659,203 agricultural workers in the United 
 States, an average of 2.64 per 100 acres. 
 
 Then let us remember that there has been com- 
 paratively little direct disorganization of our whole 
 machinery of life by the catastrophe of the Great 
 War, while in Europe there has been not only im- 
 measurable direct destruction from the War but what
 
 170 WHAT HAPPENED TO EUROPE 
 
 will prove more harmful than all that, there has 
 been disorganization of the delicate interrelations 
 and reactions in the whole international industrial 
 machine which it will take, at best, a generation to 
 correct. 
 
 In the all important relationship between capital 
 and labor, we start with some comparative ad- 
 vantages, too. Labor with us has been far better 
 paid and has fewer just grievances than has labor 
 in any other industrial nation. Still we have our 
 share in the world problem of bringing about true 
 cooperation between capital and labor. Those na- 
 tions which make the greatest progress in that field 
 will have an ultimate advantage over those nations 
 which keep up an internal warfare that fosters dis- 
 content, resulting in great masses of population feel- 
 ing that they are living under conditions of bitter 
 injustice. This is true, no matter what other advan- 
 tages the discontented people may have. 
 
 I have come to believe that half the woes of the 
 world are directly attributable to an ignorance of 
 economic law and to a blindness to social injustices. 
 In the end, the prosperity of a people always bears 
 a true relation to their capacity for production. If 
 the capacity for production be interfered with, as 
 it always must be, when workmen are discontented, 
 because they feel that they unfairly share in the
 
 AMERICA'S OPPORTUNITY 171 
 
 profits of industry and because of economic fallacies 
 to which they cling that result in a conscious limita- 
 tion of production, then the limits of national pros- 
 perity are sharply bounded, no matter what the rich- 
 ness of natural resources may be. Therefore I be- 
 lieve that the measure of our future prosperity in 
 America is definitely related to the wisdom with 
 which we work out the relationship between capital 
 and labor. That relationship will never be wisely 
 worked out in an atmosphere of economic ignorance. 
 Our failure to understand the purport and signifi- 
 cance of some of the great underlying principles of 
 economics is general. There is quite as much of 
 that ignorance in the managing offices as there is in 
 the factories. 
 
 Elsewhere I have tried to give some exposition of 
 what seems to me the greatest problem of the age as 
 it is presented in Europe, the problem of the rela- 
 tionship of capital and labor. I believe the stability 
 of the present order of society, the maintenance of 
 a society based upon the principle of property rights, 
 is bound up with the way this problem is worked 
 out in Europe. We cannot stand a world apart in 
 its solution. Indeed, we cannot stand a world apart 
 in any sense. No matter how self-sufficient we may 
 believe ourselves to be, no matter how unlimited are 
 the resources of natural wealth within us, we are
 
 172 WHAT HAPPENED TO EUROPE 
 
 inevitably part of what is coming to be a very small 
 world, a world in which ideas travel with a freedom 
 and rapidity that must force us to become interna- 
 tionalists in our views, and must govern us by inter- 
 national considerations, whatever may be our nat- 
 ural tendencies to Chauvinism or our disposition to- 
 ward an insular isolation and security. 
 
 A farmer in a Kansas cornfield may fail to see 
 what concern it is of his if there is unrest in the 
 Balkans, Bolshevism at Warsaw, a growing army 
 of adherents to Syndicalism, or Guild Socialism in 
 England, or a financial crisis in France. Inevitably, 
 however, this farmer in the center of America will 
 directly feel the effects of all the ebullitions of life 
 on this other continent. He is to-day nearer to 
 the things that may happen in Paris, in Belgium or 
 in London than were the peasant farmers in those 
 very countries to their own capitals in times gone 
 by. If a Kansas farmer is to find his direct inter- 
 ests involved, quite in spite of himself and prob- 
 ably without his knowledge or understanding, in 
 the tangled influences that will be working on the 
 social life of Europe, then what may be said of the 
 manufacturing and financial interests of America 
 that are already conscious of their relation to world 
 affairs ? 
 
