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Karl Radek

The Winding-Up
of the Versailles Treaty

(Part 1)

The winding-up of the Versailles Peace

The year that separates us from the III. Congress marks the beginning of the winding-up of the Versailles Peace and the Treaties connected therewith. While the upholders of the capitalist order, in innumerable books, millions of articles, and many public conferences and secretly behind the scenes of diplomacy, have been preoccupied with the problem of revising the Versailles Peace, this revision is gradually being effected through the inner logic of things, which is tearing away stone after stone from the foundations of the Versailles edifice. It is sufficient to point to the conferences at Washington, Genoa, and The Hague as well as to the victory of the Turkish army, in order to perceive the ominous cracks in the pillars on which the Versailles Peace was erected. In Eastern and South Eastern Europe and in Asia Minor the winding-up proceeds through the Red Army and the Turkish national Forces, in the Far East through the American dollar, and in Central Europe through the collapse of the German mark. A proper appreciation of this process will at the same time reveal to us those new political and economic grouping of forces which have already begun to crystallise. A clear and definite conception of the motor forces operating in this process will enable us also to comprehend the events which are maturing on the political stage of the world.

I. The balance of forces of the Versailles Peace

The Peace Treaties signed after the victory of the Allies over Germany, Austria-Hungary, Bulgaria and Turkey in Europe, do not represent the unified expression of a general victory of allied capital, but merely a distribution of power among the various parties of the Entente. They laid the foundation of the hegemony of French Imperialism on the European Continent, the hegemony of Great Britain in the Near East and on the seas, and they gave to Japan a privileged position in the Far East, which forms a vantage-ground for the struggle for supremacy in Eastern Asia.

Looking closely at the Versailles Peace it is not difficult to perceive that the creation of a Poland on the right flank of Germany, and the pushing forward the frontiers of France to the left bank of the Rhine – for this is practically the meaning of the occupation of the Rhine provinces – have resulted in the absolute supremacy of France on the European continent. The British publicist, Dr. E. Dillon, in his paper on the Genoa Conference, justly remarked that not even in the heyday of Napoleonic glories did France exercise such a far-reaching military sway over Europe as at present by virtue of the Versailles Treaty. The fact that the Allies assigned to Poland even regions teeming with German population, created a corridor and gave her Dantsig and Upper Silesia, has chained Poland to the triumphal car of France and turned her into a guard of the Versailles Peace in Eastern Europe. Alongside of Poland we see the States of the Little Entente – Czechoslovakia, Yugoslavia and Roumania, equipped with French war material and trained by French military instructors, as the second line of French continental predominance. In conjunction with Roumania, Poland plays the role of the policeman of France against Soviet Russia, while Yugoslavia is used by France to counterbalance Italy. To Poland and Czechoslovakia has at the same time been assigned the task of seeing to it that Germany should fulfil the conditions imposed upon her by the Versailles Treaty.

Turning now our attention to the gains which have fallen into the lap of Great Britain by virtue of the Versailles Treaty, we are at once struck by the fact that even during the negotiations regarding the armistice (October 1918), Great Britain rejected the demand for freedom of the seas. The question has remained an open one, that is, despite all talk about the freedom of the seas, Great Britain has remained master of the Suez Canal, the Straits, Aden and Singapore; her supremacy in the Mediterranean and the Indian Ocean has in no way been adversely affected. Her war base at Hongkong secures to her, next to Japan, the strongest influential position in the Pacific. Her control of the Atlantic rests on a series of first-class naval bases. In addition to this, she has strengthened her dominion in the Near East through her understanding with France concerning Turkey, by virtue of which the Straits and Constantinople have been subjected to their joint control, but, as the naval strength of Great Britain is far superior to that of France, it is really the former Power which exercises full control. Into British hands have also been transferred Arabia and Mesopotamia, which form an unbroken bridge connecting Egypt with India and give their masters the full control of the Persian Gulf and the Red Sea. France, it is true, has got Syria, from which she could threaten the Suez Canal routes. But the war has bled France to such a degree that, for the time being, she is quite unable to make use of her position in the Eastern Mediterranean.

In the Far East, the Allies have abstained from promoting the interests of China, contrary to the latter’s expectations; Shantung has remained in the hands of Japan, opening to her the gate to Chinese coal and ironworks, which she needs, in the first place, for the strengthening of her militarism. Japan has received, besides, important naval bases in the southern parts of the Pacific.

II. Winding-up of the Versailles Peace in Central Europe

I begin with Central Europe, although, chronologically, the break-up of the Versailles Peace began in Soviet Russia. But Germany represents to-day the central problem of the capitalist world, since without a reconstruction of German industrial life, no reconstruction of European capitalism is possible, so that the German problem, or the question concerning the fate of the most important defeated Power in the world war, leads us directly to the question concerning the most important victor in this war, – namely the United States of America.

The story of the Allies’ Reparation demands from defeated Germany is familiar to everybody, so that I can confine myself to a recital of the most important points. The Allies, after having taken from Germany her merchant marine, her capital investments abroad, 83 per cent of her iron, one third of her coal, and 15 per cent of her foodstuffs, imposed upon her a heavy economic tribute.

