PARIS 1919 (31 page)

Germany was left, as even the Allies admitted, with something closer to a police force than an army. When the promise of reductions in all armies failed to materialize in later years, it added to British unease about the German treaty, and to German resentment. With an army of 100,000 men and a navy of 15,000, and with no air force, tanks, armored cars, heavy guns, dirigibles or submarines, Germany was to be put in a position where it could not wage an aggressive war. Most of its existing stocks of weapons, and all its fortifications west of the Rhine and along its eastern bank, were to be destroyed. Only a few factories in Germany would be allowed to produce war materials, and all imports were forbidden. To make sure that Germany did not train men surreptitiously, public services, such as the police, had to be kept at prewar levels, and private societies—touring clubs, for example, or veterans' associations—were not allowed to do anything of a military nature. In Germany's high schools and universities, students were no longer to be cadets. All this would be enforced by the Germans themselves, supervised by an Inter-Allied Commission of Control. It was, in retrospect, like the ropes of the Lilliputians over Gulliver.
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The difficulties over the military terms were not yet over. Wilson now found himself in a serious quarrel with the British over the naval terms, a quarrel that reflected both older rivalries and the newer one that was developing as the United States became a world naval power. To begin with, the British Admiralty longed to destroy the Kiel Canal, which linked the Baltic and the North Sea and thus enabled Germany to move even its largest ships without sending them through the straits by Copenhagen. The admirals feared, with good reason, that commercial shipping interests and the American government might object. The alternative of handing over the canal to the Danes was out of the question; they showed no enthusiasm for such a poisoned chalice. The best that could be done was to take it out of German control and let every nation's ships use it. The Americans objected even to that. “A punitive measure,” said Admiral William Benson, the American naval representative and chief of naval operations. With the new Panama Canal firmly under their control, the Americans did not want precedents for international management of waterways. Benson also objected in general to imposing harsh terms on Germany, which he argued would drag the United States into endless efforts to enforce them. The compromise, which went into the treaty, simply allowed free passage for all countries at peace with Germany.
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The Americans had similar reservations about British proposals to raze the fortifications along Germany's coasts. “Naval armaments were being limited,” Lansing complained. “Why then should Germany not be permitted to defend her own coasts?” Lloyd George came up with a solution; defensive fortifications were acceptable, offensive ones were not. In the end, all German fortifications conveniently turned out to be defensive except the ones that the British really cared about.

Out in the North Sea were two tiny low-lying islands, Heligoland (Helgoland) and Dune, which the British had given to Germany in 1890, in what seemed like an excellent deal, for Zanzibar. Unfortunately, time had produced airplanes, submarines and long-range guns—and the Anglo-German naval race. The useless specks of land became formidable bases. The Admiralty had a simple solution: “The key of the mad dog's kennel must be in our pocket,” said an admiral, “for there is no knowing when the evil beast will get another attack of hydrophobia.” If the Americans objected, an alternative was to blow them both to smithereens. From his retirement in England, the half-blind Sir Edward Grey put in his suggestion, to turn Heligoland into a sanctuary: “For some reason this, humanly speaking, unattractive and barren spot is a resting place for millions of birds on migration.” Why not give it to Hughes of Australia? suggested Clemenceau. The final British position, which the French supported, was that only the fortifications and harbors should be destroyed. President Wilson “was entirely in sympathy with the destruction of the fortifications on the Islands of Heligoland and Dune, but he thought the destruction of the breakwaters was rather a serious matter from a humane point of view, as those formed havens for fishermen in case of storms in the North Sea.” He did not, he added, want to give “an impression of gratuitous violence.” The fishermen, according to the British, could easily find shelter in natural harbors. The British got their way on this, but the islands remained German. In the 1930s, with the Nazis in power, the fortifications were rebuilt, only to be blown up again after the Second World War.
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When it came to Germany's submarines, the British and the Americans found themselves on the same side. “These pests ought to be disposed of,” said Lloyd George when the matter came up for discussion. The American secretary of the navy, Josephus Daniels, spoke for many when he compared them to poison gas: “I believe all submarines should be sunk and no more should be built by any nation, if and when the League of Nations becomes a fact.” The French and Italians objected. “There is no treacherous weapon,” said the French minister of marine, “there can only be treachery in the way the weapon is used.” And if the submarines were to be destroyed, they would like a share in the work and in the profits from the scrap. In the end, the French navy took ten submarines; the remainder were broken up.
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The real tension between the British and the Americans came over Germany's surface ships. Initially both had taken the same view: their admirals did not want them; it would be expensive and difficult to incorporate them into their own fleets. Although Wilson thought it foolish to destroy perfectly good ships, Lloyd George rather liked the idea of sinking them ceremoniously in the middle of the Atlantic. The French and the Italians objected. France, said a French admiral, had thrown all its resources into winning the war on land. “Our fleet suffered losses which could not be repaired, while the fleets of our allies increased in considerable proportion.” It would make more sense, in his view, to divide the ships up. The Japanese suggested diffidently that they might take a few as well.