 Let no American feel that he can escape all rela-
 
 AMERICA'S OPPORTUNITY 173 
 
 tionship to post-war developments in Europe. That 
 is impossible, and being impossible, we should at least 
 aim to understand those developments sufficiently to 
 recognize something of their significance to us and 
 judge of our responsibilities to the outside world. 
 The future of Europe is going to be largely shaped 
 by the wisdom or the lack of wisdom that we in 
 America show in our grasp of European affairs, in 
 the way we seize our world opportunities and in the 
 sincerity with which we discharge our world obliga- 
 tions and render service where service is due. If we 
 are narrow, provincial, selfish, all those qualities will 
 react on our own future. If we are wise, broad and 
 generous with our help, our recompense will be be- 
 yond measure. 
 
 And now in conclusion I want to say one solemn 
 word in regard to the supreme lesson which I have 
 drawn from my observation of the present situation 
 in Europe and that is a lesson to which I have not 
 in this book heretofore referred. It is the duty that 
 lies on each of us to give our country good govern- 
 ment. I did not know before that I had in me a 
 power of such poignant sympathy with dumb and un- 
 comprehending peoples as this opportunity for obser- 
 vation has awakened. One hears the demagogue 
 prate about his love for the people and properly rates 
 those sentiments. No one with seeing eyes and a
 
 174 WHAT HAPPENED TO EUROPE 
 
 sympathetic heart could make a wide observation of 
 present European conditions, however, without being 
 moved to his depths in pity of peoples who are suf- 
 fering because they have been badly governed. 
 
 Here is half the world, half of that world of in- 
 telligent, literate, industrious people who are made 
 on much the same lines as ourselves, who, through 
 no fault of their own, who, in spite of a willingness 
 to labor skillfully and industriously, have passed 
 through a horrible catastrophe and are facing an- 
 other that might in the range of possibility be still 
 worse. Their fate has been and will be directed by 
 factors that seem outside their own volition. 
 
 Wherever there has been moderately good govern- 
 ment, there has quickly followed astounding progress. 
 The inherent capacity of people under modern condi- 
 tions to improve their surroundings, given the boon 
 of honest, wise and just government, is marvelous; 
 but whatever a government lacks in honesty, wisdom 
 and judgment this is quickly reflected in a plight that 
 seemingly no amount of fine individual characteris- 
 tics can overcome. Much of the lack of good gov- 
 ernment oomes solely from ignorance. 
 
 No matter in what direction we look, we find some 
 men in governmental positions who seem more moved 
 by personal ambition than by an unselfish desire wisely 
 to serve. No matter what desperate national cir-
 
 AMERICA'S OPPORTUNITY 175 
 
 cumstances may exist, we see that great national 
 needs fail sometimes to bring out from national lead- 
 ers the unselfish service that their people should have. 
 
 I have said that it appears that half the woes of the 
 world were occasioned by economic ignorance, and 
 it seems as if most of the other half could be traced 
 to selfish political ambition. And so this is the 
 lesson that has dominated all that I have learned. 
 It is that the crime of all crimes, most far-reaching 
 in its effect, the crime which involves harm to more 
 innocent people than any other in the whole category 
 of human frailty is the crime of abusing the privilege 
 to serve. A thief may injure him from whom he 
 steals. A murderer cuts short a single life. Those 
 crimes are as nothing compared to the uncompre- 
 hended crime which a public official commits in per- 
 mitting personal ambition or ignorance to blind him 
 to public duties. 
 
 If enough Americans could see what endless con- 
 sequences of sorrow and injustice flow from the al- 
 most unconscious acts of men who fail to recognize 
 the solemnity of a public trust and who shape their 
 acts on lines which they conceive may further their 
 personal ambitions rather than steadfastly keeping 
 before them the opportunity for service to those who 
 have put them in high position, I believe that Amer- 
 ica could then easily take her true place in world
 
 176 WHAT HAPPENED TO EUROPE 
 
 leadership. If that could be done, there would be 
 an end to lightly passing over failure or dereliction 
 in public office. Men unfitted by ability or moral 
 grip to comprehend and to render the service that 
 they might do, would be driven from public place by 
 a whirlwind of public opinion. Conversely, men who 
 did discharge the great obligation laid upon them by 
 a public trust would be honored far beyond the 
 honors that can possibly come to success in other 
 fields. 
 
 And so it all goes back to a sound citizenship, to 
 a comprehension by all of us of our individual re- 
 sponsibility for good government, to the active ac- 
 ceptance of individual responsibility by every man 
 who lays any claim to the rank of good citizenship.
 
