FOREIGN AFFAIRS

AN AMERICAN QUARTERLY REVIEW

APRIL, 1932

Manchuria, the League, and the United States A. Lawrence Lowell 351
After the Indian Conference.The Marquess of Zetland 369
Hitler: Phenomenon and Portent .Paul S che
fer 382
Trade, Tariffs, the Wells Bidwell 391
Depression.Percy
B?low and the War. Jules Cambon 402
Neighbors: A Canadian View.R 417
In the Disarmament Labyrinth:
Can Aircraft Be Limited?.Edward P. Warner 431
Chemical Warfare.James E. Mills 444
Soviet Economy in a New Phase.Bruce Hopper 453
1931.Shepard Morgan 465
The Protection of American Foreign Bondholders Allen W. Dulles 474
War. A. Andreades
Japanese Finance Since the 485
The American Investment in Latin America . William 0. Scroggs 502
Obstacles to Reconstruction . . . . L. Laszlo Ecker
Hungarian 505
Some Recent Books on International Relations William L. Langer 510
Source Material.Deny s P. 525
Myers

HAMILTON FISH ARMSTRONG

Editor
Editorial Advisory Board
NEWTON D. BAKER W. DAVIS HARRY A. GARFIELD
JOHN
ISAIAH BOWMAN CHARLES G. DAWES EDWIN F. GAY
GEORGE H. BLAKESLEE STEPHEN P. DUGGAN GEORGE W. WICKERSHAM

Published quarterly by Council on Foreign Relations, Inc. Printed at 10 Ferry Street,

Concord, N. H. Editorial and Business Offices, 45 East 65th Street, New York, N. Y.
Subscriptions, $5.00 a year, post free to any address in the world. The Editors will be glad
to consider offered for publication, but assume no them.
manuscripts responsibility regarding

Vol. 10, No. 3. ? 1932, Council on Foreign Relations, Inc. Printed in U. S. A.

 CONTRIBUTORS TO THIS ISSUE
A. LAWRENCE LOWELL, President of Harvard University, author of
"The Government of England" and other works * * * THE MARQUESS
OF ZETLAND, Governor of Bengal, 1917-22; former President of the Royal
Geographical Society; author of the three-volume "Life of Lord Curzon" and
other works * * * PAUL SCHEFFER, Washington correspondent of the
Berliner Tageblatt, formerly correspondent in Soviet Russia, author of "Sieben
Union" * * * PERCY WELLS BIDWELL,
Jahre Sowjet Economist,
United States Tariff Commission, 1922-30; Professor of Economics at the
of Buffalo * * * CAMBON, French Ambassador at
University JULES
Washington, 18 97-1902; Ambassador at Madrid, 1902-07; Ambassador at
Berlin, 1907-15; later Secretary-General of the Ministry of Foreign Affairs
* * * R, * * * EDWARD P. WARNER, Assistant
Anonymous Secretary
of the Navy for Aeronautics, 1926-29; now Editor of Aviation * * *
JAMES E. MILLS, Professor of Chemistry, University of South Carolina;
Chairman of the Division of Chemistry and Chemical Technology, National
Research Council * * * BRUCE HOPPER, Assistant Professor of Govern
ment, Harvard author of "Pan-Sovietism" * * * SHEP ARD
University;
MORGAN, Vice-President of the Chase National Bank; formerly Finance
Director of the office for Reparation Payments; author of the B. I. S.
sections of the Young Plan * * * ALLEN W. DULLES, American Mem
ber of the Preparatory Commission for the Disarmament Conference at
Geneva in 1926, and legal adviser to the American delegation at the Three
Power Naval Conference at Geneva in 1927 * * * A. ANDREADES,
Professor of Economics at the University of Athens; author of "History of
the Bank of England;" lecturer at the University of Tokio * * *
recently
WILLIAM 0. SCROGGS, of the editorial staff of the New York World,
1925-31; now Director of Information of the Council on Foreign Relations
* * * L. LASZLO ECKER, Fellow at Harvard University.
University

The articles in Foreign Affairs do not represent any consensus of beliefs. We

do not expect that readers of the review will sympathize with all the sentiments they
find there, for some of our writers will flatly disagree with others; but we hold that
while keeping clear of mere vagaries Foreign Affairs can do more to guide
American public opinion by a broad hospitality to divergent ideas than it can by
identifying itself with one school. It does not accept responsibility for the views
expressed in any articles, signed or unsigned, which appear in its pages. What
it does accept is the responsibility for giving them a chance to appear there.
The Editors.
 FOREIGN AFFAIRS
Vol. 10 APRIL, 1932 No. 3

MANCHURIA, THE LEAGUE, AND

THE UNITED STATES
By .4. Lawrence Lowell
ETAILS of the events that occurred in the Far East last
autumn are not always clear, because the accounts given
by the two parties to the conflict do not always agree.
Nevertheless, in their main outlines they are sufficiently plain
for an understanding of their character and significance.
The war between China and Japan was brought to a close by
the Treaty of Shimonoseki on April i7, 1895. China acknowledged
the independence of Korea, which Japan rapidly brought under
her domination and fifteen years later annexed. By the treaty
China further ceded Formosa, the Pescadores, and the southern
part of the Manchurian peninsula of Liaotung; but a collective
intervention of France, Germany and Russia forced Japan to
restore this last. Smarting from her defeat, and anxious for pro-
tection, China in 1896 made a defensive alliance with Russia
and authorized the building and use by that Power of the Chinese
Eastern Railway. Two years later she gave to Russia a lease for
twenty-five years of the Liaotung peninsula, and the right to
build a railway thereto through southern Manchuria. At about
the same time, Germany obtained a ninety-nine year lease of
Kiaochow, and Great Britain one of Weihaiwei so long as Rus-
sia held Port Arthur at the southern end of the Liaotung penin-
sula.
After the Boxer troubles in 19oo, Japan believed that Russia
regarded herself as having acquired complete ownership in the
Manchurian territory leased to her, a belief that led to the Russo-
Japanese War and Russia's signal defeat. By the Treaty of Ports-
mouth, which ended the war in 19o5, Russia ceded to Japan her
lease of the peninsula and her railway rights south of Changchun.
352 FOREIGN AFFAIRS
The treaty also ceded to Japan rights in territorial waters,
harbor works, mines, and other property; but except as thus
stated, the treaty recognized the sovereignty of China and her
right to develop Manchuria. Now the provisions affecting China
were subject to her consent, which she gave by the Treaty of
Peking on December 22, 19o5, with a provision that Japan was
to conform to the agreements made with Russia about leases
and railway construction "so far as circumstances permit."
There were various supplementary provisions about opening
cities for international residence, and, on the part of Japan, of
withdrawing her railway guards - if Russia did the same on the
Chinese Eastern Railway - when China should be able to afford
full protection to the lives and property of foreigners; and there
were agreements about the regulation of sundry affairs of mutual
interest.
So the matter stood for ten years, when Japan made her famous
twenty-one demands on China, which, under pressure from the
United States, were somewhat modified, but took shape in the
treaties of May I915. These recognized Japan's position in
Manchuria as naturally predominant, and extended the lease of
the Liaotung peninsula to 1997, that of the South Manchuria
Railway to 2002, and of the Antung-Mukden Railway to 2007;
besides revising and enlarging the agreements about loans, mines
and land leases. The 'validity of these treaties China has al-
ways contested, on the ground that they were obtained by duress.
But this was not all. Japan claimed that by a secret protocol to
the Treaty of Peking in 19o5 the Chinese engaged, in order to
avoid competition, not to build railways parallel to the South
Manchuria lines. At the time of this writing no official texts of the
protocols have been published (nor any text until 1930), and the
Chinese deny that, if ever made, they have any force whatever.
After Japan had acquired the foregoing rights in Manchuria
there was a good deal of talk about its being a region into which
her people might immigrate and thereby relieve her overflowing
population. That has not proved true, probably because of
the cold in winter; and the result is that, including the Koreans
who are the most numerous there, the whole number of Japanese
subjects in Manchuria little exceeds one million, whereas the
country has rapidly filled with Chinese who now number about
thirty millions. Thus, so far as race is concerned, the people of
the country are Chinese and the Japanese foreigners. On the
 MANCHURIA AND THE LEAGUE 3S3
other hand, the Japanese investments are very large; and,
what is of more permanent significance, Manchuria supplies
coal, iron and food, which to Japan, overcrowded and lacking
in minerals, are of the highest importance. Indeed, in case of
war with any considerable maritime nation, these supplies would
be almost essential. Therefore the Japanese deem Manchuria
vital to themselves, and, since the war with Russia, have been
striving to enlarge their interests and control there; while the
Chinese, on the other hand, feeling that Manchuria is a part
of their country, inhabited overwhelmingly by their people, in
which the Japanese have unjustly got a foothold, have been try-
ing to develop the country outside, and in competition with, the
railway zone. For this purpose they have built lines, rivals to the
South Manchuria, which are said to have reduced its traffic forty
percent in the year before the recent outbreak. If the secret
protocol is valid, the Chinese have certainly violated it. If the
treaty rights claimed by Japan have no validity, then she has
been pursuing a course of action that has no justification. What-
ever the rights may be, it is obvious that the aims of the two
countries were wholly incompatible, and therefore sure to cause
friction; and, if their differences could not be settled by peaceful
means, a resort to force would become inevitable.
In case of an armed conflict between the two countries in
Manchuria the chances were highly favorable to Japan. Her
troops were equipped and trained with all the latest efficiency,
and she had a powerful navy; while China had no fleet at all,
and although the number of her soldiers purported to be enor-
mous, and even in Manchuria many times larger than any force
Japan was likely to put there, they were clearly ineffective against
Japanese troops. Moreover, the only road between China and
Manchuria over which troops could pass, or their lines of com-
munication be maintained, lay within the range of the Japanese
warships at Shanhaikwan between the mountains and the sea.
It may be added that the control of the Chinese Republic over
the government of Manchuria has always been very uncertain,
and last year even the local strength of the government at Nan-
king was precarious. To complete the picture, we must remember
that both Japan and China were members of the League of
Nations and represented on the Council; that Japan was a party
to the Nine Power Treaty for preserving the integrity of China,
and of the Briand-Kellogg Pact for the prevention of war; but
 FOREIGN AFFAIRS
that last September all nations were unusually straitened and
hampered by the world-wide economic depres'sion.
II

Such was the situation when on June 27 last a Japanese cap-

tain, Nakamura, was murdered in Manchuria. This was by no
means a solitary instance of race hostility, but it was the kind that
often sets a match to the: powder magazine. The explosion came
on September 18. According to the Japanese account, about half
past ten that evening Chinese soldiers and brigands destroyed a
part of the track of the South Manchuria Railway and fired upon
the guards. The injury could not have been very great, for the
trains were soon running; again; but the Japanese acted quickly
and systematically. By about six o'clock the next morning their
troops attacked Mukden, and, there being no serious resistance,
soon occupied the city. In twenty-four hours they had occupied
every important place within the region where their chief inter-
ests lay, a country roughly as large as New York or Pennsylvania;
turned out the local governments, and began quickly to replace
them by Chinese under Japanese supervision. It was a very
effective piece of work, amazingly so if unpremeditated.
It so happened that the League of Nations was in session, and
immediately on the receipt in Europe of the news, on the after-
noon of September 19, Mr. Yoshizawa, the Japanese member,
informed the Council that a collision had occurred between the
Japanese and Chinese t~roops near Mukden. There were known
as yet, he said, few details, but the Japanese Government had
taken measures to prevent this local incident from leading to
undesirable complications. He added that he had asked his
government for information. Mr. Sze, the Chinese representa-
tive, was greatly disturbed, and feared very serious consequences.
The President of the Council (M. Lerroux, of Spain) said that it
had heard with satisfaction that the Japanese Government would
take measures to deal with the situation.
At the next meeting, on September 22, Mr. Sze gave a full
account of the affair and said that it might be necessary to apply
other Articles of the Covenant beyond No. XI. Mr. Yoshizawa
replied that the trouble had arisen from the destruction by Chi-
nese soldiers of part of the railway, and the small body of Japa-
nese troops had to occupy important points to prevent further
incidents and protect the railway and the lives of Japanese
 MANCHURIA AND THE LEAGUE