Britain was about to give way at the beginning of March when House told Lloyd George that the United States could not accept an increase in the British navy. The distribution of the German fleet had set off alarm bells in the mind of the excitable and Anglophobic American naval adviser. Admiral Benson pointed out that whether the distribution was done on the basis of contribution to the war effort or on that of losses, in either case Britain would come out with the greatest share. “In future her sole naval rival will be the United States, and every ship built or acquired by Great Britain can have in mind only the American fleet.” Britain, he was convinced, was determined to dominate the world's seas and world trade.
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Lloyd George tried to defuse the issue by suggesting another of his sleights of hand: the ships would be given out, but the United States and Britain would go ahead and sink theirs. Unwisely, perhaps, he made this dependent “upon the understanding that we should not in the future enter into a building competition against each other.” Otherwise the British navy would simply go ahead and keep its share of the German ships. Behind his proposal lay British concern over the continuing expansion of the American navy, which threatened to end Britain's naval dominance. Daniels had brought a second major building program before Congress at the end of 1918. The public justifications were reassuring: that the program was really just a continuation of the one of 1916 or that it was intended only to support the League of Nations. In Paris, however, Benson was saying firmly that the United States should not stop until its navy equaled Britain's. It was a fundamental of British policy that its navy must be larger than any other, ideally larger than any two other navies. But the British knew that they could not keep up financially in a naval race; moreover, they did not want to jeopardize their new relationship with the United States.
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Daniels came over to Paris in person to try to defuse the tension. “President,” he told his diary, “hoped we would talk it over and reach some right understanding.” The talks went badly. “The supremacy of the British Navy,” Walter Long, the first lord of the Admiralty, told Benson and Daniels, “was an absolute necessity, not only for the very existence of the British Empire but even for the peace of the world.” Benson replied briskly that the United States was quite capable of taking a share in keeping the peace. He and his British counterpart, “Rosie” Wemyss, quarreled so angrily that Daniels feared they were about to come to blows. “The British Admiral thought his country ought to have the right to build the biggest navy in the world and we ought to agree to it. To Benson that would have been treason to his own country.” The British threatened to oppose the special amendment on the Monroe Doctrine in the covenant of the League. Lloyd George told Daniels over breakfast on April Fool's Day that the League would be useless if the United States continued its building. “They had stopped work on their cruisers, & we ought to stop work if we really trusted the League Wilson wanted.”
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In the end, since neither side, admirals apart, really wanted a break, a truce was declared. The Americans promised to modify their building program (which they had to do in any case, because Congress was being difficult) and the British promised not to oppose the amendment or the League. Each side agreed it would continue to consult with the other. The new mood did not, however, produce an agreement on the German ships that remained at Scapa Flow. “We should like to see them sunk,” Wemyss told a subordinate, “but I do see that they are a pawn in the game.” The cooperation between the British and the Americans which had so struck observers was ruffled by what later came to be called “the naval battle of Paris.” It was to be shaken even further by the question of German reparations.
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15