 CHAPTER XVI 
 
 AFTER I had had an opportunity to study condi- 
 tions throughout the European countries which I vis- 
 ited, I prepared, just as I was leaving Holland on 
 May 1st, a brief outline of a plan for an interna- 
 tional loan to these European nations so urgently in 
 need of aid for the restarting of their industrial proc- 
 esses. 
 
 I presented this outline for discussion and criticism 
 to some of our American officials from Washington, 
 to a number of leading French statesmen and finan- 
 ciers, and to the principal bankers in Holland and in 
 London. The details of this proposed peace loan 
 might be worked out in various ways. The prin- 
 ciples on which such a loan is based, however, I feel 
 should follow essentially the fundamental lines of this 
 brief statement. In the following paragraphs I have 
 set forth, in practically its original form, the mem- 
 orandum discussed with the various government of- 
 ficials and bankers in Europe. 
 
 177
 
 178 WHAT HAPPENED TO EUROPE 
 
 MEMORANDUM IN REGARD TO AN INTERNATIONAL LOAN 
 
 It seems to me obvious that the problem of financ- 
 ing the rehabilitation of Belgium, France, or any 
 other of the European nations, is one that must be 
 solved for Europe as a whole. It is undesirable to 
 take up the financing of one country separately and 
 at the same time allow other European countries, 
 through lack of aid, to fail in restarting industry. 
 
 European nations might be compared to a group 
 of houses in all of which is inflammable material. 
 Fire in any one would endanger all, and it would 
 hardly be worth while to put safeguards against fire 
 originating in a single house. The safeguards would 
 have to be put in all the houses or there could be no 
 safety for any of them. 
 
 A failure to restart industry in any European na- 
 tion, resulting in continued idleness, want, and hard- 
 ship, is certain to lead to social upheavals that will 
 be communicated to other nations. The problem, 
 therefore, is an inclusive one, and must be so solved 
 that there will be a serious and a comprehensive ef- 
 fort made to reestablish the industrial cycle in each 
 one of the European countries simultaneously. If 
 this is not done, there can be no safety in financing 
 any one of them. 
 
 If the financing of reconstruction is considered by 
 nations separately, the question of security will be-
 
 LOAN TO EUROPE 179 
 
 come a determining factor in any plan for making 
 advances. Europe presents a situation in which the 
 determining factor in regard to rehabilitation loans 
 should be necessity rather than security; for, unless 
 those nations in which the necessity is the greatest 
 are cared for as well as those in which the security 
 might be thought to be the best, social or industrial 
 disorganization may result. The contagion thus 
 bred might spread, endangering the whole social fab- 
 ric of Europe. 
 
 The element of time is now of prime importance. 
 Unless there is speedy action in the direction of re- 
 starting paralyzed industry, there may follow a 
 quick march of events toward revolutionary out- 
 breaks in any country where idleness is continued and 
 is followed by hunger and want. The prime eco- 
 nomic necessity is now to reestablish the flow of pro- 
 duction, to give employment to the millions of un- 
 employed, and to get each European country started 
 back toward a normal industrial life. The danger in 
 not doing this promptly, or in not doing it for all, is 
 so extreme that it is no exaggeration to say that fail- 
 ure to do this may mean a breakdown in European 
 civilization which will involve the whole world. The 
 conditions are so extraordinary that extraordinary 
 means of coping with the difficulties should not be 
 rejected because of their novelty.
 
 180 WHAT HAPPENED TO EUROPE 
 
 If we were to wait for government credit granting, 
 there may be involved so many political considera- 
 tions that an amount of time would be consumed such 
 as to make any projected scheme of aid without avail. 
 One of these political considerations lies in the fact 
 that those nations which have shared in the ten bil- 
 lions of loans the United States has made to the vari- 
 ous European governments, now feel that there is 
 just ground for suggesting that these loans be modi- 
 fied or even canceled. This sentiment is general, 
 and is held in high places. In the face of that fact, 
 it would seem to be doubtful wisdom further to in- 
 crease the loans which our government has made to 
 the European governments. The amount required is 
 so large that it would be far better to formulate a 
 plan which will not call upon already overtaxed gov- 
 ernments. The demands can much better be met 
 from the broader sources of private investment if a 
 security can be created which will appeal to the 
 private investors. But if the situation is left for 
 private investors to attempt to create an adequate 
 security in individual cases, there might be set in 
 motion such endless negotiations that the appre- 
 hended catastrophe would be likely to occur before 
 the minds of lenders and borrowers could be brought 
 together. 
 
