Free Modern Times: The World From the Twenties to the Nineties by Paul Johnson

In an essay, ‘Inter-Allied Debts’, published in 1924, Bernard Baruch, the panjandrum of the War Industries Board and then Economic Adviser to the US Peace Delegation, argued, ‘The US has refused to consider the cancellation of any debts, feeling that if she should – other reasons outside – the major cost of this and all future wars would fall upon her and thus put her in a position of subsidizing all wars, having subsidized one.’ 112 Plainly Baruch did not believe this ludicrous defence. The truth is that insistence on war-debts made no economic sense but was part of the political price paid for the foundering ofWilsonism, leaving nothing but a hole. At the 1923 Washington conference, Britain amid much acrimony agreed to pay the USA £24 million a year for ten years and £40 million a year thereafter. By the time the debts were effectively cancelled after the Great Slump, Britain had paid the USA slightly more than she received from the weaker financial Allies, and they in turn had received about £1,000 million from Germany. 113 But of this sum, most had in fact been raised in loans in the USA which were lost in the recession. So the whole process was circular, and no state, let alone any individual, was a penny the better off.
    But in the meantime, the strident chorus of claims and counterclaims had destroyed what little remained of the wartime Allied spirit. And the attempt to make Germany balance everyone else’s books simply pushed her currency to destruction. The indemnity levied by Germany on France in 1871 had been the equivalent of 4,000 million gold marks. This was the sum the Reparations Commission demanded from Germany for Belgian war damage alone, and in addition it computed Germany’s debt at 132,000 million GMS , of which France was to get 52 per cent. There were also deliveries in kind, including 2 million tons of coal a month. Germany had to pay on account 20,000 million GMS by 1 May 1921. What Germany actually did pay is in dispute, since most deliveries were in property, not cash. The Germans claimed they paid 45,000 million GMS . John Foster Dulles, the US member of the Reparations Commission, put it at 20–25,000 million GMS . 114 At all events, after repeated reductions and suspensions, Germany was declared (26 December 1922) a defaulter under Paragraphs 17–18 of Annex II of the Treaty, which provided for unspecified reprisals. On 11 January 1923, against British protests, French and Belgian troops crossed the Rhine and occupied the Ruhr. The Germans then stopped work altogether. The French imposed martial law on the area and cut off its post, telegraph and phone communications. The German retail price-index (1913:100) rose to 16,170 million. The political consequences for the Germans, and ultimately for France too, were dolorous in the extreme.
    Was the Treaty of Versailles, then, a complete failure? Many intellectuals thought so at the time; most have taken that view since. But then intellectuals were at the origin of the problem – violent ethnic nationalism – which both dictated the nature of the Versailles settlement and ensured it would not work. All the European nationalist movements, of which there were dozens by 1919, had been created and led and goaded on by academics and writers who had stressed the linguistic and cultural differences between peoples at the expense of the traditional ties and continuing economic interestswhich urged them to live together. By 1919 virtually all European intellectuals of the younger generation, not to speak of their elders, subscribed to the proposition that the right to national self-determination was a fundamental moral principle. There were a few exceptions, Karl Popper being one. 115 These few argued that self-determination was a self-defeating principle since ‘liberating’ peoples and minorities simply created more minorities. But as a rule self-determination was accepted as unarguable for Europe, just as in the 1950s and 1960s it