citizens. He stated that the Japanese Government had no in-

tention of aggravating the situation or of making war on China,
and that it was ready to enter into direct negotiations with the
government of China. Mr. Sze said that his government could
not enter into direct negotiations with a nation in military
occupation of part of its territory, and demanded a return to
the status quo ante. After further discussion, in which Lord Cecil
said that any troops on Chinese territory ought to be withdrawn
without delay, the President of the Council asked time to draft a
resolution. At the meeting on the afternoon of the same day Mr.
Sze asked that the Council order the immediate withdrawal of
the Japanese troops outside the railway zone, and that it appoint
a commission of inquiry; while the President asked the Council
to authorize him, first, to appeal to both countries to refrain from
action that might aggravate the situation; second, to endeavor to
find means of enabling them to withdraw their troops immedi-
ately without danger to the lives and property of their nationals;
and, third, to inform the United States. All this the Council
unanimously did.
For the last few days Mr. Yoshizawa had been waiting for in-
formation from his government. It arrived and was presented to
the Council at the meeting on September 2S. The telegram stated
that Japan had withdrawn the greater part of her forces within
the railway zone where they were now concentrated, leaving
outside only a few troops as a precautionary measure at Mukden
and Kirin and a small number at other points, which did not
constitute any military occupation. The forces, it said, were
being withdrawn to the fullest extent allowed by the safety of
Japanese citizens and the protection of the railway. Mr. Yoshi-
zawa went on to state that Japan intended to withdraw her troops
into the railway zone as fast as the situation improved, and he
was confident that the Council would trust to her sincerity. The
Chinese, on the other hand, declared, as they constantly did, their
readiness to assume protection of the Japanese citizens in any
areas evacuated by the Japanese troops. The President said that
in view of these statements the Council might hope for a satis-
factory settlement, and again appealed to Japan to withdraw
her troops as rapidly as possible.
The subject came up again on September 28, when Mr.
Yoshizawa declared that Japan was determined to continue to
withdraw her forces as and when possible without danger to her
3S6 FOREIGN AFFAIRS
nationals, but he did riot rely upon China's offer to protect
them because she had not always been able to make her voice
heard in the provinces. At the same time Mr. Sze asked for in-
formation about alleged attacks by a~roplanes.
On September 30 the President said the Council had singled
out one object as of immediate and paramount importance, that
of the withdrawal of the troops into the railway zone, but that
a certain time had clearly to be allowed in order to insure safety
of life and property. Both parties, he said, recognized the impor-
tance of such withdrawal and both had taken steps to that end.
Under these conditions he thought there was no use in contin-
uing discussions at the present time. He then read a draft reso-
lution which - after stating that the Japanese Government had
no territorial designs in Manchuria, that the withdrawal of its
troops, which had already begun, would be continued as rapidly
as safety of life and property would permit, that the Chinese
would assume responsibility for Japanese lives and property
outside the zone - expressed the conviction that both parties
were anxious to avoid any action which might disturb peace and
good understanding, requested both parties to hasten the
restoration of normal relations and the execution of these under-
takings, and concluded by an adjournment to October 14.
This resolution, which was adopted unanimously, is con-
stantly referred to later as an agreement, and so it may well be
regarded; but whether all the parties to it had the same ideas
in mind is a very different question. The neutral members of
the Council, or at least M. Lerroux, its President, seemed to
think that the withdrawal of the Japanese troops within the rail-
road zone and the restoration of Chinese authority in the rest of
Manchuria would be peaceably accomplished before long, per-
haps wholly before the meeting of the Council a fortnight later.
Mr. Sze evidently had grave doubts whether Japan was really
withdrawing her military forces, or intended to do so; while the
Japanese, as shown by their subsequent description of conditions,
saw no security for their nationals beyond the striking power of
their arms. They had already stated, and continued to assert,
that China could not maintain order in the country; and hence
an intention to withdraw when security should be provided
signified to them no immediate change of position. Meanwhile,
it was clear that the Council was highly unlikely to be specially
summoned to meet within the next two weeks, and did not ap-
 MANCHURIA AND THE LEAGUE 357
pear disposed to take vigorous action in this matter at any time;
so that Japan had no reason to fear active interference, nor did
the identical note to both countries from the United States express-
ing "its hope that they will cause their military forces to refrain
from any further hostilities," seem alarming.
The resolution of September 30 had also requested both coun-
tries to furnish the Council with information, and this they cer-
tainly did not fail to do. Telegrams came from them at the rate
of three a day for circulation among the members of the Council.
From China came accounts of movements of Japanese troops, of
military occupation of towns and railways, seizures of public
property, incitements to independence, and dropping of bombs
from airplanes; from Japan came statements about raids by
bandits and disbanded soldiers and expeditions to repel them,
explanations of how airplanes had been sent to reconnoiter and
had dropped bombs only when fired upon, and complaints of
the anti-Japanese agitation in China proper, directed, they said,
by the Chinese Nationalist Party with the connivance of the
government.
During this period M. Lerroux felt conditions to be so serious
that he reminded both countries of their engagements to refrain
from aggravating the situation, and at China's request sum-
moned the Council a day before the date set. On October 3
he was unable to be present himself, and M. Briand was called
to the chair, which he occupied until the end of our story. On the
opening day, Mr. Sze appealed earnestly to the League for pro-
tection, especially in relation to the dropping of bombs on
Chinchow. Mr. Yoshizawa, in reply, gave a history of Japan's
claims in Manchuria and the causes for her action on September
18. The President closed the discussion by remarking that he did
not believe a dispute of this kind would lead to an irremediable
situation.
At this point there was an interlude in the drama. From the
outset of the discussion everyone had agreed to co6peration with
the United States; and on October I6 a further step was taken
by the proposal to ask her delegate to sit with the Council, al-
though of course without a vote. Japan objected that this was
substantially a change in the constitution of the Council and
required a unanimous vote; but in answer it was urged that
whether communications with our government should be
made orally or in writing was merely a matter of procedure and
3S8 FOREIGN AFFAIRS
could be decided by a majority. A motion by Japan to refer
this question to a committee of experts was lost by 12 votes
to 2; and then the motion to send the invitation was carried by
13 votes to I, Japan alone in the negative. The United States
accepted the invitation "to consider with the Council the rela-
tionship between the provisions of the Pact of Paris and the
present unfortunate situation in Manchuria;" nothing being
said about the Nine Power Treaty for the preservation of the
integrity of China.
On October 17 six of the governments represented on the
Council sent an identical note to China and Japan, calling their
attention to the Pact of Paris, and on the 2oth the United States
sent one of similar tenor. At the meeting on October 22 M.
Briand said it was now certain that the dispute was, and would re-
main to the end, circumscribed within its present limits. He
referred again to the fact: that Japan was prepared to evacuate
the occupied territory as soon as guaranties were received of
the safety of her nationals and their property, and that China was
prepared to give those guaranties. He then offered a resolution
which referred to that of September 30, recalled the undertaking
therein of Japan to continue as rapidly as possible her withdrawal
of troops in proportion as the safety of her citizens was secured,
and that of China to assume responsibility therefor. It called
upon the Japanese Government to withdraw its troops into the
railway zone "so that the total withdrawal may be effected be-
fore the date fixed for the next meeting of the Council," which
it was proposed should adjourn until November 16. In face of a
statement so definite as the one thus proposed, Japan must
either agree to withdraw speedily or give more definite
reasons for delay. Mr. Yoshizawa, therefore, after protesting
that Japan was determined to withdraw her troops into the
railway zone, stated that a definite time could not be fixed
because the safety of the Japanese residents could not be secured
until there was a change in the state of mind existing in Man-
churia and an atmosphere created in which useful co6peration
would be possible. There were, he said, several fundamental
points on which an understanding was indispensable before such
an atmosphere could be restored, and he asked that China enter
into negotiations on the matter. The existence of such fundamen-
tal points had been suggested before, but never so clearly
as now.
 MANCHURIA AND THE LEAGUE 359
The next day Mr. Sze complained that five weeks of effort by
the League and the United States had not sufficed to free the
territory of one member of the League, and a signatory of the
Pact of Paris, from an unlawful invasion by an army of another.
The time, he said, until the next meeting of the Council seemed
long; nevertheless China was ready to accept the resolution. He
went on to say that she would not discuss any subject with any
Power under the pressure of military occupation of her territory.
Mr. Yoshizawa, on the other hand, now submitted a counter
proposal, saying that Japan would withdraw her troops as the
present atmosphere cleared by the achievement of an under-
standing on the fundamental principles governing normal rela-
tions, and recommending the two governments to confer on such
an understanding. The Japanese Government, he said, had de-
termined on a number of fundamental points upon which normal
relations should be based. He was keenly pressed to explain
what he meant by these points, but said that he had no authority
to do so. The President, referring to the Pact of Paris, then
said that public opinion would not readily admit that a military
occupation under these circumstances could be regarded as
coming under the heading of pacific means. He urged Mr. Yoshi-
zawa to accept the draft resolution, but he refused. This was on
October 24. The counter resolution of Mr. Yoshizawa was then
put to a vote and lost 13 to i; and the draft resolution was
adopted by the same vote. The President regretted that they
had not attained unanimity, but took credit that they had been
able to circumscribe the conflict within its present limits. He
hoped the dispute would be ended when they next met, on No-
vember 16; and after Mr. Sze had expressed his fear that there
was little hope of an improvement in the situation in Manchuria,
the Council adjourned.
After the adjournment the Japanese Government made known
its fundamental points, which included (as had been surmised)
respect for the treaty rights of Japan. Meanwhile, China did
not abate the tale of her grievances. She complained that the
Japanese were reorganizing the local governments in Chinese
hands but under their own control, thus converting their military
occupation into a political and economic strangle-hold upon the
country. She asserted, also, that Japanese military officers had
seized the salt revenues. About this last M. Briand felt obliged
to remonstrate, observing that such acts were not related to the
36o FOREIGN AFFAIRS
safety of Japanese nationals. Japan replied that the balance of
the salt revenue not required by Nanking for payments of foreign
debts had hitherto been used by the Manchurian Government
for its military expenditures; that the Chinese committee on the
maintenance of order at Mukden had asked for it, that the salt
revenue office at Newchwang sent it to them, and that the mili-
tary did not seize it. Now this committee was acting in concert
with the Japanese authorities, and later it was virtually admitted
that the military had obtained the revenues by force.
Meanwhile, the fates were brewing trouble far to the north.
Japan reported to the Council that a bridge over the Nonni River,
carrying a railway tributary to the South Manchuria, had been
blown up by the Chinese, who had, moreover, opened fire on
Japanese sent to repair it. The message added that the guards
protecting the workmen would be withdrawn when the repairs
were done. Evidently the condition was critical, and on Novem-
ber 6 M. Briand called on both sides to avoid sanguinary action;
but, as usual in such cases, each side said the other fired first. A
few days later Japan reported that troops were concentrating in
front of the Nonni Bridge, and again on November i i M. Briand
reminded both nations of their agreement to avoid aggravat-
ing the situation. There followed contradictory reports of what
was said and done; but just as the Council of the League was
assembling, a battle was fought at Angangchi. The troops
of the Chinese General Ma were routed and the Japanese
occupied Tsitsihar, the capital of the northern province of
Manchuria, with the loss of 31 killed, 104 wounded, and 13
missing.
The League had adjourned to November i6, and on that day
it met, this time at Paris. The President informed the Council
that immediately after the late adjournment he had received a
letter from Mr. Sze saying that China would undertake to settle
all disputes with Japan as to the interpretation of treaties by
arbitration or judicial settlement; to which Japan had replied
that China had raised doubts about the very validity or the
treaties, a suggestion which the Japanese could in no case accept.
Believing that more could be accomplished by personal confer-
ences than by formal discussion, the Council did not meet again
for several days, and, indeed, the only other meetings it held
were on November 21 and December 9 and io. Since the nego-
tiations were carried on in this way, Mr. Dawes could keep in
 MANCHURIA AND THE LEAGUE
constant communication with the members of the Council with-
out sitting at their table.
On November 21 Mr. Yoshizawa made a rather startling pro-
posal of a commission of inquiry on behalf of the League to ex-
amine the situation in both Manchuria and China but without
power to intervene in the negotiations between the two countries
or to supervise the movements of the troops. Again there came a
period, and a much longer one, of private discussion in the
attempt to reach a common understanding.
On December 9 the Council held another formal session, at
which the President read a draft resolution embodying Mr.
Yoshizawa's proposal. The most important points were, first, a
reaffirmation of the Resolution of September 30 (by which the two
parties had declared that they were solemnly bound) and a de-
mand by the Council that the withdrawal to the railway zone
should be effected as speedily as possible. In the second place,
the Council, in view of the serious nature of the events, noted
that the two parties undertook to adopt all measures necessary
to avoid further aggravation of the situation. Third, it invited
them to keep the Council informed; and, fourth, the other mem-
bers to do the same. By the fifth point, the most important of all,
the Council was to appoint a commission of five to study the
question on the spot and report on anything that threatened to
disturb the peace, with a proviso that it should not be concerned
with negotiations between the parties or interfere with the mili-
tary arrangements of either. Finally, the President was to follow
the subject and summon the Council if necessary.
The next day Mr. Yoshizawa accepted this resolution on the
understanding that it did not prevent Japan from taking meas-
ures for security against bandits; while Mr. Sze said that much
of the lawlessness in Manchuria was due to the invasion by the
Japanese troops, adding that China would regard any attempt
to affect her administrative integrity, or to promote movements
for independence, as aggravating the situation. The resolution
was then adopted unanimously. In his concluding remarks M.
Briand said that the Council had averted war, and was entitled
to be confident that there would be no further hostilities. In the
same spirit Mr. Stimson expressed at this time his gratification
at the result, although not with unqualified confidence.
Whether or not the Council had really had any significant
influence on the course of affairs it evidently felt that it had ac-
362 FOREIGN AFFAIRS
complished all it could, for it was not summoned to meet again.
But the course of events did not stop. Even while the Council
was sitting, China reported preparations for an attack on Chin-
chow, the last important town in Manchuria, which the Chinese
were in no condition to defend. These reports Japan denied;
but the rumors continued, and although any such advance was
understood to be halted, and there was talk of creating a neutral
zone between the town and the Japanese troops, the proposal
came to nothing.
At this time changes took place in both governments, which
brought the conflict to a new phase. How much truth there may
have been in the impression of a dissension in Japan between the
civil cabinet and the army which it was unable to control, there
can be little doubt that the Japanese public favored energetic
measures; and within two days after the Council of the League
adjourned, the Minseito ministry resigned by reason of internal
differences on other matters and was replaced by a cabinet
under Mr. Inukai, composed of members of the Seiyukai,
the party that had in the past stood for a vigorous attitude in
Manchuria. Three days later the rising tide of feeling in China
caused the resignation of Chiang Kai-shek and the formation of
a more strongly nationaliSt government there.
Whether the new Japanese ministry adopted a different policy,
or was in fact carrying out a plan already formed, a systematic
advance towards Chinchow was evidently being prepared.
Naturally the prospect of such a stroke did not pass without
comment by the nations that had sought to avert it. Mr. Stimson
on December 22 expressed to the Japanese Foreign Office the
concern of our Government at the reports of movements con-
templated in the direction of Chinchow, but indicated no further
consequences; and similar action was taken by Great Britain
and France. Nevertheless the advance began, and continued
until Chinchow was abandoned by the Chinese and entered by
the Japanese troops early in January. From there they pushed
forward to Shanhaikwan, the gate of the Great Wall, thus com-
pleting their military occupation of all southern Manchuria.
III
In making any comment upon this story one must remember
the extreme difficulties 'in which the Council was placed from
the uncertainty of rights and facts, both of which were in dispute.
 MANCHURIA AND THE LEAGUE 363
Almost every claim was contested, every act impugned, and every
statement of fact denied. Moreover, had the rights and facts
been agreed, they presented a very unusual situation.
Japan had a right by treaty to maintain soldiers in the railway
zone, that is in Chinese territory, and hence there was ho definite
'frontier between the two countries, such that for troops to cross
it would clearly be a hostile invasion to be at once condemned.
It was a case of exceeding the limits granted by treaty -which
might be justified by a breach of the treaty on the part of the
other country. The position involved a difference a little like that
between a willful trespass on another man's land, and traversing
that land beyond the limits of an easement that he has obstructed.
Then the Chinese central government did not have actual
control of Manchuria, whose ruler was in fact largely autonomous.
The region was an easy prey for roving bands of brigands and
disbanded soldiers whose raids the authorities at Nanking could
not restrain, and for whom it could not assume responsibility.
Expeditions, therefore, by Japanese troops to suppress marauders
could hardly be treated like invasions of a foreign territory; and
the line between these and military occupation was not easy
to draw.
In such a confused situation the Council of the League pro-
ceeded cautiously. The full meaning of the first advance by
Japanese troops was not clear to its members, and perhaps not
to the government at Tokio; although Mr. Sze quickly saw that
it portended an attempt to wrest from China the control of
Manchurian territory. If this were the object, and it had been
perceived by the Council, a case would have been presented
where the members of the League were bound by the Covenant
to apply the sanctions of Article XVI, since the use of military
force for such a purpose is obviously war. That the Japanese
government had, as it constantly asserted, no intention of an-
nexing any part of Manchuria, one need not doubt; but surely
to occupy in arms a neighbor's country in order to control its
administration is enough to constitute an act of war. Nor is it
essential that a state of war should be formally declared. Both
nations avoided this; both kept up diplomatic relations through-
out; China because to declare it might have impaired her position
as an injured suppliant to the League, and would have opened
all her ports to attack; Japan because her plea before the Council
was that she had begun no war, and since she could obtain what
364 FOREIGN AFFAIRS
she wanted by the use of her troops in Manchuria there was no
military reason for operations beyond the wall.
One can, however, see a misunderstanding running all through
the discussions. Whatever the Japanese Government may at
first have thought would. result from the seizure of Mukden, it
must soon have recognized that it was no passing incident, and
the Resolution of September 30 can hardly have had the same
meaning for all the members of the Council. To China and to the
neutral representatives an agreement for the speedy withdrawal
of the troops into the railway zone meant a withdrawal as soon
as the immediate object: of the advance was accomplished -
perhaps in a few days, probably in the fortnight before the Coun-
cil met again. But to Japan it meant - as appeared more clearly
later- a withdrawal after the country had been sufficiently
reduced to order to render life and property safe for her nationals.
This she knew could not be done by China, but only by herself,
and would take much more time than the Council supposed. She
could not say how much, and therefore constantly Mused to fix
a date.
Neither the Council nor the United States undertook to
examine the substance of Japan's rights in Manchuria, the only
question considered under the Covenant or the Pact of Paris
being whether her method of proceeding was a resort to war,
seeking the solution of a dispute except by pacific means. It is
from this angle that we must regard the action of the League and
of our own government. From the whole transaction three things
appear:
First, that vigorous measures, if not taken early, become more
and more difficult to adopt, even though the evidence becomes
stronger.
Second, that the public: opinion of the world, on which so much
reliance has been placed, has little effect on a nation that, be-
lieving itself in the right, has no material interference to dread;
and a nation is highly unlikely to conduct important military
operations unless there is a predominant belief among its people
that it is very decidedly in the right. In this case the twelve
neutral members of the Council were wholly in accord; and
public opinion was as nearly unanimous, and as much aroused, as
it is ever likely to be.
The third inference to be drawn from the transaction is that -
at least in times of economic stress -. the Great Powers, on
 MANCHURIA AND THE LEAGUE 365
whom the chief burden falls, are not certain to regard as impera-
tive the sanctions of the Covenant. This the Japanese shrewdly
ascertained in observing the progress of the negotiations.
Whatever may have been the earlier belief of the countries
belonging to the League, it is hard not to consider the final ad-
vance on Chinchow as a resort to war within the meaning of
Article XVI of the Covenant; and yet no action was taken, nor
was even a further meeting of the Council called. For the future
of the League this attitude is the most significant aspect of the
matter. Mistakes in particular cases may be made, the true
nature of events may be misunderstood, and the future may not
be prejudiced, for the like may not happen again; but if world
opinion is ineffective against a determined nation, and the mem-
bers of the League cannot be relied upon to carry out its sanctions,
the prospect ofpreventing wars by means of the League is much
reduced. It will continue to be a beneficent organ for mutual
understanding, an agency for doing things that would otherwise
be more difficult; but as a force for removing the scourge of war,
and giving the world a sense of security, it will achieve less than
its founders hoped.
The position of the United States was different from that of
the other nations. Not being a member of the League, it had
assumed none of the obligations of the Covenant; and therefore,
whether its representative sat at the table of the Council or
stayed away, he could not consult with them as a responsible
colleague. He was of necessity an outsider, and the common
solidarity was thereby lamed.
On the other hand, this country is a party to the Nine Power
Treaty to maintain the territorial and administrative integrity
of China and the principle of the Open Door there. It is a party
also to the Pact of Paris never to seek the settlement or solution
of any disputes or conflicts except by pacific means. But the
obligations of both these engagements are negative - that is,
to abstain from the acts described - and involve no undertaking
to restrain any other signatory that should violate them. Al-
though the Nine Power Treaty was certainly made to protect
China, the interests of the parties to it are also involved. It is
strictly a treaty, and a breach of its conditions by any party to
it entitles any other to the redress open in the case of treaties.
The note of our government to Japan on January 7 states that
"With the recent military operations about Chinchow, the last
366 FOREIGN AFFAIRS
remaining administrative authority of the Government of the
Chinese Republic in South Manchuria, as it existed prior to
September i8, 1931, has been destroyed." To this Japan has
replied on January 16: that "the present unsettled and distracted
state of China is not what was in the contemplation" of the
parties at the time of the treaty and that "they must neces-
sarily be applied with reference to the state of facts as they
exist;" that "any replacement which occurred in the personnel
of the administration of Manchuria has been the necessary act
of the local population" who are not "destitute of the power of
self-determination and of oiganizing themselves in order to
secure civilized conditions when deserted by the existing officials."'
This appears to mean, first, that the condition of China has
virtually abrogated the provision for her administrative in-
tegrity; and, second, that the changes of administration in
Manchuria were due to a spontaneous revolutionary movement
there, not the result of Japanese military action.
The Pact of Paris, commonly called the Briand-Kellogg Treaty,
raises different questions. Is it strictly a treaty, or is it a common
declaration of policy and intention; and if a treaty, what rights
does it confer, and what action may any signatory take in case
of breach? Clearly no obligation is imposed to take any action,
nor is there any suggest:ion of the action proper to take. Our
government has assumed on more than one occasion that it was
entitled, without giving offense, to call upon any other signatory
to refrain from the use of force, and so much seems to be ad-
mitted. Conversely, if we were again to send marines to Nic-
aragua or troops to Haiti and some other signatory were to
remonstrate with us, we should feel that it was within its rights,
and that we ought to explain courteously why our action was
not contrary to the Pact. Suppose, further, that a nation with
which we have made one of our recent arbitration treaties should
claim that the Pact, being a treaty, gave it a right to demand
that we should comply with its terms; and asked to arbitrate
the question whether such a landing of forces in another country
was or was not seeking a settlement of a dispute by other than
pacific means what should we reply? The arbitration treaties
except, no doubt, the Monroe Doctrine; but no one would claim
that if the action supposed is a violation of the Pact of Paris it
is authorized by that doctrine, and hence not subject to arbitra-
tion. If the Pact of Paris is strictly a treaty, it is hard to see why
 MANCHURIA AND THE LEAGUE 367
it does not confer on the other parties thereto a right capable of
arbitration under a treaty made for the purpose of arbitrating
treaty rights. If, on the other hand, the Pact does not confer an
arbitrable right, it is hard to see in what sense it is really a treaty.
In his note of January 7 to Japan Secretary Stimson not only
calls the Pact of Paris a treaty, but uses an expression that seems
to imply that it confers tangible rights. The last sentence reads
"it (the American Government) does not intend to recognize
any situation, treaty or agreement which may be brought about
by means contrary to the covenants and obligations of the Pact
of Paris of August 27, 1928, to which Treaty both China and
Japan, as well as the United States, are parties." In the reply of
January i6 Japan sweeps it aside by the remark that, although
this might be the subject of an academic doubt, "as Japan has
no intention of adopting improper means, that question does
not practically arise."
However this may be, Secretary Stimson's statement is an in-
teresting one. It seems to mean that if the present trouble should
end by an agreement whereby China should cede to Japan any
rights in Manchuria, the United States, Russia or any other signa-
tory would have a right under the Pact to disregard them, if in its
opinion they were acquired by other than pacific means. If this
means that a signatory may intervene when the cession is made, and
insist that it be modified, that has been done in the past and does
not require the Pact of Paris. It was done by the Congress of Ber-
lin in 1878. It has been done twice with Japan, first when she was
made to yield the Liaotung peninsula in 1895, and again when the
United States caused her to reduce her twenty-one demands in
1915. But if it means that ahy signatory of the Pact has a right at
any future time to refuse to recognize the provisions of a treaty so
made, the question is much more serious. Of course, to do so
would be a certain cause of friction, highly likely to produce an
extremely dangerous situation. Suppose, for example, as is not
improbable, that China should feel compelled to cede, not the
sovereignty, but the control and administration of all Southern
Manchuria, and that our merchants, supported by our govern-
ment, should pay no attention to Japanese officials and customs
duties, how long would peace last? Yet if we do not do this we are
recognizing a condition brought about by means which Mr. Stim-
son's note implies would, in the event supposed, be contrary to the
covenants and obligations of the Pact of Paris.
 FOREIGN AFFAIRS
Of course the Pact is not retroactive. If it were, our title to
California, part of Arizona and New Mexico, to the Philippines
and Porto Rico would be without international recognition.
But for the future, unless wars are to cease entirely or are to be
followed by no changes of territory, the Pact of Paris, with an
interpretation whereby the signatories are under no obligation
to prevent war, yet are at liberty to disregard its results, might
well create more causes of strife than it would allay. It would
signify that any nation could repudiate its treaties, and disregard
those made by others, on the ground of duress. Now the object
of international law is to make the rights of nations certain, not
to unsettle them; if a wrong has been done to correct it at once,
not to leave it as a festering sore for any nation to probe there-
after, or as an excuse for action that would otherwise be without
justification. One of the worst international evils is the existence
of indefinite claims that can be used on convenient occasions.
Our government will not go to war, and unless under great prov-
ocation will not suspend commercial intercourse, as Japan
knows full well; but while using whatever pacific pressure it can
to obtain a fair settlement, it must ultimately recognize the situa-
tion that develops; and, if so, is it not wise to make clear that we
do not claim an interpretation of the Pact that, if generally ac-
cepted, might make the relation of states more uncertain, more
full of danger than if the Pact had been unsigned?
 AFTER THE INDIAN CONFERENCE
By the Marquess of Zetland
HE second session of the Indian Round Table Conference
was held in London during the autumn of 1931. In bring-
ing its proceedings to a close on December i, the Prime
Minister summed up the work done and made a declaration of
policy on behalf of the National Government which had been
returned to power with an immense majority at the October
elections. Earlier in the year, at the conclusion of the first session
of the Conference in January, Mr. MacDonald had made a
statement of policy on behalf of the Labor Government of which
he was then the head. The outstanding feature of the policy which
he had then outlined had been his Government's acceptance of
the principle that responsibility for the government of India
should be transferred from Parliament at Westminster to Indian
Legislatures; in other words the goal in view was a parliamentary
government modeled as closely as circumstances would permit on
the British system. So far as structure was concerned, the immense
size of India and the existence of huge administrative units in the
shape of the Provinces of British India, to say nothing of the Native
States, pointed clearly to a constitution of a Federal type.
Mr. MacDonald had made it clear that the goal was not to be
reached in a single stride. The new Constitution was to contain
such provisions as might be found necessary to guarantee, during
a period of transition, the observance of certain obligations rest-
ing upon Great Britain as the custodian of the interests of the
Indian peoples, and it was to confer upon the Viceroy such pow-
ers as might be necessary to enable him to afford minorities pro-
tection for their political liberties and rights. Moreover, for an
unspecified period certain portfolios were to remain outside the
control of the Indian Legislature, notably those of Defense and
External Affairs, while in regard to Finance such conditions were
to apply as would insure fulfilment of the obligations incurred
under the authority of the Secretary of State at Whitehall and the
maintenance unimpaired of India's financial stability and credit.
Mr. MacDonald had added that in such statutory safeguards as
might be devised for meeting the needs of the transitional period,
it would be the primary concern of His Majesty's Government to
see that the reserved powers were so framed and exercised as not
370 FOREIGN AFFAIRS
to prejudice the advance of India through the new Constitution
to full responsibility for her own government.
The statement with which Mr. MacDonald brought the second
session of the Conference to a close was remarkable not so much
for any new contribution towards the solution of the problem, as for
the emphatic reaffirmation which it contained of the policy laid
down in his earlier pronouncement. In January 1931 Mr. Mac-
Donald had spoken as the head of a minority Government which
depended for its existence in the House of Commons upon the
complaisance of its poli:ical opponents. And though the Con-
servative delegates at the Round Table Conference had given
conditional support to the policy then laid down, they had done
so with some hesitation, while it was notorious that a section of
the Conservative Party, both in the House of Commons and in
the constituencies, was definitely opposed to so rapid an advance.
By December 1931 the scene had undergone a dramatic change.
Mr. MacDonald now faced the Conference not as the head of a
minority Government, but as the leader of a Government re-
flecting to a unique degree the will of the nation - a Government
supported by the whole of the Conservative Party, the greater
part of the Liberal Party and that section of the Labor Party
which, under the leadership of Mr. MacDonald himself, Mr.
Thomas and Mr. Snowden, had to its credit put country before
party and given its support to the National program. In these
altered circumstances the real significance of the declaration of
December i lay in the Prime Minister's announcement of the
acceptance by the National Government of the policy laid down
in his earlier pronouncement. In particular, it was'explained,
the Government desired to reaffirm their belief in an all-India
Federation as offering the only hopeful solution of India's con-
stitutional problem. "They intend to pursue this plan unswerv-
ingly," Mr. MacDonald asserted, "and to do their utmost to
surmount the difficulties which now stand in the way of its
realization;" and he added that in order to give his declaration
of policy the fullest possible authority, it would be circulated as a
White Paper to both Houses of Parliament, whose approval
would be sought forthwith.
When early in December the matter was submitted to Parlia-
ment, a plea for caution was put forward in both Houses, and, as
was to be expected in the case of a Chamber numbering among
its members many persons with personal experience of adminis-
 AFTER THE INDIAN CONFERENCE 371
tration in India, with greater force and with a larger measure of
support in the Upper than in the Lower House; but at the end of
a three-day debate, maintained at a high level throughout, the
Government were authorized to proceed with their policy by a
majority of io6 to S8. In the House of Commons approval had
already been given by a majority of 369 to 43. The policy thus
received in striking manner the endorsement of Parliament ir-
respective of party and has thus become beyond all possibility
of challenge the policy of the nation.
It was not only in Great Britain that the scene had undergone
a transformation; between the first and second sessions of the
Conference equally striking changes had taken place in India.
The leaders of the Indian National Congress, the best organized
and the most powerful of the political parties in India, who had
rejected the offer to attend the first'session of the Round Table
Conference in 193o, had found it expedient to reconsider their
position in light of the results achieved at the conference table.
The Viceroy, Lord Irwin, quick to seize the opportunity which
had thus presented itself, had made a swift gesture by uncondi-
tionally releasing Mr. Gandhi and other leaders of the civil dis-
obedience movement from the prisons in which their defiance of
the law had landed them. His vision had been justified, for as the
result of prolonged and patient negotiation between him and Mr.
Gandhi a truce had been agreed to, the civil disobedience move-
ment had been called off, and an invitation to the Congress to
send representatives to the second session of the Round Table
Conference had been accepted.
So much for events in India. The stage was now cleared once
more at St. James's Palace in London where the management -
if the staff of the India Office on whose shoulders fell the task of
making the necessary arrangements may be so described -
awaited with interest and a good deal of curiosity the arrival of
the performers, with Mr. Gandhi, Pandit Madan Mohan Mala-
viya and Mrs. Sarojini Naidu as new and unpredictable stars in
the cast. What would be the attitude of such uncompromising
advocates of Indian independence at a conference table at which,
as was obvious in view of the decisions already reached, a not
unimportant subject of discussion would be the nature and scope
of the limitations to be imposed upon the autonomy of the Indian
Legislature under the Act by which Parliament was to confer
self-government upon India?
 FOREIGN AFFAIRS
The session was certainly not lacking in dramatic quality.
There were at times emotional passages between delegates repre-
senting different points of view, periods of tension in an atmos-
phere highly charged with explosive possibilities; but on the
whole those who looked for a spectacular drama on a grand scale
must have been disappointed. Generally speaking the proceed-
ings were carried through in a lower key than had been the case
during the earlier session. As was inevitable, the exhilarating
optimism which had been engendered by the discussion of ab-
stract principles tended to cool down when the practical difficul-
ties in the way of giving effect to them came under discussion.
The picture conjured up in the minds of many by the conception
of an all-India Federation, bringing into a single glittering edifice
the democratically governed Provinces of British India and the
autocratically governed territories of the Ruling Princes, had
been a pleasing one. Those who had planned it had seen, in
imagination, the immense and bewildering heterogeneities of the
Indian continent - those formidable and stubborn obstacles to
nationhood - vanishing under the magic dome of a political
edifice which was to defy the centrifugal tendencies inherent in
the circumstances and to give to India's many-tongued and
many-visaged peoples a hitherto unimagined measure of cohesion.
And only when the first flush of enthusiasm had died down, and
the various possible methods of applying the principle began to
claim attention, was it realized that there were likely to be draw-
backs as well as advantages attaching to the scheme. The number
of Ruling Princes present at the first session of the Conference,
though representing states of various types and of the first im-
portance, had necessarily been only a small proportion of the
whole; and it was not unnatural that some, at least, of those who
had not been present should view with apprehension the possible
consequences to their states of so rapid and so great a change.
Even in the ranks of those who had taken part in the delibera-
tions of the Conference a difference of opinion manifested itself;
thus a view departing widely from that provisionally accepted at
the Conference found a spokesman in His Highness the Maharaja
of Patiala, ruler of the largest of the Phulkian States, and himself
a recent Chancellor of the Chamber of Princes.
But the fundamental difficulty which presented itself at the
very beginning of the second session of the Conference was that
of finding a bridge across the gulf dividing the Moslems and the
 AFTER THE INDIAN CONFERENCE 373
Hindus. The Moslem delegates, fresh from contact with their
coreligionists in India, made it plain that until an agreement had
been reached securing to them the share in the future government
of the country to which they considered themselves entitled they
would not be prepared even to discuss the transfer of power to an
Indian Federal Legislature. And encouraged by the attitude of
the Moslem representatives, the Sikhs put forward claims af-
fecting their own future position in the Punjab, which it was
found impossible to reconcile with the claims of other interested
communities. Here, then, the Conference at last came to grips
with the bed-rock problem of Indian government - a problem
which has its roots deep down in history, one which has existed
throughout the British occupation -a source of danger and
often of serious disturbance, yet one which has not manifested
itself in more serious guise only because control has been in neu-
tral hands determined and able to hold the scales even between
the rival communities.
In an article written for the October 193o number of FOREIGN
AFFAIRS I made passing reference to the difficulties arising out of
Hindu-Moslem rivalry; but unless the nature of the gulf which
separates these two communities is fully understood, it is impos-
sible to appreciate the extent to which it acts as a block on the
road towards the goal which Great Britain and India alike are
striving to attain. Let us try to grasp it at least in its essentials.
The difference between Moslem and Hindu is riot only one of
religious belief and practice, for Islam like Hinduism stands for a
social system and a particular outlook upon life contrasting
sharply with that of the other community. While the caste system
of the Hindus is exclusive, the social organization of Islam is
communistic. Under the Hindu social system men are graded
minutely and segregated in an infinite number of water-tight
compartments; under Islam all men are equal. Hinduism is es-
sentially aristocratic; Islam is as emphatically democratic. An
outstanding feature of the Hindu caste system is the restriction
which it places on a man's freedom of choice in the matter of
marriage. He may not marry a woman of his own gotra; on the
other hand he must choose his wife from within his own sub-
caste. And if a man may not marry outside his own sub-caste still
less may he marry outside the Hindu community. Hence the
remarkable fact that though the Moslems have dwelt in India
for something like a thousand years, and now number some
374 FOREIGN AFFAIRS
8o,ooo,ooo, they remain a race apart and distinct from the Hindus
who form the bulk of the population.
The clash of religious thought and practice constitutes a
perennial source of trouble. The elastic polytheism of the Hindu
is aperpetual challenge to the austere monotheism of the Moslem,
so t at when a Hindu idol procession passes a mosque with drums
booming and pipes whistling it excites feelings which only too
often find expression in violence and bloodshed. On the other
hand, the Moslem is contemptuous of the Hindu's veneration
for the cow as a sacred animal, and since his own religious ob-
servances demand the slaughter of cattle he is equally guilty with
the Hindu of fanning into flame the smoldering embers of religious
passion. The archives of the Governments in India are choked
with records of communal strife. In February 1931 a band of
Hindu villagers brutally massacred eleven Moslems in a rural
district of the United Provinces. "'here was nothing modern nor
political in this crime," commented the members of a Commission
of Inquiry appointed a few weeks later to investigate a much
more serious outbreak at Cawnpore in the same province. "A
Moslem zamindar (landowner) senat a haunch of venison to a
tenant. Some Hindus said it was beef, not venison, and the
massacre of the Moslem inhabitants was the result."
Further, when endeavoring to understand the attitude of the
Moslems towards the political developments now in progress,
we must remember that they have been slower than their Hindu
rivals to take advantage of .the fcilities which have been pro-
vided under British rule for the acquisition of western education;
and that quite apart, therefore, from the handicap imposed upon
them by their numerical inferiority in any purely democratic
system of government, they are less well equipped than their
Hindu fellow citizens for achieving success in any contest in which
intellectual subtlety and familiarity with the theory and practice
of western democracy must necessarily play an important part.
Yet they are at the same time a people with many centuries of
history behind them and with race memories of the days when
the overlordship of India was theirs; a people conscious of the
proud part which their ancestors played upon a glittering stage
when or two centuries the great northern capitals of Delhi and
Agra were the seats of the resplendent courts of the famous
dynasty of the Moguls. And it is impossible to escape from the
conclusion that with the prospect of control passing gradually
 AFTER THE INDIAN CONFERENCE 375
from British hands to those of a Hindu majority in the future
Constitution, Moslem antagonism is being sharpened by Moslem
fears. The outbreak in Cawnpore in March 1931, referred to
above, was the direct outcome of the civil disobedience move-
ment, the Moslems of Cawnpore refusing to join the Hindus in
demonstrations ordered by the Congress on the occasion of the
execution of Bhagat Singh, a Punjabi revolutionary convicted of
the murder of a police officer and of waging war against the King-
Emperor. Members of the two communities quickly came into
collision and the early clashes, to quote the finding of the Com-
mission of Inquiry, "developed into a riot of unprecedented
violence and peculiar atrocity which spread with unexpected
rapidity through the whole city and even beyond it. Murders,
arson and looting were widespread for three days. . . . The loss
of life and property was great. The number of verified deaths
was 3oo, but the death roll is known to have been larger and was
probably between 400 and 500. A large number of temples and
mosques were desecrated or burnt or destroyed. .... "
More recently still, serious trouble has been experienced in
Kashmir, where the Moslem population has become restive un-
der the oppression, real or imaginary, of Hindu rule.
Here, in a nutshell, is the explanation of the Hindu-Moslem
problem, and it is obvious that with roots so deep no formula for
solving it which did not carry with it the convinced assent of
those concerned would be worth the paper on which it was writ-
ten. From the time, therefore, when the question first obtruded
itself upon the attention of the Conference, Mr. MacDonald
made it plain that it was one which Indians must settle for them-
selves. The first of the privileges and the burdens of a self-govern-
ing people was, he was at pains to point out, to agree how the
democratic principle was to be applied. Consequently, an attempt
to find a solution was made, and informal negotiations pro-
ceeded daily behind closed doors during the last days of Septem-
ber and the first days of October. Though Mr. Gandhi was
strongly opposed on principle to the demands of the Moslems for
separate communal electorates and for representation in the
Legislatures, both Provincial and Central, in excess of that to
which they would be entitled on a purely numerical basis, it is
possible that - unwilling as he was to demonstrate to the world
at large the hard reality of the communal problem, so often and so
conveniently attributed by Great Britain's enemies to a Machi-
376 FOREIGN AFFAIRS
avellian policy on her part of "divide and rule" - he might have
persuaded himself of the expediency of agreeing to them. But at
Mr. Gandhi's elbow, alert to detect and to quash any sign of
weakness on the part of his less orthodox fellow countryman,
stood Pandit Madan Mohan Malaviya, leader of the Hindu
Mahasabha - intellectually brilliant, soft-tongued and cour-
teous to a degree, but in his championship of Hindu orthodoxy,
adamant. A striking figure this -- slim, white-robed, of quiet
demeanor, yet an orator capable of passionate flights; a man who
for fifty years has maintained himself in the forefront of Indian
public life; for a decade or more Vice-Chancellor of the Hindu
University at holy Benares; twice President of the Indian Na-
tional Congress. There was little chance, indeed, that the Moslem
view would be accepted by this doughty upholder in its integrity
of the ancient tradition of the caste Hindus.
A meeting of the Committee of the Conference charged with
the duty of dealing with the Minorities question was called for
October 8. The main item of business on the agenda paper was to
receive a report by those who had been engaged in the informal
negotiations for a settlement of the Minorities problem. The
meeting provided one of the dramatic episodes of the session. The
Committee sat in one of the smaller rooms allotted to the
Conference in St. James's Palace. The whole of the seating accom-
modation at the table was occupied by members of the Commit-
tee; other delegates and the officials in attendance crowded the
floor space along the walls. A hushed silence fell as the Prime
Minister took his seat and called on Mr. Gandhi to make his
report. Every eye was turned on the small figure swathed in
many folds of homespun cotton cloth, seated immediately to
the left of the chair. With his accustomed slow delivery and
meticulous pronunciation of every syllable, Mr. Gandhi made
his eagerly awaited statement. It was with feelings "of shame and
of humiliation," he said, that he had to announce that they had
failed to reach agreement.
Subsequent attempts to find a way out of the impasse were suc-
cessful only to this extent, that the Moslems and most of the
other Minorities reached agreement amongst themselves as to
the nature of the protection to be afforded to them; but the main
question remained unsolved, neither the Moslems nor the Sikhs
nor the Hindus being able to compose their differences. This
failure necessarily robbed the remaining sittings of much of their
 AFTER THE INDIAN CONFERENCE 377
interest; for though progress was made with the consideration
of the methods by which effect might be given to the decision to
set up an all-India Federation, the Moslem delegates sat silent
spectators of the proceedings, refusing to discuss the details of a
constitution in which, in the absence of a satisfactory settlement
of their claims, they declared themselves unable to take a share.
Fresh interest was aroused in the final sitting of the session by
curiosity as to the nature of the statement which, in those cir-
cumstances, the Prime Minister would make on behalf of the
Government. The sitting began at 10.30 on the morning of Mon-
day, November 30, and once more a spirit of drama descended
on the Conference chamber. On the left of the Prime Minister
sat Mrs. Sarojini Naidu, poetess, patriot and politician, an im-
pressive figure in the ample folds of her national costume, the
gleam of her dark eyes telling of the fires that burned within. On
her left was the almost huddled figure of Mr. Gandhi and beyond
him again Pandit Madan Mohan Malaviya and other members
of the various sections of the Hindu community. On the right
of the Prime Minister were the members of the British delegation
and beyond them again the Ruling Princes. Facing the chair,
seated at the inner lap of the huge oblong table, were Dr. Ambed-
kar, the chief spokesman of the Depressed Classes; Mr. Joshi, the
thoroughgoing champion of Indian labor and ardent advocate of
adult suffrage for the three hundred and fifty millions of the
Indian continent; Sir Hubert Carr, the leading spokesman of
the British mercantile community; and the representatives of
other minorities. Behind them again at the outer ring of the table
sat the representatives of the eighty million Moslems under the
leadership of His Highness the Aga Khan.
It happened to be Mr. Gandhi's weekly day of silence, and as
speaker after speaker rose to deliver his final speech the Congress
representative sat brooding at the table, a mute, intractable and
enigmatic figure. The day wore slowly on towards its close and at
length, a little after midnight, his period of silence over, Mr.
Gandhi addressed the Conference. It was a mischievously pessi-
mistic utterance shot through with bitterness and devoid of con-
structive suggestion of any sort; and had the Conference closed
then it would have done so on a note of unrelieved, though
happily wholly unjustifiable, gloom. But a complete change was
wrought in the heavy atmosphere by a speech which must be
accorded a high place in the great oratorical efforts of mankind.
378 FOREIGN AFFAIRS
For after Pandit Madan Mohan Malaviya had spoken there rose
from the end of the table the long-robed figure of Mr. Srinivasa
Sastri, a man who through twenty years of chequered Indian
history has played with singular success the part of Elisha to the
Elijah of the late Mr. G. K. Gokhale. The peculiarly appealing
voice which Mr. Sastri knows so well how to 6mploy, rang with
the cadence of a silver bell through the night. His courteous but
none the less emphatic rebuke of Mr. Gandhi for his bitterness,
and his inspiring profession of faith in the future, dispelled as if
by magic the clouds which had descended upon the closing stages
of the Conference.
After an adjournment at 2 a. in. the delegates reassembled on
the morning of December i to listen to the statement by the
Prime Minister which has been described at the beginning of this
article. So far as the communal deadlock was concerned, Mr.
MacDonald expressed the hope that a solution might yet be
found by Indians themselves; but failing that, His Majesty's
Government would be compelled to apply a provisional scheme of
their own. He did not attempt to disguise from them the unsatis-
factory nature of any such procedure: "This would mean," he
said, "that H. M. Government would have to settle for you, not
only your problems of representation, but also to decide as wisely
and justly as possible what checks and balances the Constitution
is to contain to protect minorities from an unrestricted and tyran-
nical use of the democratic principle expressing itself solely
through majority power."
With the close of the session, interest shifted once more from
London to Delhi and Calcutta; and we must now glance at devel-
opments there. While the delegates from India had been engaged
at the Conference table, the hot-blooded members of the more
extreme section of the Indian National Congress had been view-
ing events with growing impatience. There were among them
men who had always regarded with distaste the method of con-
stitutional negotiation -men imbued with that false pride of
race which causes them to mistake hatred of other peoples for
love of their own; and when the economic distress arising out of
world-wide causes became acute in parts of rural India, the
temptation to take advantage of it proved too great for them.
Contrary both to the spirit and the letter of the truce signed by
Lord Irwin and Mr. Gandhi, they threw themselves into a no-rent
and no-tax campaign, concentraoting upon certain districts in the
 AFTER THE INDIAN CONFERENCE
United Provinces. Concurrently with these activities was to be
observed an alarming recrudescence of the terrorist movement
in various parts of India and notably in Bengal. The most revolt-
ing of the outrages perpetrated by members of the Bengal secret
societies was the treacherous and cold-blooded murder of an
English magistrate on December 14 by two Bengali girls in their
'teens, armed with pistols. But this was only the latest of a for-
midable series of outrages. Earlier in the year an English judge
had been murdered in the broad light of day while at work in his
court in Calcutta, this crime following at an interval of a week
only an attempt to assassinate Sir E. Hotson, the acting Governor
of Bombay. During the previous year the Inspector General of
Police and the Inspector General of Prisons in Bengal had both
lost their lives at the hands of the assassins and an attempt had
been made on the life of Sir G. de Montmorency, the Governor of
the Punjab. These are but examples of the murders, and at-
tempted murders, which marked the months during which the
Round Table Conference was at work. And while these events
were taking place in the interior, the organization known as the
Red Shirts, inspired by agents of the Indian National Congress,
was causing serious apprehension by its seditious activities on
the Northwest Frontier.
Against these various subversive movements, swelling in vol-
ume and increasing in violence as the days went by, the Govern-
ment found themselves obliged to take drastic action; for no
Government, unless intent on abdicating, can sit with folded
hands while its agents are assassinated, its lawful dues withheld,
its authority disregarded and its laws defied. Toward the end
of the year 1931, therefore, the Viceroy issued various ordinances
conferring upon the Executives in the Provinces the additional
powers which experience had shown were necessary to enable
them to cope with the particular forms of seditious activity with
which they found themselves confronted.
This, then, was the situation when Mr. Gandhi and other
delegates to the Indian Round Table Conference returned to
India early in the present year. It may be that Mr. Gandhi on his
return found the left wing of the Congress out of hand and de-
cided that it was better to swim with the current than to admit
his inability to control it. Yet those who had watched him closely
during the closing stages of the second session of the Round Table
Conference experienced no surprise when he crossed the Rubicon
380 FOREIGN AFFAIRS