A long time passed before the Allies could agree as to what they should demand from Germany. At Versailles no indemnity sum was fixed, but it was provided that Germany had to pay to France and Belgium the war damages and the pensions to the war invalids and the widows and orphans of the killed in war. And when the Allies arrived at the point of making up the sum total of the indemnity, they gave their imagination full rein. Even in December 1919, a French Minister declared in the Chamber that Germany would pay for 34 years 25 billion gold-marks annually, or altogether 375 billion gold-marks. In November 1920, another French Minister demanded that Germany should, pay 218 billions. The national wealth of France amounted, prior to the war, to 250 billion gold-marks, so that the reparation sum demanded from Germany would be slightly below the whole French national wealth. On the London Conference, in May 1921, the Reparation sum was fixed at 132 billion gold-marks, or Germany should pay for the next years 2 to 6 billion gold-marks annually, partly in cash, partly in kind. At the time of that decision 100 marks were equal to 1.61 dollars. After the first billion gold-marks had been paid, the rate of the mark began suddenly to fall, so that 100 marks were but equal to 0,54 dollar, that is, about 200 marks for one dollar. Germany after having duly paid several instalments, asked the Allies to allow her to postpone the next payment, as she was unable to pay the instalment which was then falling due. The Bank of England, to which Germany had applied for a loan, declared that, unless the Versailles Treaty was revised, Germany was insolvent. Thus the most important financial institution of Europe testified to the bankruptcy of the Versailles Treaty. In January 1922, the Allies assembled at Cannes. Mr. Lloyd George submitted a memorandum to the Conference, which is a document of extraordinary importance. It reveals with regard to Germany the motor forces of the winding-up process of the Versailles Peace. The memorandum declares that while France has enormously suffered through the war, and had her northern departments devastated, Great Britain, though not a single factory of her own was destroyed, had her devastated region, too, in the shape of two million unemployed. Mr. Lloyd George referred to the dependence of his country on foreign trade and declared that Great Britain could not suffer Germany, her best customer, to be wiped out. The collapse of Germany meant the collapse of the industrial life of the world. He went on to draw the attention to the fact that France was in a better position in so far as she depended in a much lesser degree on foreign trade than did Great Britain; France was able to feed her population from her own agriculture and to supply the raw materials for her industries. The main concern of France was her territorial integrity and the possibility of a German revanche. In the memorandum, Great Britain finally proposed to offer France a guarantee of her new frontier for a period of ten years, subject to the condition that France should consent to a revision of the economic provisions of the Versailles Treaty. It was decided at Cannes to reduce the payments due from Germany in 1922, to 720 million gold-marks and 1450 million gold-marks in kind. The Paris Conference of March 1922, ratified the Cannes decision and reduced the cost of the military occupation, which Germany has to bear, to 250 million gold-marks. On the initiative of the Allies, there assembled at Paris after the Genoa Conference, under the chairmanship of Mr. Pierpont Morgan, the American finance king, a committee of bank directors. This committee were to fix the conditions under which a foreign loan could be granted to Germany and which would enable her to fulfil her obligations, to the Allies and to restore her industries and consequently her finances. To this propositions the bankers replied, Germany was not able to bring order into her finances, unless the Reparation payments were reduced to such sums which would render their payment possible. The bankers further declared that under the present conditions no loan could be granted to Germany, even on the pledge of her custom duties or any other security she might offer, since the continued pressure brought to bear on her and the advance of her financial break-down might result in social upheavals which would jeopardise all guarantees. While the bankers did not think such a possibility as likely to materialise, they had none the less to take it into account, for they had to deal with a long-term loan.

This decision of the financiers as well as the murder of Rathenau, which, in its turn, was also the product of a political struggle born out of the Versailles volley, led to a catastrophic drop of the mark. At the time of the assembling of the Genoa Conference, the dollar had not even reached the rate of 300 marks. After the decision of the bankers had become known and after the murder of Rathenau, the dollar soared upwards to 1400 and even to the amount of 2000. It is a matter of course that the growing disorganisation of the German finances and economic life is not due solely to the Reparation policy of the Allies. It is, in the first place, the result of the economic weakening of Germany through the War, as well as of the policy of the German possessing classes who have withdrawn considerable portions of capital from the German industrial life in order to invest them there where the long hand of the Entente cannot reach them. And even if the Allies reduce their Reparation demands to a minimum, the economic condition of Germany would still be very difficult. But there can be no doubt that it is senseless to trace back the growing disorganisation of Germany to the machinations of German capitalists. The disorganisation is accelerated by the Reparation policy which imparts to the German process of decay a catastrophic pace.

The Allies have finally grasped that they have arrived at the end of their tether and that further developments in the same direction will result not only in the financial breakdown of Germany (which only demanded a long-term moratorium), but also implied a terrific social peril. Therefore, they applied themselves to a re-examination of the question.

At the beginning of September, M. Poincaré was expected to come to London and to discuss the matter with the British Government, who did not wish to confine the discussion to the prolongation of the dates of payments, but to go further and to bring about a new decision as to Germany’s capacity to pay.

But before M. Poincaré arrived, the British Government published Lord Balfour’s note of September 1, concerning the Interallied debts. This note represented the attempt of Great Britain to forestall the prospective thrust of M. Poincaré. From the moment of the re-opening the question of the revision of the economic provisions of the Versailles Treaty, Great Britain cherished, as it is well known, the following idea. The Allies should cancel their mutual debts, to make concessions to Germany. The British plan was based on the assumption that the Allies, after having cancelled their mutual debts, would demand from Germany not 132, but 50 billion goldmarks and would thus grant Germany not only breathing space, but the prospect for a loan, so that Germany would not have to pay the remaining 50 billions, but simply interest and sinking fund. In this case, Germany would have been freed from the French incubus, and the whole capitalist world would then assist her in restoring her industrial life. Germany, in her turn, would have to submit to a supervision of her finances and to give safe securities for a loan. This was the British plan which, though it had never been officially formulated, was much discussed behind the scenes of the Allies.