Footing the Bill

IN 1995, there was a faint echo of that most contentious issue in the German peace when a newly reunified Germany agreed that it would pay the interest still due on the loans it had received in the years between the wars to pay off the reparations imposed by the Treaty of Versailles. “The subject of reparations,” said Thomas Lamont, the banker who represented the American Treasury in Paris in 1919, “caused more trouble, contention, hard feeling, and delay at the Paris Peace Conference than any other point of the Treaty.”
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Reparations helped to poison relations between Germany and the Allies, and among the Allies themselves, for much of the 1920s and 1930s. The issue facing the peacemakers was at once very simple and very complicated. Simple, because, as Lloyd George put it, “Somebody had to pay. If Germany could not pay, it meant the British taxpayer had to pay. Those who ought to pay were those who caused the loss.”
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Complicated, because that involved drawing up the bill and working out how much Germany could actually afford. The very mention of reparations caused disagreements. Were they simply compensation for damages or were they really a disguised fine, an indemnity for war costs for the victors? Should these costs include uncollected taxes or earnings lost because of invasion, death or damage? Pensions to widows and orphans? Compensation for animals that had died when their owners fled? Were they in essence an acknowledgment by Germany and whichever of its allies could still be found of their moral responsibility for the whole catastrophic war?

France, Britain and the United States, which worked out the final agreement, had different needs and different views. The United States took a high moral line. It did not want anything for itself, but it expected the Europeans to pay back the money they had borrowed during the war. For the Europeans, reparations promised a way to pay off their debts and to reconstruct their societies. What should be included in the reparations bill therefore assumed great importance because it affected sharing out the spoils. France had suffered the most direct damage, Belgium the next most, but Britain had spent the most. There were also intense debates over the question of how much Germany could pay. If the figure were set too high, the German economy might collapse, which would not help British exporters. If too low, Germany would be getting away lightly; it would also recover more quickly, a prospect that worried the French. Getting clear figures was not easy then and since, because it was in almost everyone's interest to exaggerate and obfuscate: in the Allies', to exaggerate how much they were due, and in the Germans', how much they were paying. Because the peacemakers could not agree on a final figure, the German treaty merely included a provision for a special commission, made up of Allied representatives, which would have two years to determine what Germany should pay. This understandably brought charges from the Germans that they were being asked to sign a blank check.

Although historians are increasingly coming to the conclusion that the burden was never as great as Germany and its sympathizers claimed, reparations remain the preeminent symbol of the peace made in Paris.
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While most of the 440 clauses of the Treaty of Versailles have long been forgotten, the handful dealing with reparations stand, in what is still the received view, as evidence of a vindictive, shortsighted and poisonous document. The new Weimar democracy started life with a crushing burden and the Nazis were able to play on understandable German resentment. Responsibility for the disastrous consequences, so the argument goes, begins with the peacemakers of 1919: the vengeful, grasping Clemenceau, the pusillanimous, vacillating Lloyd George and the pathetic, broken Wilson, who allowed himself, as John Maynard Keynes put it, to be bamboozled.

Keynes did not create the picture on his own, of course, but he painted it most persuasively and most persistently. A very clever, rather ugly young man, he had sailed through Eton and Cambridge, collecting prizes and attention. His membership in the Bloomsbury circle only enhanced his propensity to moral superiority. He was a terrifying subordinate because he never bothered to hide his contempt for virtually all his superiors. Keynes went to the Peace Conference as chief Treasury adviser. In
The
Economic Consequences of the Peace,
written immediately after the German treaty was signed, he spoke, therefore, with his usual authority.