and threw down his challenge to the Government once more.

Mr. MacDonald's speech when bringing the Conference to a close
had been a straightforward and wholly unambiguous statement;
not so Mr. Gandhi's reception of it. He would refrain from ex-
pressing any opinion upon it, he said, but would search for "the
hidden meaning" underlying it; and those who were familiar
with his peculiarly unstable temperament had little doubt that
he was already contemplating a return to the barren wilderness of
non-co6peration. At any rate, seizing as his excuse Lord Willing-
don's very natural refusal to discass with him the propriety of the
measures which he had been obliged to take to safeguard the
lives of his officials and the tranquillity of the realm, Mr. Gandhi
denounced the truce and called for a renewal of civil disobedience.
How was such a situation to be met? I make no apology for
repeating the view which I expressed when Mr. Gandhi launched
his civil disobedience movement in 193o. The duty of the Govern-
ment, I then urged, was to go forward steadily and firmly on the
path which had been marked out, i.e., on the path of constitu-
tional reform, turning neither to the right hand nor to the left;
neither allowing themselves to be stampeded by the violence of
agitation in India into making concessions which, upon a con-
sideration of all the factors in the case, were deemed to be too
great in the interests of the people of India themselves, nor, on the
other hand, refusing to make such concessions as the justice of
the case might demand. I added that if such a policy was to be
successfully pursued, the Government must make it clear that
they possessed both the will and the means to restore order and
to insure respect for the law.' That is the policy which is, in fact,
being pursued. It constitutes no departure on the part of Lord
Willingdon from the policy of his predecessor. Lord Irwin has,
indeed, made it known that hiS Government had matured their
plans for meeting just such a situation as has now arisen, and he
has stated that he cannot but suppose, had he still been Viceroy,
that he would have acted precisely as Lord Willingdon has done.
It remains only to point out, that in the pursuit of the con-
structive aspect of its policy the British Government have much
more than mere promises to show. At the request of the Round
Table Conference at its first session, two committees were set up
in India, one to examine the possibility, from a financial point of
view, of constituting a new province by separating Sind from
1Speech in the House of Lords, May 28, 193o.
 AFTER THE INDIAN CONFERENCE .381
Bombay, the other to draft a scheme for the establishment of a
military college for the training of Indian officers in India. Both
committees have completed their labors and issued their reports.
In accordance with the promise of the Prime Minister at the con-
clusion of the second session of the Conference, the status of a
Governor's Province has been conferred on the Northwest Fron-
tier; a register of electors is being prepared and arrangements
made for the election of members to the new Legislature in April.
At Delhi the Viceroy has summoned a consultative committee of
delegates to the Round Table Conference, while three other
Committees presided over by English public men have, reached
India and are at work on tasks delegated to them by the Con-
ference. These tasks are the consideration of the franchise to be
adopted under the new Constitution, and the investigation of
different aspects of the financial problem involved in the forma-
tion of a Federation of entities differing so widely in their political
constitution as the Provinces of British India and the Native
States.
Thus we see in full swing the dual policy of enforcing respect
for law while at the same time taking all possible steps to expedite
the solution of the many subsidiary problems which present
themselves both to the architect and to the builder of so vast an
edifice as an all-India Federation. Emerson found the Englishman
to be him of all men who stood firmest in his shoes; "he has
stamina," he wrote, "and can take the initiative in emergencies."
It is a display of these two capacities that is called for in India
today; and it is in the Englishman's continued possession of them
that rests the best hope for the Indian peoples in the critical years
that lie before them.
 HITLER: PHENOMENON AND PORTENT
By Paul Schefer
HE National Socialist Party came into being in Germany
eleven years ago, founded by a group of seven men. Adolf
Hitler was. the seventh to join. He was soon, however, "the
man" in the group; and so he is today in the party numbering
millions of adherents which is often designated by his name.
There may be cleverer, bet:er educated, more energetic individuals
in the party than he. All the same, "the Nazis" and "Hitler's
Party" are synonymous :erms. The party, such as it is, exists
because there has been a man like Hitler for it to gather around,
a man of a definite driving: force that is powerful and contagious;
an electric person whose appeal is irresistible.
I have used the word party as the term readiest to hand.
It is not, however, a ca:se of Hitler's having added just one
more parliamentary machine to the many - the far too many
- which figure in German political life. Here is a movement
nourished on a variety of social, moral and economic forces and
which has hardly reached the political stage in its evolution.
For this very reason Hitler's party is as intolerant as any young
movement can be. It has as yet no definite program, nor as yet
any definite support which it can use to bargain with other
parties and measure its pretensions with reference to what it
.can actually obtain. In a word, the Hitler movement has not
yet assumed its rational physiognomy. The currents of feeling
which it expresses lie deep down in German life. They have still
to come to practical expression.
As always happens in such cases, there is no way of knowing
whether the party can ever take on full status as a party. We do
not know whether its leaders feel certain that it can. We are not
even sure whether Hitler in his secret heart is free from doubts,
whether, out of the inner aspirations, the chemically pure ideals,
which his following shares with him - out of so much still fluid
metal - he can forge a wea on of steel adapted to practical
politics. We do not know whet er at bottom he is a "strong man.
It is difficult for traditional democracies to picture embry-
onic political movements of the Hitler type in their beginnings.
But no less idealistic, no less utopian, were the beginnings of the
Communist movement in Russia. That movement, too, started
 HITLER: PHENOMENON AND PORTENT 383
with a few individuals of glowing convictions and extremist aims.
Did not Italian Fascism likewise begin with a few persons of
strong but vague aspirations -vague so far as any application of
them to practical life was concerned? And did not those petty
groups enlarge suddenly into big organizations? As late as 1927
the Fascist Minister of Justice, Signor Rocco, remarked to the
author of this article that the theory and the general program
of Fascism would have to evolve out of an actual struggle
with realities; that the Fascist movement did not derive from
a program, nor was it being guided by one; that the program
would be supplied by the march of events. In Fascism, accord-
ingly, the prime factor has been something altogether subjective,
a driving force that does not know precisely where it is headed,
but which, wherever it is, will be sure of itself. Mussolini has
been a statesman and not merely a stirrer of emotions. The
dynamic elements which he crystallized, he soon pressed into the
service of very definite aims - and that was the case with Lenin,
too. The leaders of the National Socialists in Germany admit, in
thoughtful moments, that'for "ten years or so" they will make
mistakes, even bad ones. But the success of their Bolshevist and
Fascist predecessors inclines them to view that prospect with
calm. Those who consider the Hitler movement from a detached
standpoint -indifferently, maybe, or even with sympathy or
hostility - should not beguile themselves with the onsideration
that it is "utopian," or that "it has no fixed program," or that its
concrete demands are "nonsensical." In the party's present stage
of development its demands are more safely to be regarded as
symbols, as signboards indicating a eneral direction, but saying
nothing as to what will be found at the end of the road. It is true,
of course, that these symbols represent in large part real things,
existing institutions, other facts, against which National Social-
ism is making radical protest. The danger lurking in the situation
is therefore enormous. Irreparable havoc may be wrought in
Germany if the movement grows in power without maturing
correspondingly in its thought. Soviet Russia has been through
just that experience - and its leaders as well. It is all the more
important, therefore, to appraise the Hitler movement as the
thing that it really is today, and to understand its true meaning.

