A DARK FUTURE.

Oamaru Mail, Volume XLIV, Issue 14044, 29 April 1920, Page 7

A DARK FUTURE.

Mr.J. M. Keynes spoke at trie Manchester College of Technology .on "The Economic State of - Europe Resulting irom the peace Treaty." Until nation in June, 1919. he was .the chief representative of the British Treasury at the Peace Conference, and acted as the Chancellor of the Exchequer's deputy mi the Supreme Economic Council. Mr Keynes desalt with three main aspects o{ the present state of Europe—the coal and iron-ore situation in Germany, the food situation iir Europe, and , the tariff situation. Mr Keynes pointed out that the great industrial development 01 Germany since 1870 was built up on a fabric of iron and coal. That fabric had been largely destroyed by the Peace Treaty. Before the war 75 per cent, of Germany's iron ore came from Lorraine, which, however, was not the great centre of the blast furnaces (containing only 25 per cent.), or of coal. A great part of the ore of Lorraine was carried into Germany to be worked up. Now that Lorraine had ceased to be German, the problem arose whether the iron ore was to form the foundation of a great steel trade for France, or. as formerly, was to be sent

into Germany proper. So far the French had refused to agree-to any exchange *■ arrangements, and the result, in his judgment, was to reduce enormously the effective productive capacity of Europe. France now had the ore: Germany had the blast furnaces and the coal, and there was no effective arrangement for the interchange of the two. France, of course, made great efforts in the Treaty to secure > that she should get coal as well as iron, and shamelessly took the .Sarre coalfields. i But. unfortunately—it was unknown to President Wilson in Paris—the Sarre coal