This plan rested on the following assumptions:

1. That USA was prepared to forego the Allies’ debts;
2. That France was inclined to meet the wishes of Germany and Great Britain. (Mr. Lloyd George, in his Cannes Memorandum, asked from France the cessation of submarine building.)

In anticipation of the British plan, France had prepared a plan of her own. The French plan was to induce Great Britain to cancel the debts which France owed to her, no matter whether USA was prepared, or not, to cancel the debts which Great Britain owed to her. In making this proposal, Poincaré was by no means thinking of cancelling the debts which Roumania, Serbia, and Russia owed to France. He also left open the question of political concessions. Moreover, even if all conditions and reservations of M. Poincaré were fulfilled, France would not consider herself to be under any obligation to enter into a general agreement with Germany. France was only prepared to grant Germany a moratorium. In order to forestall this thrust and to put a stop to all negotiations on such lines, the British Government published the Balfour note, in which they explained their attitude.

Great Britain, according to that, forgoes all her claims on her Allies only in case of a general settlement of the debts and indemnities and of the cancelling of the claims by USA: Only in such a case would Great Britain be prepared to forego her claims on France. In Lord Balfour’s note the question of the Interallied debts is the main question. It is, therefore, necessary to look more closely at this question, for it is indeed the most important problem of the capitalist world at the present moment, and it offers the best reply to the query, Which Power was the real victor in the world war?

At first we give some essential statistics as to the Interallied debts:

The sum total of the Allied debts to USA amounts to 10,150,300,000 dollars, the sum total of interest 1,172,200,000 dollars.

II. The indebtedness of the Allies to Great Britain

The arrears of reimbursements of war loans amounted in pounds sterling up to March 31, 1922:

Loans for maintaining or restoring the economic life (in £):

The sum total of allied indebtedness to Great Britain, including that of the British Dominions, which amounts to £150,432,000, is £2,017,461,000.

III. The indebtedness of Great Britain

On March 31, 1922, Great Britain owed (in £) to:

IV. Loans granted by France

On March 31, 1922, France had outstanding debts (in francs) in:

V. The indebtedness of France

On March 31, 1922, France owed to:

As to Italy and Belgium there are no data available concerning their indebtedness. The scanty statistical figures in this respects are contradictory.

The note of Lord Balfour met with an extremely hostile reception in USA. From the thousands of newspaper articles that have appeared in Great Britain and USA on this subject we shall only quote one. It came from the pen of the well-known American journalist Frank Symmonds, who throws some light on the attitude of America in the “New York Herald” and in the London “Times”. Symmonds writes:

“The question as to whether Great Britain will succeed in convincing the USA of the necessity of cancelling the debts forms the main problem of the whole international situation. The position of Great Britain in this question is a difficult one. While not a single state on the European continent is able to pay, there can be no manner of doubt that it is possible for Great Britain to pay. In the last months she has repeatedly admitted the existence of such a possibility. British statesmen simply boasted that Great Britain was prepared to pay, underlining the contrast between the attitude of Great Britain towards her obligations and the attitude of the various States of the European continent. The British Government can therefore not be allowed to shirk its duty or to demand a postponement when the respective days of maturity arrive.”

Mr. Symmonds further remarks that neither France, nor Russia or Italy are in a position to pay and that their debts must be regarded as fictitious, so that neither USA nor Great Britain will get a cent out of them. He goes on to declare:

“What Great Britain owes to us, is real money which can be asked for and reimbursed. On the other hand, what the Allies owe to Britain is not real money. Great Britain thus expects us to cancel in her favour, and without any equivalent, a debt of five billion dollars.” (Retranslated from the German.)

Finally he points out that Europe and in the first place Great Britain and France, though both in a difficult financial position, are continuing to arm. American public opinion thinks that those armaments are going on at the expense of the American taxpayers; and still Europe is not satisfied, for it demands that USA should also take over the German liabilities.

This point of view is shared by the great majority of the American public. The attitude of some financiers, who advocate “cancelling of debts”, or some politicians who join them in this advocacy, as for instance the well-known New York banker, Mr. Vanderlip, or the former Senator and Presidential candidate, Mr. Knox, produces the illusion that American help would in the near future be forthcoming. The truth however is that a participation of USA in the reconstruction of Europe is but demanded by those banking and commercial circles who are interested in European exports and imports. The aspirations of those businessmen, however, cannot be squared with the position of American public finance which is anything but splendid. A comparison with the financial position in 1914 shows that in the latter year the total Federal Income and Expenditure was one billion dollars, while to-day the mere interest on the war loans requires more than a billion. According to the report of the Financial Secretary, Mr. Mellon, the consolidated debt of the USA amounted on March 31, 1922, to 16 billion dollars. If we add to it the other debts, the grand total is 23 billions. The first problem the new Administration of Mr. Harding had to face concerned retrenchment of Federal expenditure. It would have been a suicidal policy on the part of Mr. Harding to ask the American bondholders to cancel the Interallied debts of twelve billion dollars. America looks upon those debts as obligations which cannot be shirked under any circumstances. One may therefore easily understand that all attempts of Great Britain to connect the Interallied debts with the solidarity shown on the battlefields cannot arouse the sympathy of the bourgeoisie and still less of the masses, and as America sees how at the same time the formidable armaments of Europe continue unabated – the French army is 800,000 strong and the fleet of Great Britain is gigantic – the conviction is borne in upon her that it is at the America expense that Europe is strengthening its navies and armies. The ill-humour springs however from very real interests of the American bourgeoisie. USA is the richest country in the world. It predominates on the cotton, coal and petroleum markets. It possesses to-day a first rate merchant marine. It is therefore quite plain that but for the continued armaments of Europe the American hegemony would be unchallenged.