Hitler is the most successful orator that Germany has ever

possessed. It is a striking fact that the spoken word should be
384 FOREIGN AFFAIRS
exerting such a strong influence at the present moment in Ger-
man history. The Germans are a people of books, not of audi-
toriums. It is an interesting and a stirring experience to listen to
Hitler - his bitterest enemies have often fallen under his spell.
And it is very instructive t~o examine his audiences. The hall where
he is to speak often closes its doors an hour before the meeting is
scheduled to begin because it is already filled to overflowing.
One always sees a clean, neatly-dressed crowd with faces that
betray intellectual pursuits of one kind or another: clerks, pro-
fessors, engineers, school, teachers, students, civil service em-
ployees. These audiences are preoccupied, chary of words, quiet.
Their faces are tense, often drawn. The only bustle in the room
will come from the "hall guards," a typical product of these new
times - rough young fellows - the Sturm Abteilungen, or "shock
troops." The predominant element in the picture is what is so
aptly described in Germany as the "de-classed" middle class:
creatures visibly down at the heel, spiritually crushed in the
struggle with everyday reality, distraught under a perpetual
worry about the indispensable necessaries of life. One notes
many young people among them. All in all, it is an exceedingly
variegated mixture of types from the past, from the present, and
one might almost say from the future of Germany: it is that
famous "brew" into which Germany, once so stably articulated
in her classes and callings, has dissolved during these past ten
years as a result of economic disaster, unemployment and shifts
in power. They are all people who have had conceptions of life,
and conceptions of their personal roles in life, with which their
present situation stands in violent contrast. Often they are people
who have been pushed aside, people who have not been admitted
to German life under pregent-day conditions. The proletariat,
the working man, has on the whole bettered his financial situa-
tion under the Republic; whereas the middle strata of society have
had to lower their standard of living to an incredible minimum.
Even if the observer had never heard of Hitler's program he
might guess what this depressing assemblage of people is waiting
for. It is waiting for a gospel, a message, a Word that will release
it from the pinch of wan:, something that will compensate for the
unbearable limitations of its present mode of existence. It wants to
get hold of an ideal that will guide it forth from the quagmire
where it finds itself. It wants to hear an assurance that it is en-
titled to a place in this new world. The man who can lift these
 HITLER: PHENOMENON AND PORTENT 385
eople from their depression of spirit even for the space of an
our can win them to himself and to the cause that he tells them
represents the substance of "liberation." A situation for a great
orator! A great situation for an orator!
Hitler's adversaries are right in charging that such an audi-
ence can easily be misused. Hitler's utterances on the subject of
propaganda, both from the platform and in print, show in fact
that he is willing to use any means which he judges serviceable
in winning adherents to his cause. He fans the flames of hatred
just as unscrupulously as he arouses the most exaggerated hopes.
However, let us keep to his audiences. What is it that stirs
them? What keys can Hitler strike with such effect that he can
drag millions of people whithersoever he chooses?
Fundamentally it is a question of the hard times which have
settled over Germany ever since the war. Great fortunes have
come into being, though they are probably more apparent than
real. Meantime, statistics show that as regards the middle classes,
which used to be Germany's backbone, the standard of living is
far below the pre-war level. Since 1929 it has sunk to unprece-
dented depths. Hitler turns his guns against those people who
have increased their fortunes disproportionately to the general
average of wealth accumulation in Germany, and especially
against the anonymous wealth of the trusts - "coupon slavery."
He attacks reparations which are sapping the life-blood of Ger-
many. All this is well known abroad.
Hitler berates "Marxism," denounces and vilifies it. In this lies
a very instructive portion of his propaganda and of his fanaticism.
Unquestionably it is his most emphatic theme. The people before
him are Germans. Can they, as Germans, consent that a large
number of their fellow-citizens, the industrial workers, should be
taught that in the last analysis they are more closely bound up
with the working classes in other lands than with their own
countrymen who do not happen to be "proletarians?" The people
who are sitting in front of Hitler have, for the most part, sunk
below the standard of living of a German workingman with a job.
As for some of the others, there is only a slight difference between
their income and the wages of a workingman. For all that,
they do not think of themselves as proletarians. That they do is
one of Moscow's illusions. Quite the contrary! On that very ac-
count they insist that they prefer to live in a state that is not
governed by workpeople, a state that knows no discriminations
386 FOREIGN AFFAIRS
of class - not a state according to the ideals which Marx set up
for his state of workingmen, where the proletariat hold the power
and set the tone. On just such grounds they want to be "na-
tional." From just such feelings nationalism has taken on a new
meaning and impetus, not only in Germany, but in Italy and
other countries.
To the same extent these people feel strangers to the "forces of
wealth." They have nothing -just as the working classes have
nothing. Hence the surprising mixture of concepts apparent in
the baroque expression, "National Socialism." The effects of the
capitalist system also weigh down upon them. They hate "the
plutocrats." Their battle cry is about what they call the "Jewish
financial tyranny," an artificial scarecrow, devised ad hoc, and
aimed at one individual or another. Propaganda requires such
things.
Hitler proclaims that a German today cannot properly say
"we Germans." The "we" has no meaning. Marxism says "we,"
but it knows a different kind of "we." And is not capitalism
international, after its fashion? Germany must become one again.
Germany needs to become one again in order to be "free" again.
She will be "free" again when she is again respected abroad!
All this, as is apparent, is held together by very simple stress on
German homogeneity, on things that seem self-evident. But in
the impoverished and "enslaved" Germany of the present
"the program" must prevail absolutely, actively, as the highest
expression of the country's life.
In this clamor for unity, for unification, there is something
that is never put clearly into words but which is nevertheless
playing an important part. It is a problem of German "culture."
Hitler storms at the "intellectuals." He is forever crying alarm
against their conception of the world. The best educated people
in Germany are indifferent to the national interest- and the
word for "interest" - "be/ange" - is a new German term taken
over to replace the Latin word. They have an international out-
look. They do not "think German."
In Germany, as everywhere else, there are great differences in
degrees of popular education; but such differences have greater
social significance in Germany than in other countries. They
create sharper distinctions between one individual and another.
Hitler is against all that. He is fighting for the right of the half-
educated to their own picture of the world, to a culture which is
 HITLER: PHENOMENON AND PORTENT 387
illumined by love of country. He shouts at the university students
that they are not worthy of pursuing their scholarly studies if
they cannot find a common ground with the mechanic who is
intent on serving his country. Hitler takes into account the reac-
tion of the moderately educated but thinking person to the
superiority of those who are highly educated, a reaction that is
not without its resentments. Hitler himself is a self-educated
person, a thorough-going "autodidact," and he has read in many
directions. In his eyes the essential thing is not high intellectual
finish, but active love of country and mutual understanding
among all. Germany, with a huge intellectual proletariat, which
in many cases does not come up to the older standards of educa-
tion, really finds herself in an educational crisis. Hitler's idea is to
give the people a common meeting ground of convictions which
abolish all distinctions and in which all share. Cultural differences
must yield to patriotic sentiments, not result in divisions between
individuals and classes. This expresses itself in attacks on the
intellectuals whom the plain man least understands.
What unites all of Hitler's listeners is a feeling of humiliation,
of injured self-respect. This comes into play in many directions,
economic, social, cultural. And even diplomatic! For it is a quite
natural thing that all these feelings of hurt should gather and
precipitate about the r6le which Germany has been playing in the
world since Versailles. While, with some undulations, the inter-
national position of Germany has been improving, this relative
increase in her prestige has made no great impression on the
German masses. Discriminations against Germany within the
world of nations have, on the other hand, been generally noticed
by the plain people. By dint of careful nursing, the notion of
reparations has been transmuted into the notionof "payments
of tribute;" and economic distress has found in reparations an
explanation that is clear and convincing to everybody. The
same is true of social unrest. The people who sit before Hitler
have in their minds a very clear picture of the forces that are
determining their present situation, and it is not difficult to carry
them on to the corollaries. Hitler can lay hold on them in their
innermost sensibilities when he raises his cry for unity, promises
them the "respect" of the world as the fruit of unity, and tells
them that Germany can have no foreign policy - on this theme
he harps in every conceivable connection -until she has made
hersel one. No party in Germany has a formula so simple. No
388 FOREIGN AFFAIRS
party has gone to the trouble of understanding this particular
class of people as Hitler has done. That is why he has suc-
ceeded in leading such an astonishing following whithersoever
he will.
The foregoing will perhaps help one to understand the simple
primitive impulses on which Hitler continually plays in order to
draw the masses to him. One may find them understandable, and
even see in them much that is constructive for the preservation of
Germany. But a person may well be shocked at the expression
which Hitler and his people have given to the forces which they
have mobilized, and wince at the anti-Semitism and the chauvin-
ism which he is ever stirring up with such reckless skill.
It is important here to distinguish between the propagandist
aspect of the Hitler movement and its realistic political aspect.
On the one side it is devoted wholly to the acquisition of power,
and so drives unscrupulously ahead as all such movements do.
On the other side it gas to consider the exercise of power, or at
least preparations for such exercise. What National Socialism,
once in power, will become under the pressure of adverse con-
ditions, under the influence Of the German temperament which
is by nature disinclined to extremes, is the real question - a
question not answerable today, but which the student of foreign
affairs must consider quite apart from watchwords of the moment.
It is evident that Hitler himself is impressed by the fact that
his movement is predominantly of an emotional character and is
held together by sentiment. His movement lives in opposition and
on opposition. How will it act when it is called upon to deal with
the tremendously difficult concrete problems which confront
Germany both at home and abroad? Can the movement be
carried over into practical politics?
It is striking, in this connection, that recently Hitler and his
entourage have declared that members of the National Socialist
Party are to occupy no public offices in "the Third Reich." In
"the Third Reich," the party would be just a power station for
driving the state machine. In "the Brown House" in Munich,
the headquarters of the party, many specialists of varying politi-
cal complexions are at work on ways and means for dealing with
concrete economic problems, and other sorts of questions. Hitler,
furthermore,- has recently been making connections with in-
dividuals of importance in the business world. The cabinet in
 HITLER: PHENOMENON AND PORTENT 389

"the Third Reich" is to be a cabinet of experts. Inside the party,

meantime, there is not a little quiet criticism of many deputies
who were most unexpectedly swept into the Reichstag by the
surprising triumph at the last elections. They now are not ex-
perienced, not competent, enough. They were good enough to
run, but not good enough to be elected! The party leaders are
well aware of all this. In Russia and Italy "the party" stands as a
general directorate behind the administration, but it has also
taken over high positions in the state. Hitler will have none of
that. Efficiency is to be rewarded with tolerance. Even a Jewish
minister of finance - the thing has actually been said - is not
beyond the range of possibility. As regards anti-Semitism, there
are proofs that in matters political Hitler recognizes not only the
absolute, but also the relative! In practical terms, trouble will be
made only for the "immigrant Jew" who has not "fitted himself
in."
Little by little, too, it will be made clear to the masses standing
behind Hitler that the movement cannot become active in foreign
policy until it has attained its domestic goals. Hitler's emissaries
went to Geneva with instructions to state to the French that
Hitler "afterwards as now" will "regard a rapprochement be-
tween France and Germany as absolutely essential." That shows
apoint which this article set out to show: how plastic the notions
of the National Socialist leadership can be. On January 26,
behind closed doors but watched attentively by all the nation,
Hitler made a speech before representatives of the Manufacturers'
Club at Duisseldorf. The audience, made up of people who were
eager for a glance at the dangerous demagogue, was in large part
hostile. But he enjoyed a complete success. He was in a position to
say things which worked just as effectively upon that select audi-
ence as upon the crowds of six thousand that flock to the Tennis
Hall in Berlin. And that shows how elastic are the possibilities
of the movement in its present stage of development. One may
add, also, that it shows its political vagueness. But there is noth-
ing vague about the millions of followers. They are formidably
real; and it would hardly be sound statesmanship to ignore them.
Chancellor Brilning has had three interviews with Hitler
since September 193 o . The last took place in the full limelight of
public attention and public curiosity. Dr. Brilning is one of the
most significant statesmen that Germany has had in the last
hundred years. He is no less a patriot than Hitler; and he has
390 FOREIGN AFFAIRS
an iron nerve with which Hitler is far from being blessed. He has a
crystal-clear picture of the German life about him. It is incon-
ceivable that the significance of such a movement as Hitler's has
escaped Dr. Briining. The contacts with Hitler did not lead to
any common understanding - on good grounds, so far as Briin-
ing is concerned: he is responsible for the stability of a most com-
plex Germany, a Germany that is rapidly nearing a new economic
crisis and is holding her balance only with the greatest effort.
National Socialism is not, as the French say, "ministrable."
It has not worked itself up to the point where it can be given a
diploma in politics. It is torn within by conflicting currents. It
has a half-Communist wing; it is quarreling over the question of
participation in parliament, and over the question of the national
Presidency; its leaders are not sure of their following, nor are they
in agreement among themselves - their common basis is propa-
ganda, rather than anything else. Hitler and his associates are
striving to give a body to this young and obstreperous soul.
That is Hitler's problem in particular; and to such an extent that
many say he is afraid to assume power.
But to get hold of the energies that are expressed inNational
Socialism, and to use them, is also the problem of the men who are
keeping Germany alive today - business leaders, the Govern-
ment, everyone, in short, who represents tradition in German
achievement. The surprising triumph of National Socialism at
the polls has slowly awakened the routine parties to the issue. It
has revealed to them a grand political task, on the performance of
which the very existence of Germany may depend.
Let us imagine that the millions of German citizens who are
today following Hitler prove to be disappointed. In that case no
patriotic movement could have any chance in Germany for a long
time. Economic distress and social unrest would then destroy the
foundations of present-day Germany. The bourgeois Germany of
moderate views - and the Social Democracy must stand with
that Germany- is confronted with a technical problem. It has
a gasoline tank before it. The tank may explode, with disastrous
effects upon the whole country. But the tank also contains
riches which may be cleverly used to drive many a profitable
machine. Such is the alternative which the patriotic movement,
born of unprecedented conditions, sets before the German people.
 TRADE, TARIFFS, THE DEPRESSION
By Percy Wells Bidwell
N OTHING in recent history has so strikingly emphasized
the need for international codperation in the economic
I field as the business depression which now for over two
years has weighed down upon the world. The central banks have
taken the lead in devising emergency measures to prevent the
collapse of currencies, and the Bank for International Settlements
offers great possibilities for permanent financial collaboration.
But the co6perative spirit which dire necessity has forced
the governments of the great lending nations to display in
the field of international finance finds as yet no counterpart
in a field of co6rdinate importance, that of international trade.
On the contrary, instead of inducing co6peration in commercial
relations the depression has revived nationalism in its most ag-
ressive form. Tendencies toward lowering tariff barriers have
een stifled. Tariffs have been raised, new duties imposed, ob-
noxious restrictions revived and new devices invented for ham-
pering the flow of goods from one country to another. And thus
the depression has been deepened and prolonged. For tariffs are
not only results of the depression; they are also among its causes.
The collapse in international trade during the past two years
finds no parallel in the annals of modern business. For the fiscal
year I93I the export trade of 54 countries, representing over 90
percent of the world's total, was valued at 20.3 billions of dollars.
For 193o the value was 27.8 billions, and for 1929 it was 30.3
billions. In the two years the United States suffered a loss of 2.3
billions in its exports, amounting to 43 percent of their 1928-29
value. Eleven other important trading nations saw their sales cut
more than one-fourth. Taking the world as a whole, the fall in
exports (setting aside purely statistical differences) implies a
corresponding and equal change in imports.
The disappearance of IO billion dollars' worth of exports and
an equal value of import trade in a period of two years has
more significance than can easily be comprehended. Taken on a
value basis alone, the shrinkage in money turnover meant ruin
to a host of private business firms; it was responsible also for a
falling-off in customs revenues that embarrassed many govern-
ments. But it is in relation to balances of payments that changes
392 FOREIGN AFFAIRS
in the values of exports and imports find their chief, one might
almost say their tragic, significance. In these days of international
borrowing and lending there are debtor countries in all parts of
the world depending on a surplus in the value of merchandise
exports over imports to provide the foreign exchange necessary
for periodical interest payments. Their exports are chiefly food-
stuffs and raw materials,, commodities whose prices were first
affected by the crisis. The result has been a drastic shrinkage in
their trade balances. Six countries - Argentina, Australia,
Brazil, Canada, Chile and India - had a combined trade balance
of 274 million dollars on the credit side in the first quarter of
1928; their balance was 5I millions in the first quarter of 1931
but it was on the debit side. The resulting unfavorable rates of
exchange, with exports of gold, were responsible for still further
declines in export prices.
The quantitative changes in foreign trade owing to the world-
wide decline in prices have not been as great as the value figures
seem to indicate. Estimates for the United States, based on offi-
cial statistics, place the quantitative loss in imports in the fiscal
years from 1929 to 1931 at 19 percent and in exports at 31 percent.
A recent League of Nations publication, "Course and Phases of
the World Economic Depression," shows the changes in the vol-
ume of exports and imports of fifteen nations. Thirteen of the
fifteen imported a smaller quantity of goods in 1930 than in 1929,
and ten showed losses in exports. The losses in import trade
ranged from i to i9 percent and in export trade from 3 to 18
percent. These figures are confirmed by the comparison of weights
of merchandise imported and exported. Six countries - Ger-
many, France, Italy, Czechoslovakia, Japan and Brazil - im-
ported 89,938,000 tons of merchandise in 1929 and 76,214,000
tons in 1931; their exports in 1929 weighed 62,233,000 tons and
in 1931 only 52,976,ooo tons. It is this decline in actual volume
of goods moving across national frontiers which the student of in-
ternational trade finds of most significance. And it is in this respect
that the present disturbance is unique. Previous business crises
have indeed been accompanied by violent changes in the values
of exports anid imports but such changes were chiefly the reflection
of falling prices; the quantities exchanged fluctuated little. Profes-
sor Wagemann has shown that during the depression of the nineties
of the past century the volume of world trade dropped below the
long-time trend by only 7 percent, and in 1907 by about the same
 TRADE, TARIFFS, THE DEPRESSION 393
amount. Estimates on a similar basis for the first quarter of 1931
show a decline in volume of no less than 2o percent.
The meaning of what has happened can hardly be grasped from
the mere statistical record. We need to visualize the enormously
complex territorial division of labor or regional specialization
which has been built up during the past century on the basis
of continually expanding international trade. Notwithstanding
protective tariffs, war and other impediments, foreign trade has
grown from decade to decade, becoming an increasingly powerful
factor in raising mankind's standard of living. Only because of an
increasing volume of exchange with the newer communities of the
Americas, Australia and Africa have the industrial nations
bordering the North Atlantic been able to maintain and raise
their standard of living in the face of rapidly increasing popula-
tion. The whole economic organization of countries like Great
Britain, Germany, Belgium and Italy is predicated on the con-
tinuance and expansion of export and import trade. Most of the
main groups of German industries depend on export trade for
from IO to 50 percent of their sales. The important group of
chemical, iron, engineering and electro-chemical industries, for
example, sell from IO to 2o percent abroad. About 25 percent of
the total industrial output of Great Britain is exported. For coun-
tries in such circumstances, and even for the United States which
exports only IO percent of its production, a continued decline of
foreign markets must necessitate a wholesale readjustment of
industries with higher costs of production and a lower standard
of living for themass of the population. It means nothing less than
a return toward self-sufficient economy, reversing the trend of
industrial progress during the last century.
What has been the connection between trade restrictions I and
the depression? An intelligent answer to this question can be
made only after a survey of the course of commercial policy in
the years immediately preceding and during the depression. The
years 1925 to 1929 cover a period of rapid industrial recovery the
world over, but particularly in Europe. Rationalization was
lowering costs in both industry and agriculture, currencies were
stabilized, and the economic balance between Europe and the
rest of the world was being rapidly restored. International trade
increased more rapidly than production. With increasing pros-
1 Including not only protective tariffs but all kinds of public and quasi-public interferences with
export and import,trade.
394 FOREIGN AFFAIRS
perity the demand for foreign products rose and there was a
marked expansion in the trade in manufactured goods. It was
only natural that better economic conditions should bring a move-
ment toward more liberal commercial policies. The competitive
struggle became somewhat less bitter and the long-time view of the
advantages of freer trade gained greater recognition. It became in-
creasingly evident that the multitude of restrictions which had been
imposed upon foreign commerce by the necessities of war, and con-
tinued by the exaggerated nationalism of the post-war years, were
hampering rather than helping the new expansion of business.
The hope of lowering tariffs and doing away with restrictions
inspired the World Economic Conference of May-June 1927.
Although the Conference was merely a deliberative body, the vigor-
ous language of its pronouncements strengthened the position of
statesmen and others the world over who were working for more
liberal commercial policies. Its declaration that "the time has
come to put an end to the increase in tariffs and to move in the
opposite direction" became the battlecry of tariff reform. At-
tempts to turn the tariff program of the Conference into action
began in October 1927 when an international conference as-
sembled to discuss the abolition of restrictions and prohibitions
on imports and exports. Their deliberations resulted in a multi-
lateral treaty which was signed by the representatives of 19
nations. In it they undertook to abolish, subject to certain reser-
vations, all restrictions and prohibitions of an economic char-
acter and to refrain in the future from the use of these obnoxious
instruments of commercial policy..It should be explained at once
that customs duties, whether protective or for revenue purposes,
were specifically excluded from the treaty. It referred only to
embargoes, licensing systems, the fixing of quotas and other
super-protective devices. The treaty was signed by the United
States and it was later ratified by our Senate. But it has never
gone into effect. The necessary number of ratifications were
made, but some of these were conditional upon the ratification by
specified states. Finally, in June 1930 the success of the treaty
hinged upon the action of a single state, Poland. Her decision not
to ratify deprived the agreement of binding force. Nevertheless,
seven countries, the United States among them, agreed to abide
by its terms. 2
2While negotiations on the main treaty were in progress, trade in hides, skins and bones was
actually freed from prohibitions and restrictions by a treaty of 17 states effective October 1929.
 TRADE, TARIFFS, THE DEPRESSION 395
A second objective set by the World Economic Conference was
the stabilization of tariffs - the prevention of sudden and fre-
quent revisions. For a year or two it appeared that this objective
was in a fair way to be attained. Dr. Henry Chalmers found that
in Europe the number of general tariff revisions decreased from
Io in 1927 to 5 in 1928 and to 2 in 1929. But meanwhile a good
deal of instability had appeared in one part of the tariff field, that
relating to agricultural products. Not only in the United States,
but in Europe and practically all over the world, agriculture had
experienced even more difficulty than industry in adjusting itself
to post-war conditions. The mechanization of agriculture in
Canada and the United States and the cheapening of ocean
transportation intensified the competition of western cereals in
the markets of Europe. In response to the demands for govern-
ment aid, tariff duties were raised and a wide variety of other
devices, new and old, were put into effect to enable domestic
producers better to meet foreign competition. Requirements that
millers use a specified proportion of domestic rye or wheat in
milling flour were introduced, import quotas for cereals were fixed,
and in a number of countries the trade in grain was made a govern-
ment monopoly.
As the result largely of the renewed interest in agricultural
protection the general level of European tariffs at the end of 1929
was slightly higher than it had been in May 1927 when the World
Economic Conference assembled. The desire to check what
threatened to be a renewed general upward movement in tariffs
produced a number of schemes for "concerted economic action."
Under the auspices of the League of Nations the so-called Tariff
Truce Conference convened in -February 1930. Its sponsors hoped
to get agreement among an important group of countries not to
raise customs duties during a period of one or two years, not to
impose any new duties of a protective nature, and not to create
any new impediments to trade. The conference was not success-
ful. The treaty which finally emerged from its deliberations was
weak and ambiguous and failed to arouse interest or support. No
agreement could be reached as to the date when it should become
effective and it still remains in suspense.
For Europe's change in attitude on tariff matters in 1930 the
threat of the new American tariff must bear a large share of re-
sponsibility. During eighteen months European and Latin Ameri-
can business men had watched the tortuous progress of the Hawley
396 FOREIGN AFFAIRS
Bill and the Smoot Bill through our Congress. As duties on indus-
trial as well as agricultural products were raised one after another
to new record heights they saw the best market in the world
being closed to their goods. In the face of this monumental event,
their efforts to reduce European tariff barriers seemed hardly worth
while. In a former issue of FOREIGN AFFAIRS the present writer
described how Europe received the Smoot-Hawley Tariff. 3 In
spite of official denials it is clear that many of the foreign tariff'
revisions of 1930 were in the nature of reprisals. Six general tariff
revisions occurred in Europe alone in 1930 with the general trend
of rates upward. There was a general unsettlement of import
duties and all but two of the governments of continental Europe
made some changes in specified items during the year. The great
majority of the new European duties were higher than the old.
Renewed tariff activity was also evident among the Latin-
American republics, at least five of which overhauled their sched-
ules with the result that a majority of the new duties were higher
than those which they replaced. In the British Empire, Australia
made marked increases in her import duties, reinforced by re-
strictions and prohibitions; and an extensive upward revision
was carried through in New Zealand. In Canada two successive
eneral revisions of the tariff raised duties to new high levels. In
oth Canada and New Zealand the margin of British preference
was increased.
In addition to the desire to hit back at the Americans, the
downward turn of the business cycle was a powerful influence in
reversing European tariff sentiment in 193 o and in giving mo-
mentum to the movement to raise barriers. As the depression
spread and deepened, business conditions rather than American
policy became the determining factor. In Western Europe, as in
the United States, agriculture demanded protection rom the
violent decline in world prices of foodstuffs and agricultural raw
materials. In the food-exporting countries also, for example in
Australia and South America, the price decline inspired tariff
revision. But in their case it was not the farmer who was to be
helped by higher import duties, but the budget and the trade
balance. The abandonment by England of the gold standard in
September 1931 introduced a new occasion for raising tariffs, i.e.,
protection against exchange dumping. British India, Canada,
the Scandinavian countries, Finland and Japan all followed Eng-
8See "The New American Tariff: Europe's Answer," FoREIGN AFF ARS, October 1930.
 TRADE, TARIFFS, THE DEPRESSION 397
land's example before the close of the year, and with each addi-
tion to the ranks of countries "off gold" the volume of trade
restrictions increased. Moreover, countries still clinging nominally
to gold imposed controls on dealings in foreign exchange which
have added immensely to the difficulties of exporters and im-
porters.
The year 1931 will stand out in economic history as the great
year of protectionism. In January there was a general upward
revision of tariffs by China, followed during the succeeding
months by Chile, Canada, Paraguay, Estonia, Argentina and
British India in about the order named. Seven in all, and all up-
ward revisions. In addition a number of countries, including
Mexico, Italy, China and the Union of South Africa, imposed
flat surtaxes on existing duties which amounted to general up-
ward revisions. A similar result was accomplished by Uruguay in
requiring that 25 percent of all duties should be paid in gold; by
Brazil in revising, several months in succession, the official ratio
of paper to gold values; and by Australia when that country
revised its method of converting foreign currencies for duty pur-
poses. Including these, the number of general upward revisions
is raised to fourteen. The crowning event of the year was the
announcement in November that Great Britain had abandoned
its traditional free trade policy. On November 25 the Board of
Trade, pending the introduction of a general tariff bill, imposed
emergency duties of 50 percent ad valorem on a long list of
commodities.
Special or partial tariff revisions during 1931 ran well into the
hundreds. Practically every important trading nation made some
change in its import tariff, and increases in rates predominated
over decreases in the ratio of 4 to i. In Europe, the tariff tinkers
of France, Italy, Germany, Poland and the Irish Free State were
particularly active. All South American and Central American
countries raised individual items; the tariffs of Argentina, Mexico
and Cuba were in a continual turmoil. In the United States the
President, with the help of his reorganized Tariff Commission,
made 22 changes in rates of duty, i5 downward and 7 upward.
More disturbing in their immediate effects on international
trade were the restrictions and prohibitions which were revised
with new vigor. Excluding sanitary measures and others obvi-
ously imposed for non-economic purposes, we find that no less
than 22 countries had recourse in 1931 to these, the most drastic
398 FOREIGN AFFAIRS
of all protective measures. Among European countries France
was the leader in the employment of import restrictions. Some of
the commodities which in 1931 might be imported into France
only by license were coal, coke, lumber, sugar, dairy products,
meats and fish. Poland also made liberal use of import restrictions.
She fixed quotas on imports from the United States of soap,
oranges, motorcycles, canned fish and canned pineapple at a
certain weight of each commodity for each quarter of the year.
The Baltic states extended their restrictions on trade in cereals
and Sweden went so far as to declare the grain trade a govern-
ment monopoly. Persia joined Soviet Russia in making all foreign
trade a government monopoly. Embargoes on certain Russian
products were declared by Canada, and Australia extended her
embargo on sugar for five years. The smaller countries, not to be
outdone, announced new restrictions; for example, Iceland re-
stricted imports of canned goods and Tunis of fertilizers.
Salvador, at the request of the printers' union in that country,
prohibited the importation of linotype and similar machines for a
period of five years as a measure to relieve unemployment.
Some restrictions were removed. Several countries producing
raw materials for foreign markets reduced export duties as a
means of offsetting the influence of falling prices. Mexico and
Rumania, in particular, made substantial progress in freeing
their export trade from restrictions. But from the world viewpoint
their efforts were offset i:o a considerable extent by new export
restrictions of Nigeria on tin, of Japan on rice, and of the Dutch
East Indies on sugar.
Where will it all end? Obviously the nations have been led into
the tariff orgy of the past two years by a wild spirit of sauve qui
peut. Each has been determined to ward off disaster from its own
producers and its own finances by any means possible. And none
was hindered by the knowledge that the inevitable result of such
a policy, when relentlessly pursued by eighty or ninety sovereign
states, is to drive world prices still lower, to reduce still further
the volume of international exchanges, to swell the ranks of the
unemployed in industrial centers, and to add to the prevailing
financial confusion. For it is one of the plainest lessons from the
experience of recent years that, far from being a cure, tariffs are
to be numbered among the active causes of our present disaster.
The instability in the world prices of crude foodstuffs and agri-
cultural raw materials, which was one of the first signs of the ap-
 TRADE, TARIFFS, THE DEPRESSION 399
proaching crisis, was in large part caused by the increasing
obstacles which tariffs and import restrictions placed in the way
of international trade in these commodities. Not only European
critics but also some of the keenest observers in our own country
hold the American policy of high protection responsible for the
extraordinary accumulation of gold in the United States in the
years 1922 to 1929, and for the frenzy of speculation and its
aftermath.
If protective tariffs were in reality a cure for business crises,
they would long ago have had a chance to demonstrate their
efficacy. Yet study of the business annals of the years before the war
shows that protectionist Germany and Russia were no more im-
mune from periods of business recession than was free-trade
England or The Netherlands.4 As a matter of fact the free-trade
countries came off somewhat better than their protectionist
neighbors. And in the United States, with its consistent record of
high and increasing tariffs, business and financial crises were more
frequent than in any other country.
But now new defenders of the tariff have arisen. The tariff is to
be made an instrument of national economic planning. We are
told to look at Russia, the only country of importance with a
greater trade in 1931 than in 1929. What we are suffering from,
it is said, is not too much tariff but not enough tariff. The world-
wide depression is used as a vivid illustration of the dangers of
international economic interdependence, and we have held up
before us the merits of a self-contained and isolated state.
It is undeniably true that the specialization in manufacturing
of Belgium, the United Kingdom and Germany exposes them to
the danger of fluctuations in demand in any of their far-flung
markets, and to the danger of uncontrollable variations in prices
and supplies of the food and raw materials which they draw from
remote sources. And it is true also that there are self-contained
villages in the interior of China that have not yet heard of the
depression and may never hear of it. The distance which separates
such communities from the centers of trade and finance, and the
difficulties of communication and transportation, cut them off
more effectively than any tariff could from depression. But they
are also cut off from prosperity and from all the civilizing influ-
ences of foreign trade. It is quite true that should the United
See "Business Annals," by Willard L Thorp and H. E. Thorp, National Bureau of Eco-
nomic Research, New York, 1926.
 FOREIGN AFFAIRS
States choose commercial isolation her industrial system would
no longer be in danger of shocks from without. Business crises in
foreign countries would no longer affect us. But no tariff wall can
protect us from shocks from within, and these might even be the
more disastrous because of the very fact of isolation. For foreign
trade often acts as a safety-valve for domestic business. More
than once an impending crisis in the United States has been
warded off by a favorable turn in export trade, and more than
once a period of depression has been shortened by the same
beneficent influence.
But even if immunity from business crises were to be purchased
by commercial isolation, could we afford it? Would not the cost
be too high? Consider fi:rst that any further curtailment in our
imports would be certain to affect our exports. Are we prepared
in the interests of self-sufficiency to sacrifice the profits of hun-
dreds of thousands of our cotton planters, tobacco planters and
wheat growers, and the growers of the millions of bushels of corn
which eventually, in the form of pork products, find their way to
foreign markets? And where, if we are to carry self-sufficiency to
its logical conclusion, are our makers of automobile tires to find
500,000 tons of rubber each year, our canneries their tin, and our
farmers their binder twine? But even assuming that the necessary
vast readjustments in industries and occupations could be carried
through successfully - that is, without too great a decline in our
standard of living - what would be the effect on our financial
position?
If this depression has proved anything it is that international
trade and international finance are fundamentally inseparable.
We can shut off the flow of goods, but if we do we shall at the
same time dam the outflowing stream of capital exports and the
inward flow of interest from our foreign debtors, and of capital
repayments. One cannot but admire the single-mindedness of
those who, understanding these facts, still demand isolation. But
for most of us the abandonment of 18 billions of commercial
obligations, to say nothing of war debts, is too great a price to
pay for the doubtful benefits of commercial isolation.
If not isolation, what then? Are we on the horns of a dilemma?
Perhaps not. There is a way out, the way of concerted action, of
international economic cobperation. At present this may seem a
romantic dream. But when prosperity begins to return the na-
tions, in small groups or in large, will meet to grapple again with
 TRADE, TARIFFS, THE DEPRESSION 401