 The danger which would surround any security
 
 LOAN TO EUROPE 181 
 
 that could be created under such circumstances would 
 be so great that private investors would be forced 
 to demand what would look to borrowers like extor- 
 tionate rates ; and international relationships, which 
 are already showing evidence of strain, would be 
 likely to undergo still greater stress, which might de- 
 velop such unhappy international results as to en- 
 danger any attempt to create adequate credits in 
 this form. 
 
 With these considerations in view, it would seem 
 that any successful attempt to finance the rehabilita- 
 tion of the Continental nations must keep in mind the 
 following fundamental principles : 
 
 (1) The European situation must be treated as 
 a whole. 
 
 (2) The amount involved is so large and the ele- 
 ment of time so important that it is extremely dan- 
 gerous to undertake the legislative programs that 
 would be necessary before lending countries could 
 place their governments in a position adequately to 
 participate in a loan to the several borrowing na- 
 tions. 
 
 (3) There are the most important considerations 
 pointing to the desirability of accomplishing the 
 necessary financing at a moderate rate of interest. 
 
 (4) The political situation is so involved, and the 
 financial conceptions so various and chaotic in the
 
 182 WHAT HAPPENED TO EUROPE 
 
 different countries that it is highly desirable to pre- 
 sent one formula for obtaining credit which all the 
 borrowing countries should alike follow. 
 
 (5) If private investment funds are to be 
 promptly and successfully attracted at moderate in- 
 terest rates, there must be created an obligation that 
 offers the highest type of security that it is possible 
 to create. 
 
 (6) As the total aggregate of what each borrow- 
 ing nation would believe was a minimum required for 
 rehabilitation of its industries would reach a sum 
 too large to be contemplated in any proposed plan, 
 the lenders should determine, based upon a study of 
 the necessities of each nation, what the apportion- 
 ment of any proposed loan should be among the sev- 
 eral nations. 
 
 (7) An independent judgment arrived at in the 
 light of the representations made by each nation of 
 the minimum necessary to start industrial production 
 would present a sounder program than would result 
 if each individual nation were merely given a financial 
 credit and left free to work out the expenditure of 
 that credit as it saw fit. 
 
 (8) In view of the urgent necessity for restarting 
 the industrial processes, a necessity paramount to 
 any merely financial requirement, the entire proceeds 
 of such a loan as is herein proposed should be realized
 
 LOAN TO EUROPE 188 
 
 by each borrowing nation in the actual form of food, 
 clothing, fuel, machinery, raw materials for manufac- 
 ture, and rolling stock for the rehabilitation of trans- 
 portation; and none of the proceeds of such a loan 
 should go into the treasuries of the borrowing na- 
 tions to be used for governmental financial needs. 
 
 In view of the foregoing considerations and of the 
 suggested principles that should be embodied in any 
 comprehensive scheme, the following is a plan for an 
 international loan, to be participated in by the 
 United States of America, the Netherlands, the Scan- 
 dinavian countries, Switzerland, Japan, those South 
 American countries which are important exporters to 
 Europe, and Great Britain, although the latter to 
 perhaps a limited amount, if British interests so de- 
 sired. 
 
 PLAN FOE AN INTERNATIONAL PEACE LOAN 
 
 The governments of the lending nations each 
 should appoint a consortium of bankers, to have- 
 charge in the respective countries of the flotation 
 of an international loan of a certain amount. These 
 consortiums of bankers in conjunction with their re- 
 spective governments each should appoint members 
 of an International Loan Commission, the headquar- 
 ters of which might well be in the Peace Palace at 
 The Hague; and the number of representatives of
 
 184 WHAT HAPPENED TO EUROPE 
 
 each country respectively, or their voting power, 
 should be equitably determined. 
 
 The International Loan Commission would de- 
 termine, from the facts regarding the industrial situ- 
 ation in each of the possible borrowing countries, the 
 proportionate allocation of parts of the total loan to 
 each borrowing nation; and later should determine, 
 in conjunction with representatives from the borrow- 
 ing nations, the definite amounts of machinery, raw 
 material, rolling stock, etc., which should be fur- 
 nished. 
 