USA has of course no prospect whatever of getting back her outstanding debts from any of the Allies except from Great Britain. This is quite evident from the balance of payments of Europe to USA In 1921, the excess of European imports, from that country amounted to 1,600,000,000; beside this, private European debtors had to pay in interest 350 million dollars to American creditors (private persons in Europe owe to American banks five billion dollars). Europe owed thus to USA in 1921, about two billions, or, to be exact 1,950,000,000 dollars, not taking into account the outstanding interest on the Inter-allied loans. On the other hand, Europe was credited by America with the following amounts, (1.) 100 million dollars as interest from European investments there; (2.) 500 millions dollars of European emigrants in America and the various American benefit associations; (3.) 150 millions of American expenses in Europe; (4.) 50 millions of miscellaneous liabilities for freights, to banks, etc. Altogether about 800 millions. Deducting this sum from the European liabilities to America (not counting the interest on the Interallied debts) there remains annually a balance of 1,150,000,000 dollars due from Europe to America. The question now arises, wherewith could Europe pay that sum? Of course, with goods. Should Europe try to settle her account with America in order to pay off at least the required 5 per cent of its debts, then its exports to America must assume fantastic proportions.

Little prospect as there was in the last years to increase European exports to USA, it practically vanished now. On September 21, a.c. a new custom tariff came into force; it is plainly a protective tariff for a whole number of commodities which Europe could export. The duties fixed therein are the highest known. From the point of view of international relations, this tariff is of extraordinary importance. Not only does it deprive Germany and Great Britain of the prospect of increasing their exports to America, but makes it very difficult for them to maintain even the volume of their present exports. Moreover, it aggravates in an unheard-of manner the difficulties of the debtor nations of Europe to fulfil their financial obligations towards America. In order to maintain her credits, Great Britain will have to make heroic efforts to pay her debts. Germany however will only be able to increase her exports by driving down the standard of life of her workers to the Chinese level.

The new American tariff acquires its high importance not only from its effects, but also from the causes to which it owes its origin. These causes are to be found in the structure of the American industry. A certain number of American employers have lately begun to buy in Europe, particularly in Germany, factories and works, in order to exploit German labour, whose wages are at least six times lower than those of American Labour. This created a dangerous competition with the American industry. All the manufacturers who supply the home markets rose up like one man against European competition. The result of their remonstrances was the new custom tariff; it was only opposed by the bankers who are financing the American enterprises in Europe, as well as by those traders who are interested in European exports to America. Another cause of the victory of the new tariff is to be found in the fall of prices of agricultural produce and the threatening competition of Argentine and Canadian foodstuffs on the American market. These facts led to an alliance between the American farmers and American industrial capital for the purpose of enforcing a high protective tariff. This tariff is a further step in the direction of severing America from Europe, of the isolation of America; it shatters all hopes of a cancelling of the Interallied debts, of large American investments in Europe, of granting a considerable loan by America to Germany. The new custom tariff empowers the President to increase or reduce the custom rates by 50 per cent, if the necessity arises. America thus secures to herself a mighty instrument for influencing the policy of all other Powers. Should, for instance, Great Britain try to pursue a philandering policy with Japan to the prejudice of America, should she attempt to compete with America or refuse to meet America in the petroleum question, the new tariff will be applied to turn the exchanges against her. America has also got the possibility of catching hold of France and using her against Great Britain. France can be lured by tariff concessions. The tariff delivers also Germany into the hands of America. By refusing Germany a loan, America is able to put German industry and finances into such a tight corner that it will be possible for the dollar to buy out Germany at the lowest price. At the time when the former Senator Knox came forward with the plan that America should espouse the cause of Europe, he proposed the following scheme for the supervision of Germany’s finances. As France is the adversary of Germany, and as Great Britain has not the confidence of France, neither a French nor a British supervision of German finances is feasible. An impartial supervision has therefore to be appointed and there can be no better one than Mr. Hoover. This is the American programme concerning the control of German affairs, – a programme which, considering the growing aggravation of the economic condition of Europe may soon be realised. In this way the Versailles Treaty, erected on the absolute predominance of France over Germany, is being wound-up, and the whole question is but this, in which form the Allies will be prepared to give their consent to this liquidation.

Whether this winding-up will take the shape of an understanding between American and French capital or of an understanding between British and American capital, is a question which cannot yet be answered.