the problem of trade restrictions and tariff barriers. The United

States has everything to gain and nothing to lose by joining in a
concerted effort to remove restrictions and prohibitions on im-
ports and exports. For thus far we have made no use of these
weapons to protect our home markets, and it is undeniable that
restrictions imposed by foreign countries greatly handicap our
exporters and threaten our supplies of important raw materials.
We shall probably continue to regard our import duties as a
domestic question. To predict the date when on our own initiative
we shall carry through a downward tariff revision would be fool-
hardy. For here we have to reckon not only with the opposition
of protected industries but also with the dead weight of tradition,
supported often by ignorance and superstition. But the busi-
ness crisis of 1929 may mark the opening of a new era in American
commercial policy. It is a principle so familiar as to be almost
axiomatic that economic policies, even those which at a given
moment appear most inflexible, are eventually responsive to
changes in economic conditions. Such adjustments are not im-
mediate; some lag must be expected. For example, our policy of
restricting immigration followed several decades after the dis-
appearance of the frontier and the exhaustion of free land. The
epochal change in our recent history is our transition from a
debtor nation to the world's greatest creditor. Sooner or later
this change must bring a modification of our exaggerated pro-
tectionism. The process of change, slow as it may be, will be
-hastened by the events of 1929-1932. One of the compensations
of disasters is that they jolt us out of our ruts of thought and
action and hasten many an incipient reform.
 BULOW AND THE WAR
By 7ules Cambon

IT WOULD be hard today to find a German willing to admit

that in 1914 Austria deliberately took the initiative in
starting hostilities, and that Germany, far from restraining
her, upheld, encouraged and seconded her in that most hideous
of adventures. Indeed, one of the most striking political phe-
nomena of post-war Europe is the unanimity that German
opinion has attained on the subject of Germany's innocence.
The German people distrust individualism in politics, as in other
spheres of life; in this unanimity, then, there is something pe-
culiarly Germanic. Kiderien-Wichter, when Secretary of State
for Foreign Affairs, often told me in Berlin that his country,
more than any other on earth, was capable of adopting one
common opinion, and that thanks to that trait the press was
easily able to direct trends in public thinking.
One should add that growth in democracy tends to develop
in nations a conviction that they are not responsible for things
that happen. Everywhere the masses set themselves more and
more clearly apart from their governments and are wont to
blame any mistakes in policy on the latter exclusively. This
feeling of irresponsibility, supported by ignorance and incom-
petence, is natural- and decidedly dangerous. For the reality
is, meantime, that nations, seen. from the outside, are not dis-"
tinguishable from their governments. It is through the agency
of their governments that they negotiate, make alliances, quarrel.
The ministers who represent them have no other authority than
the fact that they do represent them. As the democratic spirit
grows, the conduct of affairs of state comes to depend more and
more upon popular behavior; between peoples and their ministers
prevails a sort of constant: collaboration; and in that lies the real
source of the strength that statesmen have. Bismarck himself,
whose violent struggles with assemblies will not be forgotten,
succeeded in mastering the opposition which he affected to despise
only because at heart he was at one with the instinctive feelings
of the German nation. That was why, after throwing his own
party overboard, he was able to realize that unity which had all
along been the very thing his adversaries had unconsciously been
aiming at.
 BULOW AND THE WAR 403
Again, German opinion enjoys playing with complicated
notions, and in passing judgment on the events leading up to
the Great War it is careful to mix historic epochs: it insists, as
we say, on "going back to the Flood." Quite deliberately it
ignores the period during which (in the face of all efforts of the
French and British Governments) the catastrophe of 194 was
being brewed and was being rushed to a climax. Those Govern-
ments unceasingly proposed measures, conferences, conversations
which would have found some peaceful issue from the dan-
gerous situation. But they brought up short on the resolve of the
Austrian Government, which was bent on war, and on the ob-
stinate refusal of the German Government to make Vienna see
reason. Like Bismarck when in 187o he declared that he was
making war on Louis XIV and avenging Conradin of Hohenstau-
fen who had died in Naples in the thirteenth century, public
opinion in Germany today loves to invoke the past -where it
helps confuse the issue. It harks back to those troublous and
uncertain years when, frightened by the military provisions of
her redoubtable adversary, France was seeking friendships among
the nations about her and was increasing her own means of de-
fense. It thus manages to create a fog in which it is no longer
possible to distinguish the truth.
I was, in my time, Ambassador to Germany. I remember the
day when the Imperial Government, eager to increase the
strength of its army, decided to call upon private fortunes, and
by a lump tax required certain rich individuals to contribute to
the development of the military machine. France was worried,
and M. Barthou, our Premier at the time, tried to offset this
new danger by establishing the three-year term of military
service. Berlin was scandalized and regarded as an overt provoca-
tion what was only a rejoinder.
It is at bottom a similar - and rather naive - sense of not
being responsible which is leading German opinion today to fall
back on the remote past to escape reproach for the events in
1914. To pass judgment on those events one need only to re-
member the threats which William II addressed to the King of
the Belgians at the end of 1913; to remember the language in
which Maximilian Harden declared, in the Zukunft, that Germany
had insisted on war and that victory was justifying her for having
done so; or to turn back to the words of 'Chancellor Bethmann-
Hollweg, who, at a moment when the people of Berlin felt sure
404 FOREIGN AFFAIRS
of victory, did not hesitate to admit, from the rostrum in the
Reichstag, the irregularity of the acts of the Government over
which he was presiding.
It has not, furthermore, been generally enough observed that
Italy's attitude on the eve of the war and during the early stages
of hostilities would be unexplainable if responsibility for the con-
flict did not fall upon the two principal Powers in Central Europe.
Italy parted company wit-h her allies because they had taken the
initiative in war without consulting her, as the terms of the Triple
Alliance required of them, and without paying any attention to
her legitimate criticisms; and because that initiative in itself put
the two Powers in question in the position of aggressors. In
August 1914 Italy proclaimed that Germany and Austria had
thereby broken the terms of the Alliance which had bound them
to her, and had thus freed her from all obligations toward them.
Shortly after the outbreak of hostilities, and after my return to
France from Berlin, I went to Rome. I had known the Marquis di
San Giuliano, the Minist:er for Foreign Affairs, for many years.
I called on him in his room where he lay sick -as the event
proved, sick unto death. I remember his words. Nothing could
equal the severity with which, at that solemn moment, he
characterized the conduct of Italy's former allies and described
the uprising of Italian national' sentiment against them.
In view of all this it is easy to understand the unfavorable
reception which has greeted the recently published memoirs of
Prince von Biilow in Germany,' for they are in absolute contradic-
tion with the state of German sentiment to which I alluded at
the beginning of this article. Consider, for example, the harshness
which the author evinces toward his successor as Chancellor,
the rebuke which he administers to him for having admitted the
illegality of the entry of German troops into Belgium and, having
once made the admission, for not having at once retracted it.
These memoirs, of course, as is the case with other memoirs,
sometimes slightly alter the truth for the greater glory of their
author; but they do not falsify the truth altogether; and it would
be as serious an error to disregard them as it would be to trust
their every detail. Since their publication, moreover, we have
I"Filrst von Bi6low: Denkwtirdigkeiten." Berlin: Ullstein, 1931, 4 volumes. The American
edition is published by Little, Brown (Boston), the British edition by Putnam. (London), the
French edition by Plon (Paris). In the American and British editions only two volumes have so
far appeared.
 BUJLOW AND THE WAR 405
been given the secret correspondence between William II and
von Billow while the latter was Chancellor, and those letters
throw light upon the memoirs and show by just what sentiments
those two powerful and interesting personages were inspired.
Bernhard von Billow was quite as much a prince of the mind
as he was a Prussian nobleman. He was an irresistible person.
His conversation was charming, his culture vast and profound,
and I have never known a man with a mind more open.
His father had been for many years in the service of Denmark;
thence he had moved on, first to the service of the Grand Duke
of Mecklenburg-Strelitz, and thereafter to the service of the
Grand Duke of Mecklenburg-Schwerin. Finally Bismarck, who
had a high regard for his talents, offered him a post, and so he
came to be Secretary of State for Foreign Affairs of the German
Empire. He was a man of distinction; but his successive changes
of nationality cannot fail to strike one as surprising; for the in-
terests of Denmark, the Mecklenburgs, and the Empire were
after all very different interests. Chancellor von Billow, it would
seem, inherited from his father a certain detachment toward the
powers whom he served. He had what one might call independence
of mind and perhaps of heart. He was none the less zealous in
service on that account, but he preserved an unbiased mind -
which explains many things, notably elements that may seem
contradictory in the devotion which he professed for the Emperor
William II so long as he was Chancellor, and in the manner in
which he really judged him and in which he treats him in his
memoirs.
In the sphere of politics, Prince von Billow was merciless, as
he proved in connection with Poland. He persecuted Poland, and
one of the grievances he has against his successor is that the latter
should have allowed himself even to consider a possible reEstab-
lishment of Poland. He prided himself on following the example
of Bismarck; yet there were many differences between him and
his supposed model. Bismarck, in the first place, was a man of
uncompromising temperament and was devoted to his own
handiwork. He had made Germany, and he had sacrificed to that
cause not only his personal comfort but even his personal feelings.
He had changed parties in the interests of his cause. He had
begun his career in the party of reaction; then he had, as it
seemed, deserted his friends of the first hour to achieve German
2 "Correspondance secrate de Billow et de Guillaume II." Paris: Grasset, x93x, 265 pp.
4o6 FOREIGN AFFAIRS
unity with the National Liberals. Toward the end of his life he
seemed to swing back toward the Right again. Really he was
unwilling to merge himself in any party. In the course of all his
fluctuations of allegiance he had a single purpose in mind: 'the
consolidation of the Empire which he had built. Looking abroad,
it was his idea to forge among the three northern Empires-
Austria, Germany and Russia-a union similar to the Holy
Alliance of former days which had been ostensibly designed to
uphold the monarchical principle. He formed a close association
with the government at Vienna; but he was careful to sign a
reassuring agreement with the cabinet at Saint Petersburg. His
great complaint against Emperor William II and his own suc-
cessor, Chancellor von Caprivi, was for their having allowed the
guaranty of security for Germany, embodied in that agreement,
to lapse. He hated France. He had conquered that country; but
she was not dead, and he viewed with uneasiness the element of
risk that might lurk in another war. His hatred, furthermore, was
a chivalrous thing, taking due account of the feelings of his ad-
versary. Thus, far from opposing the colonial development of
France, he promoted it, trying to find an outlet for French ac-
tivity in that direction. Utter realist that he was, he favored the
occupation of Tunis by France and was willing to open Morocco
to her also.
Prince von Billow did not have any such breadth of vision nor
any such creative intelligence. He had a mind of great suppleness
and strove to model his conduct to suit events - in particular,
to the changing caprices of William II. He sought, courtier that
he was, to give continuity and coherence to the Emperor's views,
and in that direction he went to extremes. He remained im-
perturbably the ally of Austria, but without conserving his
freedom of action therewith, as Bismarck had done. In his hands
the Austrian alliance became a strictly interdependent relation-
ship which eventually brought the two Empires to ruin. He stated
in print that France wa3 a decadent nation, and he despised
her. He dealt with France frivolously and entirely without cau-
tion. Whereas Bismarck realized that France had to live, and
found a place for her colonial policy in his outlook, Prince von
Billow bluntly crossed her path and disputed her expansion in
Northern Africa.
In his memoirs Prince von Billow has two objects in view. He
seeks to prove that while he was in power his conduct and his
 BULOW AND THE WAR