 Each lending nation would furnish, according to 
 its capacity, an amount of machinery, raw materials, 
 etc., equal to its amount of participation in the inter- 
 national loan, with adequate safeguards insuring to 
 the borrowers that these materials were furnished at 
 proper prices. 
 
 The International Loan Commission would pro- 
 pose to the borrowing nations that they would fur- 
 nish to them credits to the determined amounts, to be 
 expended in the way provided, against obligations 
 that in the case of every nation followed the same 
 formula. The obligations would run for say fifteen 
 years, bear per cent, interest, provide for amorti- 
 zation of one-fifteenth each year, and be repayable, 
 interest and amortization in the currencies of the 
 various lending countries in the proportion in which
 
 LOAN TO EUROPE 185 
 
 the obligation was at the time of each interest pay- 
 ment actually held by the nationals of such country. 
 
 Each borrowing nation should pledge a first lien 
 upon its customs revenue to meet the interest and 
 amortization service of that portion of the interna- 
 tional loan allocated to that particular nation. 
 
 The International Loan Commission would issue 
 for sale to the investors in each loaning nation its 
 obligations secured by the obligations of the sev- 
 eral borrowing nations. The interest charge on the 
 obligation of the International Loan Commission 
 would be the first charge against all the income re- 
 ceived by the Loan Commission from all of the bor- 
 rowing nations. If one or more of the borrowing 
 nations defaulted in the first years of the contract, 
 the International Loan Commission could devote such 
 part of the amortization funds received from the 
 other nations as might be necessary to the payment 
 of interest on the International Loan Commission's 
 total outstanding bonds and any such depletion of 
 amortization funds could subsequently be made good 
 when the defaulting nation made good its overdue 
 obligations. The result of this would be that even in 
 the event a nation defaulted in its obligations to the 
 International Loan Commission, the full interest pay- 
 ments would be kept up on the obligations issued by 
 the International Loan Commission, and time would
 
 186 WHAT HAPPENED TO EUROPE 
 
 thus be given to any dafaulting nation to subse- 
 quently make up this default. If it were unable to 
 do that before the final maturity of the loan, the loss 
 would then make itself manifest in a deficit in the ulti- 
 mate final payment of the principal of the Interna- 
 tional Loan Commission's obligations. 
 
 Each borrowing nation would undertake to lay 
 sufficient import duties to provide amply for its obli- 
 gations to the International Loan Commission. The 
 obligations would include in addition to the interest 
 and amortization of the original loan, the proper ex- 
 pense of the flotation of the International Loan Com- 
 mission's obligations, and the expense of the Interna- 
 tional Loan Commission up to the final discharge of 
 its obligations. 
 
 Any borrowing nation finding itself in a position 
 to liquidate its obligation to the International Loan 
 Commission in advance of the maturities of those obli- 
 gations, and desiring to do so, would be permitted to 
 liquidate those obligations at, say 
 
 The point may at once be raised that some at least 
 of the borrowing nations would raise objection to 
 pledging a first lien on their customs receipts. If 
 such a proposal were made individually to separate 
 nations, that objection might be insurmountable. 
 The difficulties of the situation are so great, however,
 
 LOAN TO EUROPE 187 
 
 that nothing short of a prior lien obligation would 
 offer sufficient security to warrant bankers going to 
 the investment public with an obligation for the in- 
 dustrial rehabilitation of Europe; and if all of the 
 borrowing nations were asked to follow the same 
 formula, the political objections would be far less 
 serious than if an attempt were made to induce gov- 
 ernments one at a time to thus grant a priority lien. 
 Any government that found itself in a position to 
 finance on more favorable terms subsequently could 
 relieve itself of this pledge of revenue by redeeming 
 its obligations to the International Loan Commission 
 at a moderate premium. 
 
 The plan which is in the mind of many of the finan- 
 cial officials of the borrowing governments, to redis- 
 count their expected indemnity claims against the 
 Central Powers, is one which will find little favor 
 among investors. The investors of no lending na- 
 tion will be disposed to put themselves in a position 
 of collecting this indemnity from either an impotent 
 or unwilling power. If the indemnity is paid, the 
 obligation which it is proposed to secure by putting 
 up the indemnity as collateral would be paid. If it 
 is not paid, the task of collecting it is not one that 
 any thoughtful investor will voluntarily become in- 
 volved in. 
 