But all this does not mean that the condition of France is hopeless and that she has no means of fighting the effects of the present state of affairs. The French system of taxation presses far less on the possessing classes than does British taxation. The French Government could, in case of necessity, cover the budget deficit by means of higher taxation. If it has not done so yet, it is simply from fear of the masses of peasants whom it promised that Germany would pay all, as well as from the dread of the capitalists who are bitterly opposed to income tax and death duties. In order to avert an internecine struggle, the French Government will stick at nothing in her pressure upon Germany. And should France ruthlessly pursue her Reparation policy, the Franco-British alliance will go to pieces. As it is well known, Germany’s main aim in her struggle against France was the combination of German coal with the French iron-ore basis of Briey. Behind this plan stood, during the war, the German heavy industry which through the extension of its basis aspired to the economic supremacy in Europe. The broken Germany lost 15 per cent of her agricultural area, 83 per cent of her iron-ore, and one-third of her coal. Despite all that the heavy industry continued to extend in growing measure the economic life of Germany. Despite the defeat they held fast to the old aim, but it should be now attained to with French assistance. This plan is based on the fact that as long as France has not occupied the Ruhr valley, she must be satisfied with Saar coal, which however the French steel industry does not need, for it is only coke that it requires. This consideration induced France to demand from Germany as payment of a part of the Reparation sums, a certain quantity of coke. Herr Stinnes and other industrials now believed that this want would compel the French heavy industry to enter with them into an agreement for the purpose of creating a powerful coal and steel trust in Central Europe which would control the continent. While French troops would have the honour of guarding the interests of the Franco-German coal and steel trust, its inner organisation and control would be in the hands of German capitalists. French industrial circles, the Comité des Forges, opposed this scheme of Stinnes; first, because they feared lest it should result in the re-establishment of the domination of German capital, secondly, because they hoped for the occupation of the Ruhr valley which would give them the German coke, without any agreement with Stinnes and without running the risk of an economic recovery of German capitalism. The French heavy industry was therefore, unlike the banks, not interested in any operation enabling Germany to pay the Reparation instalments; moreover, its interest lay in the inability of Germany to pay, for in this case the occupation of the Ruhr valley by France would earlier or later become inevitable. But the danger of a rupture with Great Britain prevented the French Government carrying out its aggressive intentions. In the same measure as the possibility for Germany to pay the Reparation decreased and the catastrophic disorganisation of the German finances became more evident, some of the representatives of the French heavy industry thought it necessary to enter into negotiations with the German heavy industry. The agreement between Herr Sinnes and Marquis de Lubersac concerning the rebuilding of Northern France is the beginning of this new policy. The French Government utterly dislikes this policy. France is quite aware that if this policy of agreements is extended and eventually leads to a combination of the heavy industries of Germany and France, the result will be the rise of a powerful competition of Great Britain and, consequently, of a struggle with Great Britain. On the other hand, some of the French industrial circles fear the competition of the German industry. All these factors will, also in the future, obstruct the growth of a policy of rapprochment between the German and French heavy industry. None the less, considering the German financial bankruptcy and the perils in which France might be involved by an occupation of the Ruhr valley, such a rapprochment appears to be the only possible way-out of the Reparation maze. But also this could not save the Versailles Treaty. The meaning of the Versailles Treaty was the destruction of Germany. In obtaining the right to an occupation of the Rhine provinces, the old French Rhine policy of the times of the Westphalian Peace, Louis XIV. and Napoleon celebrated its resurrection. The formation of a Rhine-buffer-state as a wedge between North and South Germany would have for its result the creation of a Roman Catholic State which would join German Austria and Bavaria and thus counterbalance North Germany. The Versailles Treaty pursues not only the object, to enable France to get out of Germany as much money and goods as possible, but it was simply a sentence of death upon Germany. If now France, for the sake of saving her own economic position, feels the necessity of a combination with the German heavy industry, she will surely obtain by this means much money and economic and military power for a struggle with Great Britain, but she will at the same time have to pay for it with a reconstruction of Germany. For the steering of such an economic course must inevitably lead to a change of the political bearing of France towards Germany. On the other hand, Great Britain will hardly look on, with folded arms, and tolerate the rise of such a formidable European competitor. Great Britain which competes with Japan in the Far East; Great Britain which fought with Germany as her competitor on the continent, at a time when Germany had at her disposal not a tenth part of the power which France would have in consequence of a combination of French and German heavy industries, – could we, then, reasonably expect Great Britain to acquiesce in the formation of such a combine? Every attempt on the part of Germany to make friends with France has hitherto been parried by an thrust, – the German loss of Upper Silesia was the British reply to the Wiesbaden Agreement. The defeat of Mr. Lloyd George will but aggravate the struggle round the German question.

When Mr. Keynes and a lot of smaller Keynes attempted to demonstrate the necessity for a revision of the Versailles Treaty, when the international Social Democracy, the representative of the 2. and 2½ International have made themselves the echo of that demand, they enlarged upon the subject, how France, the bad spirit of Versailles, should put an end to her mad policy of ruin and a new period of peace and other glories would be inaugurated. To-day, the question of revision of the Versailles Treaty is no more discussed since the Peace Treaty has practically been wound-up. This liquidation of the Versailles Peace means nothing less than the establishment of a new configuration of groupings of forces within European capitalism, new possibilities of international conflicts, in which Germany is the object and not the subject of the struggle.

III. The Capitalist world and Soviet Russia

Looked at chronologically, the winding-up of the Versailles Peace set in, as already mentioned, not in Germany, but in Russia. When the Allies drafted that diplomatic instrument, in which Russia was mentioned only in some of its supplementary clauses, their deliberate intention was not only to destroy Soviet Russia, but also to destroy Russia as a great Power.