olicy were at all times pacific, and he seeks to prove that if the
mperor had kept him at the head of the government he would
have avoided war.
Two very debatable contentions! It is easy enough for Prince
von Billow to argue the harmlessness of his policy on the ground
that so long as he was in office no war occurred; but the question
is rather whether, by the quest for prestige which he pursued for
his personal satisfaction, he did not bring Europe to such a state
of nervous tension that, after smoldering underground for a
long time, the flames finally burst out in 1914. The Chancellor
always kept in close touch with that curious individual,
Baron von Holstein. Von Holstein had personal predilections of a
most passionate sort and his influence at Wilhelmstrasse was
great. He had drawn aloof from Bismarck, and whatever his ideas
chanced to be, he preferred to keep them secret. The ambassa-
dors of other countries did not know him, for he preferred not to
be known, considering mysteriousness better ada pted to shrewd
policy. He even avoided the Emperor: at one time he was thought
to have fallen from favor, and it was the general impression that
he was altogether out of touch with affairs. That was a misap-
prehension. Von Biilow was taking him into his confidence all
along, even consulting him on the wording of telegrams. On one
occasion a friend of King Edward VII, Sir Ernest Cassel, passing
by chance through Berlin, paid a visit to the Chancellor; and
since he had met von Holstein he inquired after him. "Would you
like to see him?" von Billow answered. "He is here." And he
directed Cassel to an adjoining office. Such an intimacy was
significant; it also was replete with dangers, for von Holstein
lived too far apart from the world to have impartial views on
things. Nor did he have any perception of moral forces. That is
why he felt free to disdain any consideration of French aspirations,
and thereby overstimulated them, giving France a singular
power of attraction for all peoples over whose feelings Germany
was riding roughshod.
The attitude of Prince von Billow toward the policy of the
French Foreign Office was in harmony with the views of von
Holstein. That was why he wrote, in 19o5, that Germany had
embarked on the Morocco venture out of considerations of
prestige, pure and simple; and that confession illuminates, along
with von Billow's policy, his personal temperament. In fact, one
is surprised in reading the von Billow memoirs at the r6le which
 FOREIGN AFFAIRS
the author's vanity plays in them. They are an apology designed
to justify whatever he did and, more than that, to increase his
personal stature. Manifestly, and diplomacy quite aside, he is
what one might call in the vernacular a man "on the make." In
his fourth volume he speaks of his marriage to Donna Laura
Minghetti and complacently underlines, meantime, his successes
with the fair sex. In a man of his great intellectual distinction
such indiscreet presumption leaps to the eye. At bottom the same
self-satisfaction expresses itself in all his conduct and explains
many things.
To be sure, Prince von Billow had to deal with Emperor Wil-
liam II, and that was by no means the least delicate aspect of his
task. The Emperor was a man ever doing the unexpected thing,
often following the lead of a lively imagination, and at times
"seeing straighter" than the Chancellor himself. He was more
or less uncertain as to what he really wanted, and at times
abruptly changed his views. He was not without talent as a
speaker; but his eloquences sometimes carried him too far - for
he loved to talk. The speeches he made at Bremen and D6beritz
became known to the general public and filled reasonable people
with alarm. He was sensitive and high-strung. Nowhere does his
temperament appear more clearly than in the extraordinary
letter which he wrote on August i i, i9o5, to Prince von Bilow.
Von Billow had offered his resignation in consequence of a dis-
agreement with his sovereign, and the Emperor was trying to
retain him. He reminded him that he, the Emperor, would never
survive such a misfortune, and besought him to think of his poor
wife, the Empress, and their children! The letter was afterwards
published, and in spite of everything it still gives ground for
astonishment. Yet, for all of such bubblings of sentiment, the
Emperor is careful to remind von Billow that he is just a tool in
the imperial hands, and that at the instance of von Bilow and
against his own inclinations he had landed at Tangier in order
to enable von Bilow to win a point in his policy. So this en-
thusiastic friendship overlooked nothing; and we get an insight
.into the underlying realities of these two men's relationship.
Both of them seemed to surrender utterly to the sentiments
which they professed to have for each other; at the same time
they viewed each other without mercy; and when finally they
parted company, each showed clearly how he really felt. The
Prince is implacable toward the Emperor in his memoirs, and
 BULOW AND THE WAR 409
he forgets all the protestations of devotion with which he was
once so lavish.
The Chancellor regarded the landing at Tangier as a triumph.
In reality, it was a defeat for the Berlin Government. Von
Schoen, who accompanied William II on his voyage, declared
that in this whole business his Sovereign saw more clearly than
did the Chancellor. The Emperor was against the landing. He
thought it a risky step to take. It could only arouse uneasiness in
France; and since the Moroccan Government had made prepara-
tions to receive him, he might be placed in the position of slight-
ing it. In spite of his great delicacy of perception, the Chancellor
was not aware that there was a deal of personal vanity in that
whole demonstration - which in itself amounted to nothing.
It was the same with the Algeciras Conference, into which von
Billow drove France by bringing all the weight of his prestige to
bear upon her, and which occasioned the fall of M. Delcass6.
Before the Reichstag von Billow represented it as a success for
Germany, and he takes the same attitude in his memoirs; in
reality, it arrayed against Germany the Powers which at that time
sided with France.
On another occasion - the one, in fact, which brought about
von Billow's resignation - one may ask whether he had really
measured the consequences of his acts, and whether, in order to
justify his conduct, he does not alter the truth in his memoirs. I
am referring to the publication in 19o8 in the Daily Telegraph of
the Emperor's famous interview. At that time Zimmermann was
Under Secretary of State in the Ministry of Foreign Affairs; and
he has stated in an article in the Siddeutsche Monatshefte for
March 1931 that the Emperor had communicated the interview
in question to Prince von Billow, then at Norderney, with express
orders to examine it personally and not to send it to the Ministry.
The publication of the interview scandalized and exasperated
English opinion, and, to a still greater extent, public opinion in
Germany. Things went so far that, if we are to believe the
Prince's memoirs, certain members of the Bundesratwere reported
as wondering whether the Emperor ought not to abdicate. In that
extraordinary interview, William II came out as a friend of
England, not sharing the feeling of the majority of people in
Germany. He claimed, in the same fantastic document, that he
had sent to his grandmother, Queen Victoria, a plan of campaign
to be followed against the Boers, a plan that coincided, in large
410 FOREIGN AFFAIRS
part, with the one carried out by General French. He also main-
tained that in 1899 he had refused to have anything to do with
proposals which France and Russia had made to him against
England. Finally he declared that he had suggested to the British
Government that the English and German fleets in the Pacific
should combine against China and Japan.
Prince von Biilow declares in his memoirs that, being over-
crowded with work at the time, he did not read the draft of the
proposed interview, but sent it on to the Ministry in Berlin to
have the necessary corrections made in it. This involved a double
disobedience of the Emperor's orders. The case would be all the
more serious since, according to Count von Wedel, Herr Jenisch
(who was a relative of Prince von Biilow and represented the
Ministry of Foreign Affairs in the Emperor's suite) had written
to the Prince personally to advise him of the Emperor's under-
standing that the draft of the interview was submitted to him
privately and should not be taken as addressed to the Ministry.
Herr Zimmermann, furthermore-his veracity cannot be doubted
- observes that in his final report the Chancellor had made
changes in the text as corrected by the office staff, which would
indicate that he had read the document. In reality, therefore,
instead of asserting that: he had no knowledge of the interview,
Prince von Billow would have done better to confess that he
altogether misjudged the significance of the declarations which
it contained.
The Prince's attitude was still more embarrassing to the Em-
peror when the matter came up before the Reichstag. He did not
defend his Sovereign, and, noting that the words of William II
had caused a profound sensation in the country, he declared
that thenceforward the Sovereign would observe even in his
conversations a restraint indispensable to a consistent public
policy and to the prestige of the Crown. I have often wondered
ow Prince von Biilow could have used such language. It is
clear that he thought he could; and, in fact, he enjoyed a great
success, that day, with his speech from the rostrum. Shortly
before that he had expressed to me his envy of English statesmen
for their situation vis-h-vis the Crown; and I am inclined to think
he judged that the Emperor was more considerably weakened
before public opinion by the interview in the Daily Telegraph
than was really the case. With the support of the Reichstag he
thought he could deport himself with an independence analogous
 BtLOW AND THE WAR
to that of British ministers. In the course of the next year the
Emperor allowed him to sense the extent of the imperial disap-
pointment; and when "dear Bernhard," to use the expression
frequent on the Sovereign's lips in the good times, handed in his
resignation on the defeat of his tax bill in the Reichstag it was
forthwith accepted. The Emperor made no threat of suicide on
that occasion. The Chancellor seems never to have been aware of
any note of mistrust toward him in the demonstrations of affec-
tions with which the Sovereign was always overwhelming him;
but, in my judgment, he was mistaken, and especially in con-
nection with matters of foreign policy.
The Chancellor's secret correspondence with William II illumi-
nates the memoirs and enables us to evaluate many of the
assertions in them. Though Prince von Billow professed the
greatest caution, he took war, as his Emperor took war, as
a sort of game at cards, not reflecting that the essence of
gambling is the risks one runs. That explains the injudicious-
ness of his conduct toward France. If he could gain a point
of prestige in the eyes of his countrymen he had no qualms
about reopening the wounds left in the vanquished of 1870.
He despised those whom he considered weak. That was why,
in a letter of July 30, 19o5, outlining the course that Germany
should follow in the event of a war crisis, he thought that
Belgium should be called upon to declare, within six hours,
whether she would be with Germany or against her. And he
added: "We would at once enter Belgium, whatever her answer."
Such a declaration at such a date is alone enough to nullify
the claims of those who hold that Germany had no intention
of going to war before 19I4. For that matter, as far back
as 19o4, the Emperor had made to the King of the Belgians,
Leopold II, then on a visit to Berlin, the same threatening con-
fidences which he made to King Albert I in I913. The invasion of
Belgium was not, accordingly, made on the moment's impulse,
and had no relation to any direct threat by the French army.
Bethmann's deed had already been Billow's thought.
As for Italy, von Bilow had no great confidence in his alliance.
He used to say, moreover, that in politics one should not be
over-conscious of services rendered. In his eyes, Rome's partici-
pation in the Triple Alliance was good for peace times, and more
as decoration than anything else; and in 19o4 he wrote that it
would be a good idea to worry Italy as to the consequences of a
402 FOREIGN AFFAIRS
rupture with Germany, to prevent her from doing anything that
might change her flirtation with France into a permanent liaison.
Prince von Bfilow was more concerned about Russia. His
master, Bismarck, had never forgiven the Emperor, nor his own
successor, von Caprivi, for allowing his reinsurance compact
with Saint Petersburg to lapse. Italy's presence in the Triple
Alliance seemed to give von Billow a security somewhat similar
to what he would have had in that old pact. However, in 1898,
the attitude which the Emperor adopted toward Tsar Nicholas
II filled him with alarm, At that time the Emperor of Russia
proposed an international conference on disarmament (uttering,
as Napoleon III had done before him, that word which harbors
so much illusion). Emperor William II was aroused by the pro-
posal, and von Bfilow's memoirs relate that he drew up for the
well-intentioned "Nicky"' a telegram holding the notion up to
ridicule; for, deep down in his heart, he considered war as a
game at which Germany could only win. Emperor William's
demeanor toward Nicholas II varied with the whims of his
exuberant fancy. So, on the eve of the outbreak between Russia
and Japan, he encouraged Russia to go to war. He lived in terror
of the Yellow Peril, and went so far as to predict that if the
Japanese were victorious they would be turning up in Moscow,
and perhaps even in Posen. In point of fact, he was anxious to
divert the Russians from the west, and he was certain that they
would win.
A serious circumstance put the Chancellor at odds with his
Sovereign. On July 24, 1905, William II had a meeting with
Nicholas II aboard the latter's yacht at Bj6rkoe; and after a
tearful conversation he managed to obtain from the tender-
hearted Russian the signing of an agreement whereby Russia
and Germany mutually undertook to support each other by
arms in Europe, should one of them chance to be attacked. The
Russian Emperor was even expected to bring France into the
combine; for William II was always fondling the notion that
France, weakened as she was, would some day end like Austria
by abdicating into his hands. The Russian accord was directed
exclusively against England. Now von Bilow nourished for
England the same sentiments of hostility that Bismarck had
felt in his day; but the proviso in the.Bj6rkoe agreement, whereby
the eventual assistance which Russia would be called upon to
lend to Germany was limited to Europe, impressed him most
 BULOW AND THE WAR 413
annoyingly as precluding the assumption of any attack on his
part on British domination in India. He therefore begged the
Emperor to cancel from the compact the two words" in Europe,"
and wrote to the Tsar in that connection a very interesting letter
which is not published in the memoirs. In it he again revealed
his contempt for humane sentiments. He said that if France
stood by England the regiments of Russia would doubtless be
interested in the prospect of plunder in "beautiful France," and
that, to prevent France from joining England, one ought to
consider whether it would not be possible to find some territorial
compensation for her in the direction of Belgium. The whole
scheme fell overboard. On returning to Saint Petersburg, Nicho-
las II found that his minister, Lamsdorf, flatly refused to sign
the treaty of Bj6rkoe; and the Tsar, finally enlightened as to his
undertakings toward the Paris Government, which William II
was fond of alluding to as "those bandits," wrote "those bandits"
that it was his intention to honor the signature of his father.
That was the end of the fantastic entente of which the Emperor of
Germany had dreamed. Von Billow found in the fiasco a justifi-
cation of his own attitude. Not that he was not nourishing his
own illusions: for he insisted that Russia would never make
common cause with France against Germany.
In reality, in the eyes of von Biilow as in the eyes of his Sov-
ereign, the enemy against whom precautions had to be taken
was England. On this point they were both in accord with the
opinion prevailing generally in their country. King Edward
noted the fact as far back as i9oi. In the course of a visit which
he paid to Germany at that time he was impressed with the
hostility of the population toward England; and Prince von
Billow has stated in print that Miss Charlotte Knollys, at the
time lady-in-waiting to Princess Alexandra, remarked to him
that expressions of friendship between the two sovereigns and
governments would do no good, because the two peoples stood
glaring at each other like two china dogs. Underlying this ani-
mosity was surely the naval question. Prince von Billow was
convinced that since England imported virtually all her neces-
saries from abroad - even food - a maritime blockade might
in a few weeks bring her to terms. That conviction doubtless
impelled Germany, during the war, to her submarine outrages.
Admiral von Tirpitz was bent on endowing his country with a
strong navy, and Chancellor von Billow lent him his support.
4.4 FOREIGN AFFAIRS
He was forgetting that in I9OO the London Government had
offered to strike a naval bargain with him and that he had de-
clined the offer. Mr. Chamberlain, who had made overtures for
an understanding with Germany, declared in 19o2 that in view
of the uselessness of his efforts he would have no further dealings
with von Billow; and I was an eyewitness to the fruitless efforts
of Lord Haldane, who was sent in behalf of the British Govern-
ment to try to effect an understanding with Berlin. In October
19o8 von Billow was beginning to see that the antagonism be-
tween the two Powers was becoming more marked. He would
have liked to reverse engines; but it was too late for that, and his
policy was destined to end in the catastrophe of 1914.
In my judgment, however, what contributed to the disasters
of the Empire to an even greater extent than did the Chancellor's
blindness in connection with England, was his policy regarding
Austria. In I9O9 he declared that the basic principle of German
policy was to support Austria in all her aims. A devotion so
ibelungenesque could imply nothing less than an abdication
into the hands of Austria, since it deprived Germany of the
freedom of action which Bismarck had always made a point of
retaining. I have often pointed out that Prince von Billow made
a grave mistake when in 19o8 he refused to submit to interna-
tional ratification, as a mere matter of form, Austria's annexa-
tion of Bosnia-Herzegovinaa, which the Congress of Berlin had
entrusted to her administration. And I have reiterated that by his
conduct on that occasion he inspired the Vienna Government
with the notion that with Germany's support it could go to any
lengths; and that if, in 19o8, Austria had been made to feel that
she was going too far and had to reckon with others, later on, in
1914, she would doubtless not have issued that extraordinary
ultimatum which let loose: the monster of war. Prince von Billow
thought that a European concert, designed to pass on events
growing out of Austrian policy, would be as little profitable to the
interests of Germany as to those of Austria; and he often said
that those two Powers formed a block against which no tempest
could prevail. That was what he wrote in i909, and the words
contain the whole genesis of the war of 194.
It follows that I cannot accept the thesis sustained by the
Prince in his memoirs, the thesis, namely, that he is absolutely
innocent of anything that happened after his retirement from
office, and that Bethmann-Hollweg, his successor, is alone re-
 BULOW AND THE WAR 415

sponsible for the war. Billow did not fight the war; but he piled
up in Europe all the reasons and all the resentments that made
war inevitable. He did so to gain prestige for his own policy: he
slighted France systematically; he irritated England; he gave
Austria a license to do what she pleased. He has no occasion,
therefore, to be surprised that all the animosities which his
policy aroused should have combined against Germany.
That much suffices to show that Bethmann-Hollweg does not
carry the whole burden of responsibility which his predecessor
would lay upon his shoulders. Prince von Billow has his share of
the responsibility. Bethmann-Hollweg has noted that von Billow
left him a desperate inheritance; that England, France and
Russia had already come together; that Japan had joined them
by virtue of her treaty with England; that Italy was drawing
closer to them. The man of the ultimatum to Serbia and of the in-
vasion of Belgium was, to use a characterization in the memoirs,
evidently not a diplomat. His knowledge of Europe was, per-
haps, inadequate; but he had assured his predecessor that he
intended to follow the same policy that he had followed; and
that is what he did. When in July 1914 Austria hurled her ultima-
tum at Serbia, Lord Grey made four separate efforts to get the
Austro-Serbian conflict submitted to a discussion by the Euro-
pean Powers. The German Government rebuffed those proposals.
As Prince von Billow had done in 19o8 in connection with the
annexation of Bosnia-Herzegovina, it proclaimed that the matter
concerned Austria only and that Germany would do her duty as
an ally. In reality the fault one may find with Bethmann-Hollweg
is that of having imitated von Billow too scrupulously. At that
time, alarmed by the repeated refusals that issued from the Berlin
Cabinet, I inquired of the Secretary of State for Foreign Affairs
whether Germany had undertaken to follow Austria to any
length with closed eyes. Von Jagow replied that it would have
been offensive to Austrian dignity to set up the nations of Europe
as a sort of arbitration court -and in so saying he was only
repeating words that Prince von Billow had himself uttered.
What would Prince von Billow have done, had he been Chancel-
lor? He would perhaps have yielded to the same sentiment; but
when he wrote his memoirs the catastrophe had occurred; and
naturally, after the event, he prophesied that he would have
avoided it.
As a matter of fact, von Billow was perfectly aware of the
406 FOREIGN AFFAIRS
exaggeration and the danger involved in Austria's ultimatum.
Everyone in Germany, in all sincerity, lamented it; but no one
was willing to confess to such a feeling. The Emperor was re-
solved to follow his "brilliant second." Bethmann-Hollweg said
that it was merely a question of helping Austria to execute her
wishes, and that if in the end war could not be avoided it was
a question of ameliorating the conditions under which it would
have to be fought.
At bottom it was Germany's overconfidence that led her
astray. She plunged into the terrible adventure because she felt
certain of success. She relied implicitly on that wonderful ma-
chine, the German array. Everybody - the Emperor, von
Biilow, Bethmann-Hollweg, the lowliest German in the streets -
was convinced that the war could end only in triumph.
People in France have learned not to prophesy. My memory
goes back to i866. I heard it said at that time that Austria would
win. And in Paris, in i87'o, people hoped in the strength of the
French army. And yet in i866 and in 1870 the losers were Aus-
tria and France. People in Berlin were mistaken in 19I4. What-
ever the might of German arms, the outcome proved that it is
rash to expect too much of might alone; and I do not believe that
if he had been in power in 1914 Prince von Biilow would have
foreseen the future.
 NEIGHBORS
A CANADIAN VIEW