 Nothing in the foregoing plan, however, would pre-
 
 188 WHAT HAPPENED TO EUROPE 
 
 vent a nation from rediscounting the indemnity obli- 
 gations which it might secure if it desired to do so 
 and could find a lender. Nor would the granting of 
 individual commercial credits be in any way cur- 
 tailed. Individual commercial credits will eventually 
 perform a most important function, but until the 
 preliminary work of getting industry started in all 
 the countries has been undertaken, there is a lack of 
 security in all individual commercial loans, without 
 regard to the wealth of the borrower, because his 
 total wealth may be subject to depreciation or extinc- 
 tion by revolution. That is why I believe the first 
 step should be the comprehensive one of furnishing 
 the minimum necessary to restart industry in all 
 European nations concurrently. 
 
 PRINTED IN THE UNITED STATES OF AMERICA
 
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 "Brilliant Synthesis of the World's Peace Problems" 
 
 The Great Peace 
 
 PY H. H. POWERS 
 
 Author of " America Among the Nations," " The Things Men. 
 Fight For," etc. 
 
 Cloth, litno, $2.25 
 
 " The necessity for speed laid upon the author found him amply 
 prepared by study, travel, training and practice. However hurried his 
 task of writing, his arguments and conclusions are manifestly results 
 of long, earnest, soberly measured and carefully digested thought. 
 Presented in the author's graphic, comprehensive anil impressive 
 style, they constitute, in effect, a clew to the vast labyrinth through 
 which the Versailles conference must shortly wander distraught." 
 
 " The peace conferees took a dictionary and encyclopedia along 
 for a library. They should add Mr. Powers' book it would be 
 helpful amid even a stock of universal knowledge." The Philadelphia 
 North American. 
 
 " The terms of peace to be agreed upon must be based on the fullest 
 recognition of the special problems and wishes of the associated na- 
 tions. The problem of problems is the control of the sea. . . . These 
 questions are discussed with thoughtfulness and clarity, and a wide 
 grasp of circumstances and difficulties." The Detroit Free Press. 
 
 "An able, unprejudiced and illuminating treatment of a burn- 
 ing question." Philadelphia North American. 
 
 The Things Men Fight For 
 
 BY H. H. POWERS 
 
 Cloth, J2mo, $1.50 
 
 arces has 
 id causes 
 
 , 
 
 " Probably no other book dealing with the war and its sou 
 made so dispassionate and unbiased a study of conditions anc 
 as does this volume." New York Times. 
 
 " Dr. Powers' volume is one of the most arresting, stimulating and 
 original discussions dealing with the fundamental causes of war thus 
 far published." Philadelphia Press. 
 
 " Without doubt it is one of the best books of the year relative to 
 the great European war, because it calmly gives all sides of the 
 question and is critically analytic. If one can enjoy reading a war 
 book this is the one." Boston Globe. 
 
 THE MACMILLAN COMPANY 
 
 Publishers 64-66 Fifth Avenue New Tork
 
 TWO NEW BOOKS ON RECONSTRUCTION 
 
 Reconstruction and National Life 
 
 BY CECIL FAIRFIELD LAVELL 
 
 Cloth, izmo, $1.60 
 
 The purpose of Professor Lavell's new volume is, primarily, to sug- 
 gest and illustrate an historical approach to the problem of recon- 
 struction in Europe. Professor Lavell will be remembered _as author, 
 with Professor Charles E. Payne, of " Imperial England," published 
 in the fall of last year. 
 
 Problems of Reconstruction 
 
 BY ISAAC LIPPINCOTT 
 
 Associate Professor of Economics, Washington University 
 
 Cloth, I2mo, $1.60 
 
 "From an industrial point of view the nations at war are con- 
 fronted with two groups of problems. Stated briefly, the first group 
 contains questions of concentrating industrial effort largely on war 
 production, of diverting men, materials and financial resources to the 
 essential industries and of curtailing the operations of all the rest, of 
 regulating commerce with foreign countries, and of formulating policies 
 and methods for the accomplishment of these ends. In short, this is 
 principally a question of development of war control with all that 
 this implies. The second group of problems arises out of the first. 
 It involves such questions as the dissolution of the war organization, 
 the removal of the machinery of control, the restoration of men, 
 funds, and materials to the industries which serve the uses of peace, 
 and the reestablishment of normal commercial relations with the out- 
 side world. The latter are post-war problems. Their prompt solution 
 is necessary because the war has turned industrial and social life 
 into new channels, and because it will be necessary for us to restore 
 the normal order as quickly as possible These brief statements out- 
 line the tasks of this volume." 
 