The policy of throttling Germany, her destruction as an international factor, implied, as a matter of fact, the destruction of Russia as a great Power, for no matter how Russia is governed, it is always her interest to see that Germany exists, even a non-revolutionary Russia could not be indifferent to a destruction of Germany. A Russia which has been weakened to the utmost by the war, could neither have continued as a great Power nor acquired the economic and technical means to her industrial reconstruction, unless she had in the existence of Germany a counterbalance against the supremacy of the Allies. Should a non-revolutionary Russia replace Soviet Russia, she would likewise be interested in the existence of Germany as a prospective ally, even if such a non-revolutionary Russia were inclined to maintain the old alliance with the Western Powers. Moreover, not only the policy of the Allies towards Germany, but also their decisions concerning the question of the Near East implied the elimination of Russia. It is but necessary to recall the efforts and struggles which Russian Tsarism had to make in 1915, in order to get the British consent to the surrender of Constantinople and the Straits into the hands of the Russian bourgeoisie. And even if the thoroughly worsted Russian middle classes had had to forego its demand for Constantinople and the Straits, they would not have liked to see the key to the Black Sea wrested from the weak hands of Turkey and put into the mailed fist of Great Britain. Finally, the treaty that Great Britain entered into with Persia, behind the back of the Allies, during the Versailles transactions – a treaty which turned Persia into a British colony, implied also the elimination of Russia. The victorious Allies looked upon Russia as a sphere of expansion, that is, they regarded her as a country like Turkey or Persia, as their prospective colony. The struggle of the Allies against Soviet Russia meant not only war against the first proletarian Commonwealth, but an attempt to destroy Russia as an independent Power which could have reminded them of their obligations to her. The aim and end to the Allies was to crush Soviet Russia and to put in her place a weak white Russia. During the Versailles transactions, Mr. Lloyd George submitted to M. Clemenceau and the representatives of the other Allies a secret memorandum. It was lately published (for the first time) in the book “Peaceless Europe” by the former Italian Minister Nitti; it relates of the enormous fear which Soviet Russia at that time evoked among the Allies. Mr. Lloyd George said, “the whole of Europe is saturated with revolutionary ideas”. He referred to Hungary which at that time turned into a Soviet Government and to the Spartacus rising in Germany, and in stating that also the masses of the French and British people were deeply disaffected, he remarked that the masses did no more fight for an improvement of their condition, but, consciously or unconsciously, for a social transformation. Pointing to Soviet Russia, Mr. Lloyd George continued to say that Soviet Russia had not effected a new social order, her industries were shattered, her railways were a standstill. None the less, she had performed the miracle of forming an army, and even a disciplined army, the only army in the world, which was ready to fight for ideas. All that is taken literally from Mr. Lloyd George’s memorandum. From all those considerations he drew the inference that Germany must be spared in order to prevent her entering into an alliance with revolutionary Russia, while the struggle must be directed against the latter.

The two years’ war of the Allies against Soviet Russia terminated with a defeat of the former. Russia took finally the offensive and after having defeated the Poles at Kiev, marched upon Warsaw. At that moment a sharp change took place in the attitude of the Allies towards Soviet Russia. The Allies were then not only convinced that they were unable to overthrow the Soviet power, but even took into account a victory of the Red Army in Poland and the consequences which flowed from such a victory, namely, an upheaval in Germany. At the conference of Boulogne which took place at that time, not only Great Britain, but also France were prepared to recognise Soviet Russia, in order to stop the victorious advance of the Red Army. However, Soviet Russia suffered a defeat before Warsaw, and this was the signal for the Allies to refuse recognition to the Soviet Government, while France went to the lengths of recognising Wrangel. This buoyant mood continued. Even after the crushing defeat of Wrangel, even at the beginning of 1921 the Allies cherished the hope that Soviet Russia would soon breathe her last. None the less, Great Britain entered into a commercial treaty with Soviet Russia.

The reasons which compelled Great Britain to sign that treaty were twofold. First, the unemployment which had set in in the second half of 1920. This unemployment proved to the Allies, in the first place to the British capitalists, that it was impossible to continue the policy of Versailles; it proved to them that it was absolutely necessary to open up new markets, and this not only for Great Britain, but likewise for Germany; at that time the idea arose in British capitalist circles that there was only one way-out of the Reparation maze, namely, if Germany got the possibility of developing the Russian economic resources and to reconstruct her economic life at the expense of the Russian peasantry and proletariat. Besides this, there manifested itself another tendency in Great Britain, which had longer views for the, future of both countries. When in 1921 the Reparation problem and, the Near Eastern question resulted in an aggravation of the rivalry between Great Britain and France, people in London began to ask themselves whether France in her intoxication with victory was not presuming too much. In some circles of British capitalism, where sober views of the future prevailed, the idea was advanced that it was good policy to find a counterbalance against France in Russian and German power or to make use of a Germany based on Russian resources.

The new economic policy of Russia produced in Great Britain, the conviction of the complete bankruptcy of communism in Russia: the conviction that the policy of the Soviet Government and Soviet Russia would develop along the line of a reconstruction of capitalism. Mr. Lloyd George, after the Genoa Conference, spoke in the House of Commons in this sense, and his conception of the Russian situation was that of the capitalist powers. He pointed out that Soviet Russia needed credits, that without credits no economic renaissance of Russia was possible, and he continued to declare, that the leading men of Soviet Russia who understood the international situation, saw the impossibility of translating communism into practice, but that they found, the pressure of the proletarian oligarchy too strong for them. The Soviet Government could therefore not be expected to break away all at once from a system they had so long pursued, but earlier or later they would turn their back upon it and would take the road to capitalism. There is no doubt that was the general view of the bourgeois politicians who convened the Genoa Conference. They were convinced that it was but necessary to mask the demand for a restoration of capitalism, in order to induce the Soviet Government to restore all property to the expropriated foreign capitalists. Then there would develop a private capitalist order based on foreign capital, while the miserable residue of nationalised industries, which were in the hands, of the Soviet Government, would be utterly incapable of competing with private industry. And then of course they would be transferred to the Russian bourgeoisie. From the height of such an alluring perspective, Mr. Lloyd George looked down upon the dogmatic French men, who, with their inelastic, legalist mind, simply demanded from the Soviet representatives a written statement of their renunciation of communism. The practical mind of the British politician was prepared to acquiesce in the Russian Government calling itself a Soviet, also in the continued teaching of communism in Russian schools, if, only Soviet Russia would declare herself prepared to surrender her industries into the hands of foreign capitalists. At the same moment, when the Allies were discussing the suggestion of reducing the Reparation payments of Germany, they presented the Soviet representatives with a tremendously long list of money claims alleged to be due them from the pre-war period, as well as war debts. The meaning of that list was only to compel Soviet Russia, who is not able to pay, to hand over to the Allies the income from the custom duties as security for a reimbursement at a later date. With this plan in their portfolio the Allies went to Genoa, where they virtually declared to Soviet Russia. “While we have proved unable to conquer you with the sword and have let you therefore remain in power, we want to turn you into a colony of the Allies.”