ByR.
HE relations of Canada and the United States are unus-
ually intimate and important, and will become even more
intimate and more important as the Dominion grows in
population and power and as the United States becomes more
conscious of that growth than she is at present.
It is true, of course, that they loom far larger in the eyes of a
Canadian than of an American. That is natural. The United
States is a great World Power, with interests and contacts in
every corner of the globe. If Americans cannot indulge in that
Britannic boast that the sun never sets on the Empire they can
console themselves with the thought that it never sets on their
influence. Canada, on the other hand, as an international unit,
is at the very beginning of her career. In world affairs, as a state
apart from an empire, she has hardly commenced to make her
influence felt. At the present time, indeed, she really has only
two immediately important external problems: first, her relations
with the other members of the British Commonwealth of Na-
tions; and second, her relations with the United States. All else
is subordinate to these, and the Dominion's external policy
must for some time center about their handling.
The phrase "Canada's relations with the United States"
almost invariably brings to the American mind a -fague reminder
that Canada is a sort of northern extension of the United States,
a delightfully wet place for a vacation; that there are millions
of American dollars and hundreds of American branch factories
in Canada; and that the Dominion, in spite of tariff walls, is the
Republic's best customer - a proud position for any country to
achieve.
It is not intended here to examine these more material aspects
of our relations, but rather those which, in default of a better
word, may be designated "political." More particularly it is
desired to touch on two phases of these political relations: the
first, certain influences affecting Canadian-American relations;
the second, certain problems arising out of these relations, con-
sidered in the light of those influences.
In respect of the first, there are certain obvious influences
 FOREIGN AFFAIRS
such as our common language, our common inheritance, geog-
raphy, history, trade -those things which -are the inevitable
ingredients of every public utterance on this subject. They may
be dismissed with mere mention, along with the four thousand
miles of unguarded boundary and the hundred years of peace.
There are, however, two other influences, less obvious but not
less important, which affect and will continue to affect the rela-
tions between the two countries. The first is Canada's position
as a Dominion in the British Commonwealth of Nations. The
importance of this in Canadian-American relations has not been
sufficiently emphasized. The British Commonwealth, in its
organization, is not freezing - British institutions do not do that
- but it is, at least, being consolidated. It would appear, for
instance, that Canada has now reached a point where she is
perfectly satisfied with her position as a Dominion in that Com-
monwealth. Why not? She has all the advantages of independence,
without some of its obligations, and at the same time she has the
prestige and the benefits, material and otherwise, that go with
membership in a great political society. Canada, in fact, is one of
the few states that can have its cake and eat it, and a Canadian
is in the fortunate position of being able to say in far corners of
the world "civis Britannus sum," while at home he can shout
"Canada First." To put it: in another way, Canadians can go out
into the international rain if they care to, but when they get
drenched they can always scramble back under the Imperial
umbrella.
Now this position of Canada as a virtually independent state
in a British Commonwealth means that the. relations between
Canada and the United S:ates, so far as the former is concerned,
will be under the exclusive control of the Canadian Government.
It is far from certain, however, that this is going to make the con-
duct of those relations any easier for the United States than it
has been in the past. Canadians have a feeling that before the
Dominion was given the honor of running her own affairs, Great
Britain, in controversies between colony and Republic, taking
what she considered the larger view of the interests of the Empire
as a whole, had to sacrifice at times the interests of Canada. In
the future, no Canadian Government is likely to leave itself
open to that reproach. Canada may be relied on to protect her
interests possibly a little more tenaciously than Great Britain
did. If a sacrifice is to be made of immediate interest for the larger
 NEIGHBORS: A CANADIAN VIEW
value of international goodwill, it will be made by Canada and
by nobody else. One might go even further. The former colony
may turn the tables on the Mother Country and ask her to
sacrifice certain things, which may seem to be to Great Britain's
advantage, for the sake of the British Commonwealth as a whole.
Indeed, this has already been done in the case of the Anglo-
Japanese alliance. It has also been done in relation to certain
phases of Great Britain's policy towards the League of Nations
and towards the policy of European political commitments.
It has at times been to London's convenience, as well as to her
interest, to be able to say "we would like to be able to do this or
that, but those Dominions, don't you know . . ." But more than
once there has been a stronger basis than convenience for this
position, and the excuse of Dominion reluctance or Dominion
refusal has been a real one.
When Canada attempts to influence British policy in this way
it is because she is acutely conscious of the fact that, though she
is in the British Commonwealth of Nations and happy to be
there, she is also on the North American continent, alongside a
mighty neighbor. The mainspring of Canada's external policy
lies in this duality, and in the necessity of preventing her two
positions - as a British Dominion and an American state -
from conflicting. If they should conflict, Canada would be placed
in an impossible position, one which British policy as well as
Canadian must avoid if the Dominion is to stay in the Common-
wealth.
After-dinner speakers on Anglo-Canadian-American topics
often give Canada the r6le of interpreter of the United States to
Great Britain, and of Great Britain to the United States. One
may be pardoned for being somewhat skeptical of the reality or
the impressiveness of this Canadian contribution to Anglo-
American goodwill. Great Britain has her own interpreters, and
hardly needs the services of Canada in this regard. The part that
the Dominion can play in Anglo-American relations is rather that
of making certain that the policy of Great Britain with respect
to the United States will always be guided by the recognition of
the impossibility of Canada's position if her neighbor and her
Mother Country should drift apart on vital issues.
This is not to deny that in matters of detail Canadian policy
with respect to the United States will often be different from that
of Great Britain. That will be inevitable. It will, for instance,
420 FOREIGN AFFAIRS
become increasingly difficult to negotiate joint treaties between
the United States and the British Empire. The disadvantage of
certain treaties of that kind, so far as Canada is concerned, has
already become apparent, notably in the case of the Liquor
Treaty of 1924 where the negotiators in the first place were
British, and Canada only later adhered. But a possible divergence
from Great Britain on certain specific questions does not alter the
fact that the broad basis of British policy with respect to the
United States must be determined almost as much by conditions
in Ottawa as in London.
These considerations explain the part that Canada can play
at international conferences, such as the London Naval Confer-
ence and the Geneva Disarmament Conference, where the United
States is vitally concerned and where Canada's own interests
may seem to be small. The Dominion can be, and has been, a
friend to the United States at such conferences, without sacrific-
ing either her own interests or the interests of the Empire. Is it
rash to say that in return for such friendship the Republic offers
her neighbor another umbrella, the Monroe Doctrine? Washing-
ton never mentions it; Canada can scarcely bear to think about
it, for it ill becomes her pride; but it appears to be a fact never-
theless that the United States would not allow a foreign invader
to set foot on the shores of her northern neighbor.
The second influence on the relations between the two coun-
tries is that of a developing Canadian national consciousness. The
United States now faces on thQ northern half of this continent
a self-governing state, independent in all but name. But'has that
state a national personality of its own and, if so, what kind?
There are not a few 'Canadians these days who at every op-
portunity flourish the fact that above the 4 9 th parallel a new
race has developed, possessing a new national consciousness dif-
ferent from and, of course, superior to that of the United States
or the trans-Atlantic peoples from which Canada sprang. It
would be difficult indeed to show that such a distinctive race has
yet developed. It would be equally difficult to prove that it is
not developing. It certainly is. Canada is British and French, it
is true, and remains loyal to certain sentiments and certain ob-
ligations that her origins entail. She is also North American, but
above all she is Canadian, and there does not appear to be any
possibility of her Canadianism being lost in a North Americanism.
There are many in the United States who refuse to consider
 NEIGHBORS: A CANADIAN VIEW
Canada as a foreign country. That is flattering, but it may be
misleading. It would possibly be better to recognize that Canada
is acquiring an individuality of her own, similar in many respects
to both the United States and Great Britain, but distinctive in
many other respects from both. The two peoples are, of course,
closely akin, and superficially the resemblance is so striking as
to make it the sad fate of every Canadian abroad to be mistaken
for an American. They talk alike, though Americans sometimes
forget that one Canadian in every four uses French as his mother
tongue; their mental processes are often alike; their physical
environment and social customs are similar; Canadians read
American newspapers and magazines, and play American games.
Hollywood has descended on the north, and the radio knows no
international boundary. There is continuous travel backwards
and forwards across the frontier, although it is not as easy as it
once was, and very often citizens of one side live on the other side
of the line. Possibly more people cross our boundary each year -
it has been stated that the total comes close to 30,000,ooo - in
pursuit of business or pleasure than any other boundary in the
world. Finally, the financial and economic stake of United
States in Canada is enormous and cannot help but draw the two
countries together.
But because Canadians are similar to Americans in so many
respects it would be unwise to imagine either that they are similar
to them in all or that this similarity is going to make relations any
easier in their day-to-day conduct. May it not be true that Ameri-
can influence on Canada, far from really Americanizing the
Dominion, is one of the strongest forces making for a Canadian
national consciousness? One must, of course, fully recognize
the tremendous force that i2o,000,ooo cannot fail continually to
exert on io,ooo,ooo, and realize that Canada must react in some
way to that force. But it can be argued that she more often reacts
against it than in favor of it. To put it crudely, Canadians have
Americans right on top of them and so constantly about them
that if they would survive as a separate people, with their own
definite characteristics, they are forced to emphasize the fact
of their own existence and of their own separateness. In short,
the United States causes Canadians to think more about Canada.
Two other forces have made for the development of a Canadian
national consciousness, namely, the World War and French-
Canada. The influence of the latter is so well known that it need
 FOREIGN AFFAIRS
only be mentioned here -- Quebec knows she would be lost in a
continental state, or even in a continental culture.
Canada really became conscious of her separate place in the
Empire and in the world when she sent 400,000 men overseas to
fight the battles of Europe. It was during the dark days of 1914-
1918, amidst blood and sacrifice, that Canadians first acquired
faith in themselves and confidence in their ability to work out
their own national future. In a very real sense the fields of Flan-
ders are the birth-place of the Canadian nation, and it is a source
of never-ending satisfaction to the Dominion that, while the
United States was forced to win her right to nationhood fighting
against the British soldier, Canada won hers fighting by his side.
The effect of this national development is bound to make itself
felt in the conduct of relations between the two countries. And
yet, while Canada is growing in political stature and national
consciousness, she is not -as is so often the case with young
states - always sure of herself and is somewhat afraid that other
countries, especially the United States, may not appreciate her
new position as much as she appreciates it herself. This may make
Canadians somewhat assertive - a fault Americans will find it
easy to overlook - and, at the same time, sensitive to the actions
of their neighbor and even more sensitive to her indifference. Our
material inferiority we will balance by our moral superiority.
You are big, but we are better; you are great, but we are good.
The United States may, therefore, expect to encounter this atti-
tude of mind, combined with an active national viewpoint, on
questions which will arise between herself and Canada. She will
also probably find, in regard to those questions, that Canada is
somewhat suspicious of her neighbor and determined to drive
the best possible bargain for herself. In this connection the
Dominion encourages herself by believing that she is in a some-
what better position than most countries for bargaining with
Washington.
The other phase of our subject is a consideration of some of the
concrete problems which have arisen or may arise between the
two countries.
There are, of course, certain general problems which, though
they have not yet proved disturbing, have possibilities of dis-
turbance. Canada's position in the British Commonwealth has
been mentioned in t is regard. Her membership in the League,
combined with the fact that the United States is not a member, is
 NEIGHBORS: A CANADIAN VIEW 423
another source of possible difficulty. But Canada has been anxious
from the first to insure that the fulfilment of her Geneva obliga-
tions will not bring her into conflict with the United States. So
we find the Dominion, along with Great Britain and the Scandi-
navian states, taking the lead in opposition to every effort to
strengthen the police or super-sovereign powers of the League,
whether this is attempted by interpretations of the Covenant
or by separate agreements or understandings.
It is probably correct to say that on nearly every important
political question that has come before the League, Canada has
adopted a point of view which may be described as North
American, one that would probably have been adopted by the
United States herself if she had become a member of the Geneva
organization.
This point of view has been particularly noticeable in respect
to such questions as the interpretation of Articles X and XVI of
the Covenant; the application of sanctions; the Geneva Protocol
of 1924; advisory opinions of the Permanent Court; the General
Act for the Pacific Settlement of International Disputes; the
Treaty of Financial Assistance to States Victims of Aggression;
and the 1930 proposals to amend the Covenant to bring it into
harmony with the Pact of Paris.
Canada's attitude to all of the above questions has been clear,
consistent and, so she feels, constructive. It is based on an in-
sistence that the determination of questions of peace and war
must rest with national legislatures rather than with super-
national assemblies; that the true function of the League is to
prevent crimes rather than to punish culprits, and, therefore,
that the League should act primarily as a center for international
consultation and co6peration, as an institution through which
international public opinion can express itself and make its weight
felt. She does not believe, any more than the United States does,
in the League as a super-state, as a glorified Foreign Office, or as
a machine designed primarily to maintain a political status quo.
This Canadian attitude toward the League of Nations has
been voiced not only at Geneva but in London. In the latter
place it has probably had some influence on British policy. It.
as been determined primarily by three considerations. In the
first place there is Canada's position as a British Dominion.
Fifty thousand graves across an ocean have proved to Canadians
that Sarajevo means something to Saskatchewan, that there is a
424 FOREIGN AFFAIRS
price for our place in an Empire. Let that Empire, therefore,
keep out of dangerous European commitments. Secondly, there
are Canada's North American isolationist instincts, with the re-
sulting North American prejudice against European entangle-
ments, and against treaties which ask Canada to produce security
for the consumption of others. And finally, Canada's attitude
has been influenced by the effect that unlimited League obliga-
tions, involving political or economic action, might have on the
Dominion's relations with the United States.
The United States remains outside the League and has not yet
given any assurance that in a League or codperative war she would
forego her traditional insistence on neutral rights. Canada has no
desire, any more than Great Britain has, of becoming involved
at the behest of Geneva in a struggle with her neighbor over
neutral rights. That is one reason why she is so definitely opposed
to the French idea of putting a club in the hands of the League.
The use of that club might cause the United States to brandish
one of her own, an eventuality which could hardly be viewed
with equanimity by the Dominion.
There is, however, a lesson to be learned from Canada's experi-
ence at Geneva. It is this. She has demonstrated that it is possible
to maintain a North American viewpoint and, at the same time,
to remain a loyal friend and staunch supporter of the League,
refusing none of the legitimate obligations of membership. There
are many Canadians who wonder if the United States will ever
learn that lesson.
Another general problem, already mentioned in another con-
nection, is the relation of the Monroe Doctrine to Canada. What
would be the attitude of the United States if the British West
Indies desired to join the Dominion or if Canada, not Great
Britain, should intervene in a Venezuelan dispute? This is an
interesting question, but one which will hardly require an im-
mediate answer, because: Canada, for the present at least, has
no desire to become a Caribbean Power or to receive the atten-
tions of the State Department as such. Indeed, she emphasizes her
safe and splendid isolation from Latin-American turmoil by shun-
ning the vacant chair in the Pan-American building. Contact with
that turmoil has the same: lack of attraction for her as participation
in European questions has for certain United States Senators.
Among the more concrete and immediate problems between
the two countries, possibly the most important is the St.
 NEIGHBORS: A CANADIAN VIEW
Lawrence Waterways question. This is of great political and
economic significance to both countries and causes Canada for
the first time to be confronted with the negotiation on her own
responsibility of a treaty of the first magnitude. There is a
strong feeling in Canada that, advantageous as this undertak-
ing might be to the country, every precaution should be taken
to protect our political and other interests so completely that
they cannot conceivably be prejudiced - a feeling which often
expresses itself in the demand for an all-Canadian waterway and
always in an insistence on caution. There are difficulties enough
in the way of the "canal to the sea" -economic difficulties,
difficulties over state and provincial rights, power difficulties
- without having the matter tangled up with national fears
and prejudices. But it should be recognized that such entangle-
ment is possible, and wise statesmanship will take every care
to avoid it.
There are also questions arising out of the enforcement of
American prohibition laws. These, it may be assumed, provide no
small part of the work for the Department of External Affairs
in Ottawa, and have caused no slight trouble in Washington
as well. They have occasionally resulted in incidents which have
caused unfriendly comment north of the border. There should be
a clear and definite understanding between the two countries,
possibly embodied in a treaty, which might serve to settle these
rum-running and prohibition difficulties. Canadians certainly
feel that they have done their part, as a friendly neighbor, in
co6perating in the enforcement of the laws of another country.
They have accepted a Liquor Treaty which extends the juris-
diction of foreign officials over Canadian boats far beyond the
distance which is recognized as permissible in international law,
without gaining the compensating advantages which accrue to
Great Britain by that Treaty. They have passed an Act of Parlia-
ment which has prohibited clearance of liquor from Canada to
the United States, an Act which has resulted in the loss of a
large revenue to their country and the main effect of which
seems to have been the diverting of rum-running from the
Canadian border to the islands of St. Pierre and Miquelon.
Some Canadians are awaiting representations from Washington
to Paris asking France to take the same steps in respect to St.
Pierre and Miquelon that Canada was requested to take and did
take in regard to her territory.
 FOREIGN AFFAIRS
It would, of course, be mere cant for the Dominion to take
credit to herself for these acts as manifestations of superior virtue,
for they were inspired simply by those considerations which
should influence all governments in their relations with each
other. But there is a feeling in Canada that the same spirit has not
always been shown by Washington, and also that there has been
rather more zeal than discretion displayed by Coast Guard and
other officers in the enforcement of the prohibition laws in so
far as they affect smuggling. Canada, of course, is not desirous
of standing before the world as the great protector of the rum-
runner; in fact, there is little doubt that most Canadians would
be intensely relieved if, in respect to I'm Alone's, 7osephine K.'s,
and others of that breed,, we could strike a medal at Ottawa with
Queen Elizabeth's Armada inscription on it, "Deus effiavit et
dissipati sunt." We do feel, however, that we are often forced into
the invidious position of being the defender of these dubious peo-
ple in cases where the defense would seem to be absolutely un-
avoidable on grounds of international law.
Border crossing and immigration questions constitute a vexed
problem. Here there is a real danger of bureaucratic stupidity on
both sides causing irritations which are not easy to remove.
Canadians have become accustomed to going to and fro across
the international boundary, and the eradication of the habit
causes not only inconvenience but unfriendliness. It is not easy
to talk with enthusiasra about the 4,000 miles of unguarded
boundary when immigration officers make it as difficult to cross
that boundary as to climb over the tariff wall. This is a question
which particularly affects some thousands of Canadians living
on one side of the border and working on the other, whose position
has become difficult of late owing to Washington's tightening up
of regulations, caused, no doubt, by the prevailing economic
depression and consequent unemployment. At the very time when
Canada was refusing liquor clearances the United States was, if
not refusing, at least making more difficult, border crossing.
In this connection, a citation from the Border Cities Star, of
Windsor, Ontario, dated December 24, 1930, is interesting:
Thousands of Americans are employed in this country - many of them in
highly important and highly-paid executive positions. We are delighted to
have them; we want more of them. At the same time, we believe that Cana-
dians crossing the line for employment, business or social visits are entitled
to just as much courtesy, just as much consideration there. For many decades
 NEIGHBORS: A CANADIAN VIEW
it has been common custom for Canadians to work on the American side and
Americans on the Canadian side, as fancy or interest dictated. For years and
years this arrangement was not even a topic of discussion. It was traditional;
it was part of the regular routine of life along the international border. Business
was established on that basis. Homes were built. Investments were made.
The arrangement was a perfectly satisfactory one all around.
A few short years ago, however, rumblings began. In 1927 it was estimated
that more than i5,ooo persons were crossing daily from the Border Cities to
work in Detroit. Today, our Chamber of Commerce figures, this number has
been reduced to approximately 3,6oo and is steadily shrinking. This is due,
largely, to the persistent efforts of the American immigration authorities,
working, of course, on orders from Washington. The going has been made
harder and harder for those who have their employment in Detroit. All the
commuters have been put to expense, inconvenience, annoyance and, in many
cases, real humiliation. People of the finest type have been called before boards
of inquiry and then forcibly deported for a year - for no other reason than
they may not have been working in Detroit for some months. It has been a
wearing-down process, the idea being apparently to crowd the Canadian com-
muters out as rapidly as possible.
The time has come for a show-down. Does Uncle Sam want to continue
friendly business relations with this country or does he not? Does Uncle Sam
want Canada to keep on buying his goods or is he no longer interested in our
money? Does Uncle Sam appreciate Canada's action in meeting his request for
a stoppage of liquor exports from this country- at a cost of millions to
Canada - or does he not care? All these and many other questions are being
asked. Perhaps we shall be able to secure the answers to them before long.

Fisheries disputes have been a fertile source of controversy for

a hundred and fifty years or more, and the source shows no signs
of drying up. The development of large scale trawler fishing with
modern refrigeration has enabled United States fishermen on the
North Atlantic to base their operations on home ports; this has
removed most of their grievances. Minor irritations, however,
continue to develop, especially in the Pacific where the use of
Canadian shores is still essential for American fishermen and
where the Dominion's fisheries protection vessels have lately
been showing an unwonted zeal in prohibiting that use.
Closely allied to fisheries questions is the problem of terri-
torial waters. Canada's attitude to this problem should, one
would think, be the same as that of the United States, as con-
ditions are so much alike in both countries. But the Dominion
has inherited certain policies and certain preconceptions from
Great Britain in regard to territorial waters, and the British
and American views sometimes clash, notably in regard to the
admissibility in international law of a 12-mile jurisdictional zone
428 FOREIGN AFFAIRS
for Customs purposes. Each country has also claimed certain bays
and straits as territorial waters, though it is extremely doubtful
if the other in every case admits these claims.
There are boundary problems. Our boundary may be free
from cannon but it certainly is not free from controversies. Most
of them, however, can be left to that unique and valuable in-
stitution, the International Joint Commission. The work of that
body during the last twenty years has demonstrated its usefulness
as a medium for the adjustment of questions among conflicting
interests where it is necessary to have a certain amount of "give
and take" in order to get a workable settlement. But by reason
of equality of representation from both countries it does not seem
to be the most suitable type of tribunal for dealing with justicia-
ble disputes. This Joint Commission has been more often the sub-
ject of uncritical praise than careful appraisal. But if its history
and achievements are dispassionately studied it becomes ap-
parent that it has no: yet been seriously tested and that its
chances of successfully meeting that test when it comes will de-
pend on whether or not it has been kept above politics, with a
stable and able membership, working as a court of law rather than
as a commission of diplomatic representatives. The numerous
changes that have been made in the United States personnel on
the Commission have caused some suspicion that the above
attributes are not considered essential in Washington. Certain
it is that if the Joint Commission is used by either country as a
final resting'place for discarded politicians it will soon become as
futile as most of the other commissions that clutter up the inter-
national scene.
A new and interesting problem has been created by radio broad-
casting. Here is one commodity which laughs at tariff walls and re-
fuses to recognize embargoes and anti-dumping regulations. In
time of acute national feeling the radio will be used by every coun-
try to protect and promote the national interest, but even in peri-
ods of calm it acts as an instrument, if not always consciously, for
the propagation of national viewpoints, national cultures, national
ideals. For Canada, this question of radio broadcasting is an espe-
cially important one because owing to the fact that the United
States possesses nearly all the broadcasting channels and fills them
with a language which Canadians can still understand, the Do-
minion is, in the ether, more or less at the mercy of her neighbor.
It is suspected that most Canadians, when they should be listen-
 NEIGHBORS: A CANADIAN VIEW
ing to a half-hour's historical broadcast from Ottawa, are absorb-
ing the strains of a jazz orchestra from Chicago or hearing of the
virtues of a toothpaste from New York. Canada would like to
be less dependent on her neighbor in this respect. This feeling,
indeed, is one of the strongest motivating influences behind the
Canadian Radio League, which is conducting a vigorous campaign
to bring radio broadcasting under federal government control.
Finally, there are those political problems, the most important
of all, which arise out of commercial and financial contacts
between the two countries. There are some in Canada who fear
that the exploitation, or better, the development by United
States interests of Canada's natural resources will Americanize
their country. Possibly there is more cause for fear that it may
Canadianize the United States - that the enormous American
investments in this country may encourage an embarrassingly
acute interest in Canada's efforts to regulate and control her own
economic activities, and particularly in legislation to conserve
her natural resources or to extend the development of public
ownership and social control. This development has gone farther
in Canada than in the United States, witness the Canadian Na-
tional Railways, the Ontario Hydro-Electric enterprise, govern-
ment encouragement of co6perative institutions in agriculture
and the present agitation for government control of radio broad-
casting. Last November a Canadian Professor of History, speak-
ing in Montreal, suggested that the only real safeguard against the
absorption of Canada by the United States through economic
penetration lay in putting the Dominion's strategic industries
and services under public ownership and in building up through
that means an economic system quite distinct from the American.
Such a safeguard, if it were effective, might prove troublesome,
but there is at least the satisfaction, of knowing that Canada is
not Nicaragua, and that there will be no need either for marines
or Sandinos.
It may be expected, then, that the relations between the two
states will become increasingly important and that the problems
arising therefrom will grow in number and in magnitude. The
very similarities of the two peoples and the intimacy of their con-
tacts will promote such problems, while making easier, it is to
be hoped, their peaceful solution. As Chief Justice Hughes has
said, "While we will have much to discuss, we will have nothing
to fight about." Why?
430 FOREIGN AFFAIRS
There will be nothing to fight about because there is developing
in each country with respect to the other the habit of arbitration
and peaceful settlement. So true is this that when differences
now arise there is a tendency to regard them almost as domestic
matters and to apply to them domestic procedure based on in-
quiry into the facts followed by an award based on that inquiry,
which is to be accepted as a domestic award is accepted - with
obedience even if with grumbling. Furthermore, the differences
and controversies are not likely to involve directly those in-
flammatory issues of national defense, national security and
national prestige, the sources of so much disaster. War psychology
based on fear has no place in Canadian-American relations. It
would be dangerous for Canada to be afraid of the United States
in what might be termed the European sense, while it would be
absurd for the United States to be afraid of Canada in any sense.
But it should not be forgotten that while in the past peaceful
solution of mutual differences has been encouraged by Canada's
weakness and her colonial position, in the future it will have to
rest on a basis of mutual compromise, mutual understanding and
mutual respect, as between self-reliant and independent states.
That solid basis exists now, and it is because of that fact that
we can feel confident that the relations between the two great
democracies of North America will not result in serious difficulties
or engender bitterness as the seed for future trouble. There is
between them neither malice nor fear, for each feels that it can
rely on the other's sense of justice and appreciation of the ad-
vantages of good neighborhood.
 CAN AIRCRAFT BE LIMITED?
By Edward P. Warner

N THE disarmament equation aviation is still a factor x. It

is still preeminent among the difficulties, and so among the
obstructions to success on a comprehensive front. In 1932, as
on every other occasion since the World War when the matter of
arms limitation has received concerted attention, the technical
problems of the air arm are the most baffling that have to be
solved. In air forces there are no universal units of measurement.
There is no sharp distinction between one type of aircraft and an-
other such as can be drawn, for example, between battleships and
cruisers. There is no generally acceptable yardstick, correspond-
ing to tonnage in naval vessels, for the simple expression of
relative collective strength. There is not even any sharp line
of demarcation between military and non-military craft.
Limitation, difficult enough at best for technical reasons, is
made harder by the mystery which envelops the possible uses and
effectiveness of aircraft in war. Opinion is by no means agreed on
these points. Some military men and a vast number of civilians
have come to take it for granted that the next war will be fought
almost exclusively in the air, and that it will be ended within a few
hours or a few days by the destruction of all the great populous
centers in the territory of the less well-prepared of the combatants.
Opposed to this opinion is that of most students of military
and naval affairs, who take such forecasts with many grains of
salt. Those responsible for national defense are not persuaded that
aircraft make other arms obsolete. Uncertainty is inherent in
the nature of the air arm and in the conditions under which air-
craft are constructed. An air force, unlike a navy or a powerful
army, can conceivably be built under cover; and in the hands of
a treacherous neighbor it can strike in the dark.
Confronted by technical difficulties, by divided opinions, by
lively fears, it is not surprising that responsible government
officials, or at least most of them, are inclined to rely on air forces
of their own rather than on pledges as a safeguard against the
a~rial threat. Hence, statesmen and soldiers alike are highly sus-
picious of any attempt to restrict their nation's development of
air power.
The most sweeping proposal for limitation comes from those
 FOREIGN AFFAIRS
who believe that any air armaments at all are bound to wreak
destruction upon civil populations in the next war. They have
found a norm in the military aviation causes of the Versailles
treaties, by which the defeated countries have been deprived of all
air armaments since 19x(9. Taking that as pragmatic proof that
a nation can exist without an air force, they have advocated a
world-wide abolition of military flying, putting all countries upon
the German level. This plan has been most actively promoted by
M. Henri de Jouvenel, Viscount Cecil and Sir Gilbert Murray,
and has attracted some support in Germany.
The abolition of military aviation, if it could really be enforced,
would be greatly in the British interest, and it is conceivable that
the British delegation may put forward some suggestion of the
sort at Geneva. Such a proposal might be accepted by other
countries as an economy measure and to assuage the fear of bom-
bardments of undefended cities, provided military aviation could
be accurately defined and provided the fear of aerial surprise by
a treacherous neighbor could be overcome.
But experience in enforcing the a~rial clauses of the Versailles
treaty has shown that it is next to impossible to draw a hard and
fast boundary around military aviation. In i919 Germany was
beaten and disarmed. There was practically no limit to the condi-
tions which the Allies could impose upon her. The famous "nine
rules" of 1920 were designed to take into account everything
which could make an airplane fit for military service. They seri-
ously handicapped the development of German air transport.
They set up conditions so harassing and so humiliating that no
state could ever be expected to accept them except under com-
pulsion vi et armis. Yet, even so, they failed to satisfy Germany's
former enemies that milit:ary aviation was really excluded, and in
particular they failed to allay French alarm over the alleged de-
velopment of great German military air strength under the guise
of civil flying. French authorities have frequently declared that
France, with four or five thousand military planes, is outclassed
by Germany's three or four hundred air transport craft. Need-
less to say, if military aviation were abolished in all countries
civil flying would be watched with greatly intensified suspicion.
As a way out of all these difficulties M. de Jouvenel and Vis-
count Cecil have suggested the internationalization of civil
aviation. The suggestion is somewhat vaguely defined, but ap-
parently it comprises the joint international operation of air
 CAN AIRCRAFT BE LIMITED?
transport routes, the abandonment of governmental stimulus to
national aircraft industries, and the formation of a cartel to
allocate and control aircraft production.
So all-inclusive a proposal could only have come from countries
where, generally speaking, civil aviation means subsidized air
transport and where the private ownership of airplanes is on a
very modest scale. At the present time there are three airlines
from western Europe to southeastern Asia- the British "Im-
perial Airways," the French "Air-Union Lignes D'Orient," and
the Dutch "Koninklijke Luchtvaart Maatschappij," more gen-
erally known as the "K. L. M." They follow roughly parallel
routes and have kindred purposes. All three are generously sup-
ported from the public purses of their respective states. To
internationalize them would be relatively easy. It might perhaps
be feasible, though much more difficult, to internationalize the
route from Miami to Cristobal and down the west coast of South
America. It is even remotely conceivable that some form of
international supervision might be devised for purely domestic
air transport operations (such as flourish in the United States
to the extent of about 150,000 miles of flying per day) provided
they are supported by the governments in question. But how,
short of the formation of a World State, would we set about inter-
nationalizing a transport line which is completely independent of
government support and runs as an ordinary commercial enter-
prise? By what imaginable means could one internationalize the
operation of the aircraft - faster than some fighting planes and
with more carrying capacity than some bombers - employed in
the service of the Detroit News and of the McAleer Auto Polish
Company? How internationalize the operations of Mr. Wiley
Post's world-girdling Winnie Mae, or the a~rial activities of Mr.
Wallace Beery and a thousand other private fliers? These are
not mere trivia. French alarmists often allude to the Sportqflieger
Vereine, groups of young Germans banded together to learn to fly
and practising the art on machines of insignificant power and
performance. It is apparent, then, that when civil aviation is
considered in the broadest sense, in the sense in which it is actu-
ally developing, "the internationalization of civil aviation"
becomes a phrase of very limited application.
On the whole, however, the principal proposals from British
sources are for the abolition of military aviation. That was M. de
Jouvenel's original idea also, but he has recently modified it, and
 FOREIGN AFFAIRS
now proposes that military aviation be retained, but that it be
reserved as a weapon of the League of Nations. The proposal
for such an international air force was first pressed by Mr.
Clifford B. Harmon, an American long resident in Paris. The Pre-
paratory Commission gave his suggestion a chilly reception. It
can at least be said in its favor that from a purely technical point
of view the creation of' an international force would bring the
abolition of national air forces further within the realm of possi-
bility than it would otherwise be. As a practical matter, however,
Great Britain and the United States seem.likely to oppose this
scheme, just as they have opposed other plans for putting force
at the disposal of an international organization.
Discussion of plans for internationalizing aviation has had
one good result; it has brought out the necessity of drawing a
sharp distinction between military and civil aviation in govern-
ment policy, and has convinced most nations that civil enter-
prises should not be supported by their governments for purely
military reasons. This principle was adopted at a conference of
civil aviation experts held at Brussels in the spring of 1927, and is
included in the Draft Convention prepared by the Preparatory
Commission.
The officials of commercial airlines have as a rule no military
interests. In most instances they insist on financial support from
their governments, but they would much prefer that it be given
on purely commercial terms. The Brussels meeting of 1927
brought together a committee of which about one-third of the
members were actively engaged in the operation or promotion of
air transport enterprises. Most of the others were officials in the
civil aviation branches of their governments. The committee had
comparatively little difficulty in agreeing that:
It is desirable that the development of civil aviation should be directed
solely towards economic ends, and should remain outside the sphere of military
interests.
Civil aviation should be organized on autonomous lines, and every effort
should be made to keep it separate from military aviation.
If states intervene in any capacity, whether directly or indirectly, in civil
aviation undertakings, it is desirable that the state organizations dealing with
the matter should be quite separate from the organizations dealing with
military aviation.
It is desirable that governments should refrain from prescribing the embodi-
ment of military features in :he build of civil aviation material, so that this
material may be constructed for purely civil purposes, more particularly with
 CAN AIRCRAFT BE LIMITED?
a view to providing the greatest possible measure of security and the most
economic return.
As regards personnel, and in particular pilots, it would be desirable that civil
aviation undertakings of all kinds should not require such personnel to have
received a military training or give preference to those who have received such
training.
It is afortiori desirable that these undertakings should as far as possible
avoid seconding personnel from military to civil aviation for the purposes of
the latter.
The Committee desires to point out the undesirable effects which may
result from the direct or indirect encouragement by governments of civil air
transport lines for military rather than for economic or social purposes.
At the present time civil aviation in most cases has become national in
character. It would seem desirable to encourage the conclusion of eco-
nomic agreements between civil aviation undertakings in the different
countries.