 THE MACMILLAN COMPANY 
 
 Publishers 64-66 Fifth Avenue New York
 
 K. K. KAWAKAMl'S NEW BOOK 
 
 Japan and World Peace 
 
 Cloth, izmo, $1.50 
 
 Japan and the Eastern countries with their political, geo- 
 graphical and racial problems, are inextricably bound up with 
 the interests of the United States and the successful main- 
 tenance of world peace. At no time has there been a greater 
 need for our thorough understanding of Japan's problems. 
 
 Mr. Kawakami is a Japanese of progressive ideals. In his 
 new book he describes Japan's place in the League of Na- 
 tions. He defines Japan's attitude towards democracy and 
 the Monroe Doctrine and explains her policy with regard to 
 China and Siberia. What he writes is of the utmost impor- 
 tance to every thinking American reader who would under- 
 stand the future policy of Japan and her probable relations 
 with the United States. 
 
 BY THE SAME AUTHOR 
 
 Japan in World Politics 
 
 BY K. K. KAWAKAMI 
 
 Cloth, izmo, $1.50 
 
 " Not often does one find a discussion of Japanese and 
 American relations that will compare with this book in sanity, 
 reasonableness, judicial temper, and ability to see the rights 
 and wrongs of all sides of a question." New York Times. 
 
 THE MACMILLAN COMPANY 
 
 Publishers 64-66 Fifth Avenue Hew York
 
 An American Labor Policy 
 
 BY JULIUS HENRY COHEN, 
 
 Author of " Law and Order in Industry," " The Law : Busi- 
 ness or Profession?" "Commercial Arbitration and the 
 Law" 
 
 Cloth, izmo, $1.00 
 
 The author believes that what is needed at the present time for the 
 stabilizing of our industrial situation is not a British Plan, or a 
 French Plan, or a Russian Plan, but an American Plan, in harmony 
 with our institutions, our laws, our customs and our outlook gener- 
 ally. The " principle of social cooperation " which is to be put into 
 a League of Nations in order to insure " solidarity among men " as 
 well as "protection and of justice against violence" must also be 
 put into industry. The analogies and definite experiences herein 
 put forth will help to save the country from an impending crisis, and 
 the enlightened leaders of labor and of management, as well as 
 capital, will find therein some suggestion for a basis of cooperation. 
 
 The following are the topics he takes up: Industrial Law, Philoso- 
 phy of Violence, The Modern Spirit, Organization In Industry, Con- 
 stitutionalizing Industry Morale in Industry, Hiring and Firing, In- 
 dividual and Collective Bargaining, What Is The Next Step? 
 
 The Shop Committee 
 
 A HAND-BOOK FOR EMPLOYERS AND EMPLOYEES 
 
 BY WILLIAM LEAVITT STODDARD, A.B., A.M., Harvard 
 
 Administrator for the National War Labor Board, 1918-1919 
 
 Cloth, izmo, $1.25 
 
 The Shop Committee is a new thing in industry. Here is a clear 
 statement of the essential principles and facts of the Shop Com- 
 mittee System, what it is and how it works. Every large employer 
 will be vitally interested in this new industrial movement, described 
 for the first time in Mr. Stoddard's book. 
 
 During the critical period of the war the author was an administrator 
 for The National War Labor Board and in such capacity developed 
 the shop committee system in several large industrial plants. His 
 book tells in detail the introduction, operation and success of this sys- 
 tem and shows how the shop committee idea is, for both workingman 
 and employer, the ideal intra-factory machinery for eliminating friction, 
 bringing about good relations, and promoting the practice and exten- 
 sion of genuinely collective bargaining. 
 
 Mr. Stoddard's book ushers in a new era in industrial relations. 
 
 THE MACMILLAN COMPANY 
 
 Publishers 64-66 Fifth Avenue New York
 
 DATE DUE 
 
 tit* 
 
 HECDDEC131 968 
 
 PRINTED IN U.S.
 
 000 495 826
 
 3 1970 02196 3878