Soviet Russia flatly rejected that proposal. She refused to hand over her industry as private property to the former foreign private owners or to farm out her manufactures to private capitalism. The Soviet Government, who, owing to the rather slow development of the world revolution was compelled to make concessions in the interest of the reconstruction of the devastated economic life, is still prepared for a compromise, subject to the condition that it should be granted the possibility of consolidating and extending the achievements of the October Revolution. Therefore, the Soviet Government refuses to restore the private property. At the first glance the whole question might appear as a mere formality, but in essence it is not so. The surrender of the former private possessions as private property to the foreign capitalists would mean the loss of the possibility of influencing the line of the economic activities of the employers. It is different if the Government reserves to itself the right of possession, for in this case it gets the possibility of bringing its influence to bear upon the course of economic development. It is sufficient to point to the Urquhart-Treaty, which the Soviet has lately rejected, and in which Mr. Urquhart bound himself to extract, in the concession regions, copper-ores and lead-ores in rigidly fixed quantities only and within fixed periods. Soviet Russia is prepared to put at the disposal of foreign capital that part of industry only which she herself, according to her calculations, has no hope of taking in hand in the near future. Guided by the idea of keeping firmly in its hands the most important part of the industry, in the first place the heavy industry, as the principal means to an independent reconstruction of the railways, and influencing the further development of agriculture, the Soviet Government rejected the demand for restoring the whole former foreign industrial undertaking to their former possessors. The question concerning the debt involves no principle. Communism knows no principle which prohibits the payment of debts. If Soviet Russia one time refused to acknowledge the debt of the pre-war periods and those contracted during the war, she acted, on the one hand, in defence against world capitalism which declined to stop the war, while on the other hand it was an attempt to set the petty bourgeoisie, as far as it was in possession of Russian bonds, in motion against its Governments who prolonged the war. Besides this it was an attempt to rid the country of an excessively heavy burden. The present refusal of Soviet Russia to acknowledge the debts does not turn, in essence, upon principle, but on the claim of the Allies that, considering the inability of Russia to pay her debts, she should hand over to them the control of the finances and railways, and should, besides, grant them enormous concessions.

Had it been possible to come to an understanding with regard to the amount of the debts and the terms of payment, without exposing Russia to the danger of being turned into a foreign colony, the interest of the working class would have demanded a compromise. For, we repeat, no communist principle prohibits the payment of debts. The Allies, in their conversations behind the scenes, maintained then contrary view. They asserted that it all turned on a principle and on nothing else but a principle. And Mr. Lloyd George, in a speech in the House of Commons, actually reproached Soviet Russia with the illogical procedure of applying to capitalists for a loan and at the same time denying the principle of honouring financial obligations. But as the Allies refused to make any precise statement as to the amount of their claims and the terms of payment, it was altogether impossible to arrive at any compromise. The Conferences at Genoa and The Hague proved failures, for the Allies have evidently not been in any mood to accept as an accomplished fact the existence of Russia as a country in which socialism is making the first steps towards realisation.

The failure of Genoa and The Hague which in essence was due to the refusal of the Allies to recognise the plain fact of existence of a proletarian state whose aspiration it is to realise socialism, was accelerated through the struggle of oil capital about Russia. The rivalry among the oil trusts which helped to blow up both Genoa and The Hague, found occasional expression in the Press during the Conference proceedings. The real dimensions of that struggle were not only unknown to the public, but also to nine-tenths of the direct participators of those Conferences. Only a belated, but thorough study of the oil Press yielded certain clues which, by their being followed up, rendered it possible to reveal the true part which oil capital played in the failure of the Genoa and The Hague Conferences. When at the beginning of May the international oil Press intimated that the negotiations between Mr. Lloyd George and M. Chicherin had prepared the ground for a possible compromise, there appeared suddenly in the newspapers the information that an agreement had been come to between the Soviet Government and the British Royal Dutch-Shell (the well-known British oil-trust). This information, the meaning of which was for the moment not easily grasped, was the bomb that blew up the Genoa Conference. The contest between the Standard Oil and the Shell, to which we shall have to refer later on when dealing with the Near East, led, prior to the Genoa Conference, to a provisional agreement between Great Britain and USA, at which the British Government promised to pay due regard, in its negotiations with Russia, to American oil interests. While it was not a binding agreement, it made USA expect that in the question of Baku oil a united front would be maintained; the British and American oil syndicates therefore acquired shares in the Russian oil works, by which they thought to have acquired certain legal rights of the former owners. The news concerning the agreement between Russia and the Dutch-Royal-Shell was given to the Press by the Standard Oil people who suspected behind the formula on the question of private property which Mr. Lloyd George accepted, on March 30, in his compromise proposal, there lurked a definite agreement with regard to Russian oil. Mr. Lloyd George was prepared to acknowledge that Russia has the right, in case of her unwillingness or inability to restore certain factories or mines to their former owners, to pay them compensation. From this the Standard Oil people inferred that Mr. Lloyd George had made it possible for Russia to hand over to the Royal-Dutch-Shell certain oil regions which are now under the control of Americans, but which were originally the properties of Russians. This induced the Standard Oil to blow up the Genoa Conference. As to the supply of oil, France is in a miserable position. In addition to this, in negotiations with the Soviet, her position is most precarious, owing to the fact that she possesses the greatest part of the pre-war debts of Russia. Prior to the war, Tsarism got most of its loans not in London or New York, but in Paris. The outstanding debts of Russia to France are therefore very considerable. At present, Russia can get very little economic help from France, since she is herself economically weak. This condition of France, which owing to her want of equivalents is of little importance as a negotiator, involves great dangers for her, but is very favourable to Great Britain. Not reasons of principle, but very sober considerations made her refuse to approve Mr. Lloyd George’s Memorandum of March 30, although the French representative, M. Barthou, was personally in favour of it. In the same condition was the Belgian Government. Shortly after the Genoa Conference, France and Belgium established a Franco-Belgian oil syndicate, which played a decisive role at the Hague. Before the opening of the Hague Conference a confabulation took place at the Hague between the representatives of the Standard Oil, Royal-Dutch-Shell, and the Franco-Belgian Oil Syndicate, in the course of which France and Great Britain bound themselves to act together in the negotiations with Soviet Russia.