Wilson, said Keynes, was the victim of the Europeans' grisly blindman's buff. “He allowed himself to be drugged by their atmosphere, to discuss on the basis of their plans and of their data, and to be led along their paths.” Wilson betrayed his own principles, his country and the hopes of all those who wanted a better world. Lloyd George was the chief enchanter who had come out of the mists of the Welsh mountains to entice the good and the gullible into the swamps. “One catches in his company,” said Keynes in a piece he left out of the book, “that flavour of final purposelessness, inner irresponsibility, existence outside or away from our Saxon good and evil, mixed with cunning, remorselessness, love of power, that lend fascination, enthralment, and terror to the fair-seeming magicians of North European folklore.”
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Clemenceau, dried up, old and bitter, cared only for France and its security. Keynes had come to loathe the French and what he saw as their inordinate greed. He fought with their representatives over relief for Germany and over the loans France needed from Britain. The German representatives whom he met on the armistice commission were quite a different matter. In a memoir he wrote for his Bloomsbury friends he described the prominent Hamburg banker Carl Melchior as “exquisitely clean, very well and neatly dressed, with a high stiff collar . . . his eyes gleaming straight at us, with extraordinary sorrow in them, yet like an honest animal at bay.” Keynes's declaration that he felt a sort of love for Melchior need not be taken too seriously. It was a rhetorical flourish for old friends who knew his complicated sexual past.
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The peacemakers appalled Keynes. They fretted about revenge while European civilization tottered on the brink of collapse.