is not really blast-furnace coal at all, and

I France would need Westphalian coal for her furnaces. The. difficulty might have Iwe.i adjusted if it was not that under another part of the Treaty Germany was to lose, subject to a plebiscite, tipper Silesia, irom which about 25 per cent, of the coal of Germany came. Consequently, Germanv would be unable to supply tha cual required by Lorraine, except at the tost almost of closing down her manufacturing industry. The eftect of the Treaty was to take from Germany a third of her coalfields, but "lit of what remained she had first of all to make good the loss of production in the Ninth of France through injury to the French mines (which was reasonable and proper), and in addition had to furnish a tribute of 25.000,000 tons a year to France. Belgium, and Italy. On the basis of prewar production the effect of this would be to reduce the amount available for Germanv's internal uses from 159.CC0.000 tons "to 75.000.000. But the cutout of the mines had fallen by 30 per cent., and the result was that, if the clause of the Treaty was carried out Gertnanv would be left on an output of 100,00O.CCO with only 55,000.000 for her own i:.-es, considerably less than half her prewar r.evds. Hi's would mean that she fouid have no substantial manufacturing indu-trv at all: there would be no surplus for indu.-lry alter meeting the needs of railwav.- and" household requirements. Of course' the Treaty was not. in effect. hein- put into force." for it was obviously imiHi'.-.-ihle to obtain this quantity of coal, and the Allies were taking month by month oiilv a trilling amount. But the Treaty was there. It was not nieiviv a German question. A political frontier was now drawn between coal and iron that would not matter under a re-iuie of freetrade. which, o: course, there was not. The likelihood was that in the near future France would i not be in a po.-ition to make use of her iron ore and Germany would not be in a position to use her blast furnaces. ; >nd the total would be greatly less. Germany would be crippled and have no mi;" !-•<■ export—one ot the tacts whi'.-n Iml her tii exnect a sriat boom :n the iron and steel' industries or this eoMiitry. Mr Kevnes pointed out how the the ni.g.:louring neutral countries were =>eoenot.;.t on Germany for coal {as millions w.re exported before the war), and they would be fou-ed now to strain eve.y nevve to make commercial arrangements with Oe-manv to "et coal in exchange tor th-Vr '.wis. 'there would be fnet-on wh-n the Allies found Germany fcnoing coal to Holland in exchange for foodstuffs, -if - they would say. '-Germany is able to .-end coal to Holland she can send "t -to u< " The situation was even more acute i„ Austria, v. ho <l:e"v h:-r coal from C-/e ho -Slovakia. and was unab.e to ,nv for it except by the exchange ,\i '"o..ds which under th- reparation clans- ,-- of the Treaty would lv supplied to the \!lv- "There i- on this one issue of i-on and coal." - Mr Keynes sa:d. "_a verv "re.it danger of the whole economic •:fe"of the Continent, so tar as it depends „:i the.-e minerals, being damped down. The food situation in Europe Mr Key.ie, anticipated, was llkelv to be increTMnglv wo:;; nom the 1920 !!..iv--st onwards." Germany wa< suffering rem a great lack o: manures and from greatly diminished output from the land. The ' •■ !o ;tion of food she imported (la \k> cent.! would be much increased. She had not monev at present to pay Ir.r these imports. -' unless we of our grace provided hti- with it. Assuming we allowed her to obtain or to keep the moittv ne.-essaiy for her imports, .-He woi'id then come into precisely the same world markets as we ourselves were in, and would be liable to drive up prices and m-.ke an acute world shortage eveiy-■vh.-e -Vft'T this year the guaranteed prre of wheat in the United States came to ?n end: we could not rely on bumper hTve«t- there: American consumption w7>* likelv to rise because of the increased pooulatio'n: there would be no exportable Surplus from Australia. Ti Germany came on the world food supply to my considerable extent there was grave prospect of evervhodv being in difficulties lor the necessaries of life. There was on y one wav out—that Germany should go to Ri;=-ia By our blockade we not only blockaded Russia but ourselves, because Ru=-ia was not in dependence on us lor her economic necessities as we were on her Even with the release of Russia H would he lons before wheat could be ex-po-ted but it could be done by German effort directed towards the reorganisation of the transport system of Russia and 1-v "■ettin" the economic motive at work a-ain "there. Unless we were in a position to save the Russian supplies the prospects of the food situation in Europe were going to be much more serious in thairOiev had ever been. The life of Europe was menaced by a fa'l in it* productive capacity, but that hrk -.v.v like'.v to be made much worse by the splittms up of til-:-- three great mW or k>=* .-elf-suhsistins Empires-Ru-sia Germany. Austria-Hungary—into t"-e,.tv different Stat"? in the hand of immature, rather incompetent governments, v, rv short of revenue, very hostile to 'heir neighbours, set up on a nationalistic b-rvi. and if we rould judue from what wnV already happening, determined to ,»ut up tariff walls against one another thev had been created 011 racial and not e-..n'omir lines, with political and not e-onomic frontiers. The old economic unities had been broken up: each 01 the new units bv itself was incomplete. Austria for instance was unable to live, tor she was unable to get food, and unable to -et work liecausc there was no coal. She" was simply left there to die. Tiie on'.v wav of remedying this was to make " the " setting-up of these new nationalities contingent upon their enterin- a sort of tree trade union ot all those countries that formerly made some sort „f economic unity. He would like to «e it made a condition of financial assistance that the new States carved out of he Russian. Austro-Hunganan, Turkish " U d German Empires, and all mandated State* should be compelled to join a liee "trade" union for at least ten years, a union vhieV it would be open to any other to l'oin. Thev might form a o o? which could b> constructed IT free trade union that might embrace almost the whole of Europe, Asia, and A M* a Kevnes went on to emphasise the .eriou, political results of withdrawing the means of livelihood from hundreds of millions of people. was ev«lent the Treatv as t stood would ne\ei le car .STL. and the problem wotid Ue how far it was openly and drastically te vised, and how far it allowed to dag on. and was forced by the combnlwn of events to be only partially onenit"ve "There are two alternative Nicies in front of us-either revision of the Treatv openly and frankly, or .the maintenance of the Treaty andl its mod, fication in practice. Personally, 1 am verv etronslv in favour of the first alternative, because only by that shall we be able to »et back to any degree of truth and staceYiiy in these matters, and have anv proper basis for the economic future. If "we keep the Treaty in be.ng. and take I a« much coal' and money as we are aide ; year bv year, we shall always be keeping {'the level of life of the German popnlaI tion down to the lowest conceivable, and

remove from them airy incentive to. further effort, because anything more they do will simply be taken from tfieni. "Quite apart--from any reparation Ger/r many may be in a position to make, the future of Europe 'is .dark indeed. The effect of the Peace Treaty is to carry into peace the methods of war. It does everything that human ingenuity can. to make further ruin,' and to complete the destruction of the mean 3 of livelihood-in those countries which the fortuned of war 'have already gravely reduced and impaired. It is surely very short-sighted to believe you can deprive this complicated European system of its' livelihood without having extremely far-rtaching consequences. The m.ement will- come when despair will seize all their hearts. If this method is proposed, and we persevere with the deliberate destruction of the economic life of a great part of Europe, it seems to me certain that society there will break down, that-the' extremist forces - in Germany will join hands with those in Russia. If economic life breaks down, if the socia.l system of the past hundred years is destroyed over the greater part of the European continent, France and. Italy certainly will not escape from the results, nor shall we."