The attitude of the Standard Oil in this affair finds practically its explanation in the attitude of USA towards Russia. USA is not only the most powerful capitalist organism of to-day, but is also the representative of the most pronounced bourgeois individualism, – a country, in which a few decades ago every workman could have turned to farming, and every petty trader or craftsman cherished the hope of getting rich. This country is the champion of capitalism, not only on account of its interests, but of its bourgeois mentality, and there is surely no country in which the hatred of Soviet Russia was stronger or the anti-bolshevist Press propaganda so comprehensive as in America. The Central European markets for agricultural produce are thoroughly destroyed; they only buy at present what is absolutely indispensable to them. The prices of the produce of American agriculture have been falling, and the American farmers have a presentiment of the danger that might threaten them in the near future from a revival of Russian agriculture. When a few weeks ago the American Press brought from some spurious source the news that the Soviet Government intended to start this year the export of grain, the American farmers were soon at hand to call for a boycott of Russian cereals. The possibilities for American export of manufactured goods to Russia are potentially limitless. But the preliminary condition is granting of long-term credits. American capital, however, has still enormous possibilities for developing the home markets. Only a small part of it is producing for export. Moreover, at the present juncture, when American capital is supplanting British capital in Central and South America, and, in addition to this, has the prospect of buying up the German industry, it is in no hurry to enter into business relations with Russia. Standard Oil would undoubtedly be pleased to get hold of the Baku oil. But this desire arises only from the fact that so strong a competitor as Royal Dutch-Shell threatens to snatch away the Baku oil. American capital, may come to some agreement with Russia from competitive reasons: in order to prevent other capitalist countries increasing their strength` by exploiting Soviet Russia. The policy of Standard Oil at Genoa and the Hague had for its object to prevent Russia and the British Shell, coming to any agreement. As soon as this manoeuvre proved effective, the burning zeal of Standard Oil in this matter disappeared.

The failure at Genoa and the Hague does by no means prove that, an agreement between Soviet Russia and the capitalist world is, impossible, but only that the time has not arrived yet for such an, agreement. If certain people are discussing the question whether a modus vivendi is altogether possible between capitalism and proletarian, dictatorship or between capitalism and socialism, we can only say that, this question is wrongly formulated. There exists a modus vivendi, already for the last five years, it exists as an unstable equilibrium, which is characterised by a series of compromises. The whole question is as to the sort of basis on which these compromises are effected.

For the time being, the capitalist world is still convinced that Soviet Russia, owing to economic pressure, will eventually capitulate, and that it will but endeavour to mask its compromises. The continued, existence of Soviet Russia, the growth, even at a slow pace, of the productive forces, and an attitude of expectation, are the preliminary, conditions of further compromises. On the whole we may say that the; Versailles Treaty, as far as it relates to Russia, is wound-up.

A definite compromise between the old capitalist world and the new proletarian world has not been effected as yet. The capitalist world sticks to the view that it will still be able to dictate terms to Soviet Russia. However, the time, in the course of which Soviet Russia, will not be alone in her sufferings, but will threaten the objects of the struggle themselves, that time works for Russia. The whole international situation, in creating new groupings of forces and aggravating the strained international relations, increases the specific gravity of Russia. It will result in compromises based not on purely capitalist interests, but on mutual concessions. The measure of those concessions will be determined by Russia as a working class and peasant State on the one hand, and by the international situation on the other. At the arrival of the Soviet delegates at Genoa, the British Government was convinced that it will succeed in bringing about their capitulation. Our crops, though not of first-rate quality, allow us to breathe freely for a year and open up new perspectives for our reconstructive activities. This year, the year of liquidation of the Versailles Peace, a year of profound convulsions, will be the year in which we shall be face to face with re-groupings of all political factors; it will be the year in which much will depend on the attitude of Soviet Russia in this or that question. Without swashbuckling, without embarking in any adventurous enterprises, Russia may, in this phase of the rise of new antagonisms and re-groupings, safely assume a watching attitude in the firm conviction that every week of her existence will add to her international weight.

Hardly a few weeks have passed, since in glaring day-light the fact has become manifest that, owing to the impossibility of complying with the provisions of the Versailles Peace, the German “fulfilling policy” is on the point of collapsing, and still shorter is the space of time since the news of the Turkish victory – a victory pregnant with consequences – has taken the world by surprise. No matter what sort of peace will be imposed upon Turkey and which group will secure control of Turkey, the Near Eastern question has secured for Russia a place in the center of international politics, and the course of things in the Far East is taking the same direction.

 
CONTINUED

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Last updated on 18.10.2011