In Paris where those connected with the Supreme Economic Council received almost hourly the reports of the misery, disorder, and decaying organisation of all Central and Eastern Europe, allied and enemy alike, and learnt from the lips of the financial representatives of Germany and Austria unanswerable evidence of the terrible exhaustion of their countries, an occasional visit to the hot, dry room in the President's house, where the Four fulfilled their destinies in empty and arid intrigue, only added to the sense of nightmare.
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What did they achieve in their gilded rooms? According to Keynes, a peace that completed the economic destruction done to Europe by the war. They were drawing new lines on the map when they should have been setting up a free trade area; they were haggling about the debts they owed one another when they should have canceled them all; and, the criticism that reverberated most in Germany, they imposed crippling reparations. Quoting extensively from his own memoranda written for the Peace Conference, Keynes argued that Germany could pay at the most £2 billion ($10 billion). Anything more would drive it to despair, and probably revolution, with dangerous consequences for Europe.
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While he was in Paris, Keynes produced a scheme to solve Europe's economic problems and the problem of reparations in one neat, clever package. The European Allies needed to raise money, to repair war damage and to pay back their debts to each other and to the United States. The defeated nations would issue bonds for their reparations, but those bonds would be guaranteed by both enemy and Allied nations. The financial rivers would start to flow again and Europe's nations would be linked together to their common benefit. Ultimately, all depended on the participation of the United States. While on paper Britain was still a creditor nation, and France had an overall debt of $3.5 billion, the reality was rather different. Both France and Britain had lent large amounts to Russia, which had defaulted on its debts, and to other Allies such as Italy and Rumania, which were in no position to start paying them back. Britain owed the United States $4.7 billion, and France owed it $4 billion as well as $3 billion to Britain. “The economic mechanism of Europe is jammed,” Lloyd George told Wilson in April 1919, when he forwarded Keynes's memorandum. “A proposal which unfolds future prospects and shows the peoples of Europe a road by which food and employment and orderly existence can once again come their way, will be a more powerful weapon than any other for the preservation from the danger of Bolshevism of that order of human society which we believe to be the best starting point for future improvement and greater well-being.”
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The idea that the United States should use its financial resources to get Europe going again after the war had been around for some time in various forms. The French, deeply in debt to their allies and facing huge repair bills, were particularly enthusiastic about prolonging and strengthening Allied wartime economic cooperation. Their minister of commerce and industry, Etienne Clémentel, a hardworking, earnest man from a farming family, drew up an elaborate plan for a “new economic order,” where organization and coordination would replace wasteful competition, resources would be pooled and shared out as needed, and the whole would be directed by clever technocrats. When Germany had put its own political house in order, it too could be part of the new order, safely enmeshed in a strong organization. The scheme languished because of active opposition from the United States and indifference from Britain and was finally turned down by the Allies in April 1919. The effort bore unexpected fruit after the Second World War, when Jean Monnet, who had been Clémentel's assistant in 1919, founded the economic organization that grew into the European Union.
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The British preferred to hint that the United States should cancel the interest on its loans for a few years. Alternatively, the whole expense of the war could be added up and the United States could take a large proportion. Lloyd George, with his enthusiasm for big ideas, preferred an even more dramatic solution, that of simply canceling all intra-Allied debts outright. The Americans, however, were determined not to let that happen. “I realize the efforts that are being made to tie us to the shaky financial structure of Europe,” wrote Wilson to the financier Bernard Baruch, who was one of his main advisers, “and am counting upon your assistance to defeat the efforts.” Most of his experts agreed, as did the Treasury in Washington. It was up to the Europeans to sort out their own problems; the more the United States helped them, the less likely they were to stand on their own feet. In any case, there was not much chance of Congress, dominated as it now was by Republicans, approving massive financial support for the Europeans. Keynes's scheme was turned down flat like all the others, and he watched with increasing gloom as the peacemakers tried to move ahead on reparations.
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“There is no doubt,” said Lloyd George in reply to a worried query from a member of his cabinet in April, “it would be better to fix a sum if we could agree on the figure. The difficulty is first of all to ascertain it; the next is to secure agreement amongst the Allies as to the amount, and in the third place to secure an arrangement as to the proportions in which it is to be distributed. If you have any plan that will meet these three difficulties you will have solved the most baffling problem in the Peace Treaty.” Shortly after the opening of the conference the Supreme Council had set up a Commission on the Reparation of Damage, which was to look at the related questions of how much the enemy countries (which mainly meant Germany) should pay, how much they could pay, and how payment should be made. The subcommittee for the last point rarely met, but the other two subcommittees were in session day and night, producing little beyond mounds of paper. By the time Wilson left for the United States on February 14, the commission was deadlocked, with the Americans holding out for a relatively moderate figure and the British and the French demanding more. “They play with billions as children play with wooden blocks,” said a journalist cynically, “but whatever we agree to will largely be a figure of speech, for the Germans will never be able to pay such a vast sum.” The British were asking for £24 billion ($120 billion), the French for £44 billion ($220 billion); the American experts recommended £4.4 billion ($22 billion).
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The Americans also wanted to include a fixed amount in the treaty. This, their experts argued, would help to end the financial uncertainty that was holding back Europe's recovery. The Europeans disagreed. As Montagu, one of the British cabinet ministers involved in the discussions, said: “If too low a figure were given Germany would pay out cheerfully and the Allies would get too little, while, on the other hand, if too high a figure were given, she would throw up the sponge and the Allies would get nothing.
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It is easy with hindsight to say that the victors should have been less concerned with making Germany pay and should have concentrated more on getting Europe going again. But after a war that had brought destruction on such a scale and shaken European society so deeply, how could political leaders speak of forgetting? In any case, public opinion would simply not allow them to do so. “Make the Hun pay,” said the British. “Let Germany Pay First,” said the posters covering the walls of Paris.
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The European leaders saw danger even in assessing Germany's capacity to pay, because the figure was bound to be lower than the public expected. The British and the French pointed out that it was very difficult to judge how much Germany—or whatever was to be left of it—would be able to pay. The country was in a bad way, its economy and its government equally shaky. The Germans could not provide reliable statistics, even if they had wanted to. Foreign trade had evaporated, and with it an important source of revenue. Government finances were in a mess. Taxes had been kept low for political reasons and the war costs had been paid for largely through the issue of huge amounts of war bonds and special notes. The plan had always been for Germany to settle accounts for the war when it had won and could transfer its costs to the defeated enemy. In the last year of the war this had in fact started to happen; the treaties of Brest-Litovsk with Russia and of Bucharest with Rumania had transferred control of huge resources to Germany. The Bolsheviks had also been obliged to start payments on an indemnity of $600 million. In the defeated Germany of 1919, conservatives protested loudly against any attempts to raise taxes or to default on government bonds, while the left pushed for benefits for veterans and widows and orphans, subsidized food and increased wages. The government meekly acquiesced to both, and Germany's deficit climbed until, by 1921, it amounted to two thirds of the budget. There was little incentive to cut expenditures or raise taxes merely to pay reparations.
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