All of these points have been incorporated, in essential spirit,

in Article 28 of the Draft Convention. It is rather surprising,
however, and typical of the confusion pervading the whole sub-
ject because of its technical novelty and the diversity of govern-
ment policies, that the most strenuous objections to Article 28
have come from two of the most pacific of states, Sweden and
Canada. Both have a special situation. Both have a great amount
of survey work and emergency transportation to carry on in
thinly settled or completely unsettled regions, and quite innocent
of any military purpose are using military personnel for these
operations. Both object to restriction on such use. From the con-
tinental countries in which commercial air transport has a really
military purpose and flavor, on the other hand, there comes no
word of protest. We may suppose that they will still be able to
accomplish their purposes by indirection, without offense to the
letter of the Draft Convention.
Article 28 of the Draft Convention (echoing the call of the last
paragraph quoted above from the expert committee's report)
falls far short of true internationalization. What it asks for has,
in fact, already been largely attained. Already it is common prac-
tice for the airlines between European centers to be operated by
agreement between the major air transport companies of the
countries concerned. The agreements, however, do not touch on
questions of equipment or personnel. They are the outcome of
purely economic competition, with the governments participating
only to the extent of refusing to sanction penetration by a foreign
436 FOREIGN AFFAIRS

airline except on a basis of complete reciprocity and equal division

of activity. Thus, the Deutsche Lufthansa and the Compagnie
Generale de Transports A,'riens both maintain services, with equal
schedules, between Paris and Berlin. This division of traffic may
produce some co6peration between the companies concerned, but
it does little to allay international suspicion or to promote the
reduction of air armaments or limit the applicability of transport
material and personnel to military purposes.
Articles 28 and 34 of the Draft Convention, the latter calling
for complete publicity and periodic reports on the scope of civil
aviation and the number of planes in civil employment in each
country, represented a compromise on the most bitterly argued
of all the aeronautical problems that came before the Preparatory
Commission. It would be foolish to pretend that the compromise
is generally satisfactory. Undoubtedly the whole question will
now be reopened and fought over at Geneva. The dissatisfaction
of certain nations with any solution that may be reached will
stand in the way of any effective determination of the ratios or
numbers to be used in limiting military air forces.
If civil aviation were actually internationalized, perhaps this
perpetually discussed question of the extent to which civil aviation
is a useful military auxiliary would not arise. Under present con-
ditions, however, it insists on arising, and in seemingly insoluble
form. As has so often been found the case in efforts to limit arma-
ments, the nations divide sharply into two groups on the problem
of civil aviation control, -- on one side the French bloc, and on
the other an Anglo-American-German-Scandinavian grouping.
France, with an air force approaching a two-Power standard in
strength, with very little civil aviation and a people who show
little inclination to develop flying as a sport, has argued that
military and civil aviation are completely interchangeable and
that limitation must be applied to all aerial activity as a unit.
The American and German delegates, with the partial concurrence
of the British, have maintained that civil aviation is of negligible
military significance, that the economic results of any attempted
control of civil development would be disastrous, and that limi-
tation must be confined to military material and personnel, in-
cluding the reserve.
As a matter of fact neither extreme view is supportable. To
assert that a civil plane is the equal of a military plane in value,
especially without reference to its power, size or performance, is
 CAN AIRCRAFT BE LIMITED? 437
preposterous. To claim, as the American and German representa-
tives on the military subcommission of the Preparatory Commission
at one time did, that "civil aviation as such is of comparatively
little value as a war armament" may be true if the definition
of the word armament is very narrowly restricted, but in any
broad sense it is much exaggerated. It is in direct opposition to the
opinion of most experts who have written on the subject, includ-
ing those of American and German nationality. It is also refuted
by the fact that war and navy departments and air force officials
everywhere display keen interest in the progress of civil aviation,
and by the known fact that civil aircraft were pressed into emer-
gency transport service during the recent French Army manceu-
vers and proved to be of great value. It is probably correct to say
that civil aircraft, with very rare exceptions, cannot readily be
adapted for fighting, or even for bombing places that are well
enough defended to hold the bombers to a high altitude. The
trained personnel, however, constitute a resource of immense
value, and a great proportion of the civil machines can be put into
auxiliary service - for example, for transport duty, the making of
observations in quiet territory, or even the bombing of unde-
fended places.
If there were nothing to be considered except the reaching of an
agreement that would establish and maintain certain ratios of air
strength among the contracting Powers, the most reasonable point
of view would be the intermediate one that limitation should
apply directly only to military aviation, including reserves of
military material and of specially trained personnel, but with the
development of civil aviation taken into account as one of the
modifying factors. That method is impractical, however, because
civil aviation is important in different degree for the various states
and also because it has been developing so rapidly and because it
seems undesirable to impose any restriction on its natural growth
for peaceful employments. The Brussels committee of experts.
already referred to, expressed itself very strongly on the dis-
advantages of taking civil flying into account at all in arriving
at a system of limitation.
The committee further condemned, as sure to have serious
economic consequences, any restrictions on the characteristics of
civil aircraft. Limitation in terms of performance or of such
generally used engineering ratios as weight per horsepower has
often been suggested (the possibilities were analyzed in some de-
 FOREIGN AFFAIRS
tail by the present writer in FOREIGN AFFAIRS, July 1926).
In declaring itself opposed to anything of the sort, the Brussels
committee expressed its opinion that, in the light of the failure
of the attempt to define military aviation in Germany and of the
rapid development of the art of flying, no rigid definition or line
of demarcation could be drawn. The Preparatory Commission
accepted that non possumus.
The problem of definition is becoming no simpler with the pas-
sage of time. Half a dozen years ago, when the writer was pre-
paring the article just referred to, it seemed very probable that
military and commercial design in aeronautics would diverge just
as had been the case with seagoing craft, and that it would
become comparatively easy to draw the line between types. The
contrary has occurred. There has been an increasing demand for
commercial airplanes of very high speed and climbing capacity.
Although specialized mili:ary craft are still to be distinguished
by the provision that is made for the installation of various spe-
cialized items of armament, the differences in military and
commercial planes in inherent performance and in general design
characteristics are fewer now than they were in 1926.
If civil aviation is to be excluded from the account, and if no
one is able to devise a way of saying precisely what civil avia-
tion is, limitation is obviously to be confined to those air forces
which their governments frankly avow are military. The provi-
sions of Article 28, though helpful, are so vague that they cannot
be put into rigid effect. The fact is that it was necessary to dodge
the question of civil aviation in the Draft Convention. It almost
inevitably follows that reserve material will be ignored and that
limitation will be applied only to planes actually in full commission
as a regular and permanent part of the equipment of a regular
military air force. The Draft Convention (Article 25) proposes that
"the number and total horsepower of the airplanes, capable of
use in war, in commission and immediate reserve in the land, sea
and air arm forces" shall be restricted.
It is not only in respect of civil aviation that the a~ronautical
sections of the Convention suffer from vagueness. Indeed, they
contrast very badly with other portions of the document. The
paragraphs dealing with naval questions are (with the single
exception of that covering the definition of an aircraft carrier)
clear and concise. But the a~rial clauses, prepared largely by
statesmen with some knowledge of military and naval affairs in
 CAN AIRCRAFT BE LIMITED? 439
general but with no specific experience in a~ronautical matters,
are full of loopholes and doubts.
For example, there is the question of "immediate reserve."
At what point does a reserve cease to be immediate? Obviously
the term includes the machines directly attached to squadrons
in the field and held for replacement in case of minor damage to
some of the operating equipment. Obviously it excludes planes in
dead storage, bought solely against a possible emergency need and
left stored in the original crates. But does it include a general
reserve held at a depot into which all squadrons turn their ma-
chines for occasional overhaul and from which they draw new
ones? Does it include craft held for the replenishment of the
supply of military flying schools? No one appears to know.
Even more perplexing is the phrase "capable of use in war."
The reports furnished to the League of Nations by various
Powers regarding the state of their armed forces already give
evidence of the greatest confusion on this point. Some reports
include everything that will fly. Some exclude experimental types.
A number of them exclude primary training machines. Some
exclude transport and other utility types. Yet every one of those
is "capable of use in war" in some capacity or other. Seemingly
the phrase is being accepted in many cases as meaning "capable
of effective use over the front lines." Obviously, even if the word-
ing were so changed, there would still be room for immense differ-
ences of opinion and interpretation.
In spite of the vagueness of the Draft Convention where a~ro-
nautical matters are concerned, and despite the prevailing un-
willingness to do anything that will interfere with technical
development in the air, it is surprising to find no attempt what-
ever to control the properties of individual aircraft or to treat
them as individual units. The global method of limitation, hotly
opposed by all the great naval Powers in its application to sea
forces, has had its triumph in the air. Indeed, there has been a
substantial sentiment in the Preparatory Commission in favor of
limiting only the total number of planes, without any reference
whatever to their strength as individual units or in the aggregate.
In opposition, various groups of nations endeavored to secure
limitation of aggregate strength by various technical devices
which would give those nations an advantage either over the
world at large or over some traditional foe.
The relative insignificance of the points upon which these
440 FOREIGN AFFAIRS
struggles for national advantage sometimes turn is a reminder of
the extent to which the presumably general desire to reach agree-
ment for the general good is subordinated to considerations of
national advantage, and also of the importance of having highly
competent technical personnel close at hand during the discus-
sions of such matters. Most of the delegates are immensely inter-
ested in the problem of disarmament and have lived with it for a
number of years, but nothing in their experience has qualified
them to conduct a lengthy and detailed argument on the relative
advisability of limiting aircraft by aggregate horsepower or by
aggregate wing area.
It happens that differences in national practice in airplane de-
sign are much more marked than exist in the designing, for
example, of naval vessels. Thus, to mention only a single instance,
British airplanes almost invariably have wings of relatively thin
section with a large amount of external bracing to support them,
while the German and Dutch practice is to use much thicker
sections and carry the structural bracing internally. French and
American designs vary between the two extremes. The result is
that the British have to use somewhat more wing area to get the
same result than do the builders of other countries, and as a
natural result the British delegation were hotly opposed to use of
wing area as a measure of air force strength. The Germans, the
Dutch and the Americans, on the other hand, were enthusiastic
in its favor. Agreement was finally reached on the use of aggregate
horsepower as an index.
The battlefield was thereupon shifted to the definition of horse-
power. German engines run at low speed and use larger cylin-
ders than are conventional in other countries for developing the
same power. The German representative on the special technical
committee which was charged with the development of the horse-
power formula was consequently in favor of taking horsepower,
for the purposes of limitation, as directly proportional to engine
weight. The American and French delegates preferred to make it
depend on cylinder volume alone. A compromise was finally
reached which includes both factors, but which appears to be
distinctly unfair to typical German engines. It will result in giving
the German, for a given nominal limitation on horsepower, from
ten to fifteen percent less power actually developed in flight than
the French, for example, could secure under the same figure. Of
course the Germans, or any other country aggrieved by the work-
 CAN AIRCRAFT BE LIMITED?
ing out of these rules, will have the option of changing their design
practices, but it is not easy to do that within a short time.
Through all these debates the delegates of the several states have
played the parts of so many marine architects trying to develop
designs for new yachts which will "beat the rule" under which
handicapping is done, except that in this instance the endeavor is
not to create something new that will beat an existing rule but to
secure the adoption of a rule that the existing practice will beat.
But though there are plenty of flaws and ambiguities in the
Draft Convention it would be unfair to leave the subject without
paying tribute to the spirit of compromise that made it possible to
draft any convention at all. The problem is immensely compli-
cated and the agreement reached is imperfect; still it is an agree-
ment, and it is a far better one than seemed likely in 1927, when
the Preparatory Commission was holding its third and most
arduous session.
The technical points mentioned above would be trivial if the
nations were possessed of a general and genuine will to find means
for limitation, together with a reasonable degree of mutual trust.
The complexity of the problem of the air arm will have a decided
effect on the success or failure of the Conference, but it is a some-
what indirect effect. If the Conference fails to limit air forces, the
technical difficulties will be a plausible excuse rather than the un-
derlying cause. The real sources of the trouble will be in the
state of feeling in Europe, particularly the uneasiness among
the neighbors of France about the French determination to make
security the precursor of disarmament, and the resentment of
the German Government and people over the aErial clauses of the
Treaty of Versailles. The first points are more or less obvious, and
apply in some form or other to all attempts at arms limitation in
any field. The last, which is the most important, has a special
aEronautical twist.
At the time of writing the German attitude on armament ratios
has not been defined. We have yet to see what measure of inferi-
ority to France the German delegates will be prepared to accept
in a treaty which they are under no compulsion to sign. It is at
least possible that in dealing with land and sea forces some turn
of phraseology can be developed which will avoid a flagrant de-
parture from the terms of the Treaty of Versailles, and still be
acceptable to the German Government. In respect of air force
such an outcome is quite unthinkable. The Treaty says in plain
442 FOREIGN AFFAIRS
language that Germany shall have no military air force whatever.
That any German delegation will of its own free will sign a docu-
ment perpetuating that state of affairs is as inconceivable as that
an American delegation would voluntarily accept naval inferi-
ority as against any other nation. It is only a little less incon-
ceivable that France will permit any explicit modification of the
Treaty's terms. There lies the dilemma. It seems well-nigh
insoluble.
A really substantial reduction of air forces is probably less
likely than a reduction of any other form of armament. The air
arm is in process of development and expansion, and armies and
navies are becoming ever more dependent upon it. Aircraft are
now a part of the equipment of every large naval vessel and of
every unit of troops in the: field. At the present time, for instance,
the United States Navy has only about 2oo airplanes based on
aircraft carriers. On the scale on which planes are now planned
for these ships, with a much larger complement for each vessel
than was thought possible four or five years ago, the total number
needed to equip all the carriers that we are allowed under the
London Naval Treaty would be about 750. Similar situations
exist in certain other navies. The technical advisors of most of the
delegations, then, are likely to declare themselves seriously dis-
satisfied with their present standard of air strength, and desirous
of stabilizing at a considerably higher figure. Unless there is to be
a very drastic reduction indeed in the general standard of surface
armaments, any agreement affecting air forces is likely to permit a
general building up to somewhat above the present levels.
As an alternative or supplement to the limitation of numbers
and power of planes and of the personnel of air forces - especially
should agreement on those points prove extraordinarily difficult
- the Conference is likely to make an effort, by amplifying the
laws of war, to limit the ways in which planes may be employed.
There has been much discussion during the past winter, particu-
larly in British circles, of the feasibility of abolishing a~rial bom-
bardment. The Conference has had a timely object-lesson
of the destructive possibilities of that form of attack laid at its
very doorstep, for two days before it convened in Geneva the
Japanese bombed a section of Shanghai, and are reported to have
killed iso Chinese by a single bomb falling on a railway station.
The suggestion that attack upon ground objectives from the
air be abolished will not be entirely new to the delegates at
 CAN. AIRCRAFT BE LIMITED? 443
Geneva. The proposal has already been broached only to be
repelled, though not decisively. During the Preparatory Com-
mission's sixth session, in 1929, the German delegation proposed
the inclusion in the Draft Convention of a provision that: "The
High Contracting Parties mutually undertake not to launch
weapons of offense of any kind from the air by means of aircraft,
nor to employ unpiloted aircraft controlled by wireless or other-
wise, carrying explosive or incendiary gaseous substances. They
further undertake to make no preparations of any kind for the
use of such weapons of offense." M. Litvinov, following usual
Soviet policy, not only welcomed the German suggestion but
went further, declaring the Soviet Government's desire that all
implements of war directed primarily against civil populations
should be forthwith destroyed. The other delegates who spoke,
and there were many of them, damned Count von Bernstorff's
proposal with faint praise. On a record vote, only the Swedish and
Dutch representatives and one other joined MM. von Bernstorff
and Litvinov in supporting it.
The defeat was indecisive, however. A number of the delegates
who voted against the proposal, including those of the United
States and Great Britain, did homage to the spirit that was pre-
sumed to animate it and explained their votes as due solely to the
conviction that the Draft Convention was not the place for pro-
hibitions, nor for a fixing of the laws of war. It may be remarked
in passing that no such considerations restrained the same dele-
gates from voting at the same session to include in the same Con-
vention an absolute prohibition of bacteriological warfare and a
limited prohibition of gas warfare.
The delegates who voted down Count von Bernstorff's motion,
not desiring to be left in the position of upholding indiscriminate
aErial attack on cities, immediately and unanimously passed a
resolution interpreting their own action as "not in any way mean-
ing that the bombardment of civilian populations is authorized."
The 1922 Hague Conference on the Rules of A~rial Warfare had
undertaken definitely to forbid such bombardment, but only a
few nations ratified the resultant convention and it lapsed into
desuetude. The question promises to be a perennial one. It is quite
impossible to debate the limitation of a~rial armaments without
involving consideration of the advisability of changing the laws
of war, and quite illogical to insist on the rigorous separation of
two such intimately connected questions.
 CHEMICAL WARFARE
By .7ames E. Mills
HREE new and powerful weapons of warfare were devel-
oped in the World War - aEroplanes, gas and submarines.
It is fortunate for the world that two o these - a roplanes
and gas - are bound up with the development of the industries
of the world. It is axiomatic that every effort should be made to
prevent war; but if war cannot be prevented, then it is very much
better for the world that when it comes it should be fought with
weapons that have not required an immense outlay of funds dur-
ing years of peace. Mine fields, submarines and aircraft can now
aid in giving protection to harbors, with the result that expensive
coastal fortifications have become less necessary. Surprise at-
tacks become more difficult, and modern transportation facilities
enable both armies and armaments to be shifted rapidly to meet
any new attack. In many cases the influence of local interests is
the only factor preventing the closing of navy yards, fortifica-
tions and army posts no longer really needed for defensive pur-
poses. If individuals and statesmen desire disarmament, and are
willing to examine the facts carefully, then material reduction of
expensive armaments can probably be secured without sacrifice
of national security.
In order that our conclusions regarding chemical warfare may
be sane, we must study the facts disclosed by experience.
During the World War a total of about ioo,ooo tons of gas was
used by the various nations involved. The gas casualties produced
have been estimated at 534,000 for France, Great Britain, the
United States, Italy and Germany, and of those casualties ap-
proximately 4.2 percent resulted in death. As regards Russia the
facts are very uncertain. Her troops were poorly protected against
gas, however, and suffered heavily; the gas casualties in the Rus-
sian armies have been estimated at 475,000, of which I 1.7 percent
resulted in death.
Many different chemicals were used. These can be roughly
divided, according to the effect produced, into four classes.
Lachrymatory compounds, commonly known as tear gases,
force the closin of the eyes. Gas masks afford efficient protection,
but a man witlout a mask is helpless. Effective tear gases are
known which produce no casualties and no deaths. Such gases are
 CHEMICAL WARFARE
efficient agents with which to control mobs or for use against an
army without masks.1
Toxic smokes in exceedingly low concentrations cause severe
irritation of the mucous membranes of the nasal passages and
throat, the effect being much like that produced by red pepper.
A very efficient mask is required for protection. Some casualties
are caused and a few deaths. During the war the Germans manu-
factured about 14 million "Blue Cross" toxic smoke shell, and
expected to secure great results because of the ineffective masks
then in use by the Allies. Fortunately these shell, due to the man-
ner of dispersion of the toxic smoke, were almost a total failure in
so far as their gas content was concerned, though of course the
heavy explosive charge which they carried was effective.
Mustard gas was, and is, the most efficient warfare gas known.
Probably 12,000 tons of mustard gas were used during the World
War and caused in the neighborhood of 350,000 casualties among
the French, British, Americans and Germans. Of these casualties
about 2. 5 percent died. The gas mask provides protection for the
eyes and lungs, but the gas or liquid penetrates the clothing and
produces skin burns of a nature very hard to heal. At the time of
exposure no pain is produced and no discomfort, so that it is ex-
ceedingly difficult to enforce wearing of masks. Mustard gas is
persistent, and an area heavily treated with it may be untenable
for two weeks or even longer.
The phosgene and chloropicrin type of gas produces a high
rate of deaths in proportion to casualties. An unprotected army
can be practically annihilated. Gas masks afford efficient protec-
tion and during the World War the importance of these gases
decreased as the masks improved. Three cloud gas attacks against
the Russians resulted in total casualties of 140 officers and 2i,ooo
men dead and disabled. Probably none of these attacks lasted
more than twenty minutes.
The total number of special gas troops in actual service at the
front at any one time was very small, amounting to only about
17,170 men for the armies of France, Great Britain, the United
States and Germany. The same nations used nearly 6o million
gas shell, a figure representing probably between 5 and io percent
of the total amount of shell which they used.
I Some lethal gases also produce lachrymation. In this article the term "tear gas" refers to
gases which will not poison in the field concentrations used. The lethal tear gases are classified with
the phosgene-chloropicrin gases.
446 FOREIGN AFFAIRS
These facts enable us to draw some important conclusions.
Gas cannot displace the older weapons. At the same time, the use
of gas results in a large increase in casualties, and no one who
understands the facts would dare send into the field an army
which is unprotected against gas, relying for its protection upon
a treaty signed years before the war began.
Moreover, we may question whether it is wise for any nation
to agree that in time of national danger gas shall be discarded and
that a more expensive weapon, and one in fact more brutal, shall
be maintained in its place. A nation at war thinks itself in the
right and is struggling for its life. Is there any sound reason why
it should not use gas as a means of defense?
In reality - the propaganda against it notwithstanding -
gas is the most humane weapon which exists today for use in
actual warfare. More than 24 percent of the total American battle
casualties resulted in death. Only 2 percent of the American gas
casualties resulted in death. In the British Army, of all gas
casualties only 3.3 percent died. The Surgeon General's report
for i92o showed conclusively that gassing does not increase tu-
berculosis in after years and that permanent injury of any kind
from gas is comparatively rare. Gas does not mutilate the body,
and it seldom causes extreme pain- usually no pain whatever
at the time it is breathed. Later on, in the hospital, a seriously
gassed case can probably best be compared to a case of pneu-
monia. The first gas used in the war, chlorine, was extremely
irritating and painful. The change to less painful chemical agents
was not due to any humanitarian consideration. It was merely
found that a gas which poisons without pain is far more effective,
for the pain warns of danger and the soldier puts on his mask.
No attempt is being made here to argue that chemical warfare
is humane. There is little humanity in any sort of actual combat.
The facts are stated only to show that gas cannot be barred as a
weapon of war on the ground that it is barbarous. There are anti-
aircraft installations that fire one thousand rounds per minute.
Would it not seem a little absurd for the nations of the world to
rule that the aviator could not drop tear gas to confuse the aim
of his humanitarian opponent?
If we were to stop with. the foregoing statement as to the rela-
tive inhumanity of gas and other weapons of war an injustice
would be done to gas warfare, for there is a further important
difference between them- gas warfare can be made humane if
 CHEMICAL WARFARE 447
the nation using it desires; other weapons cannot. Once the bullet
or the shell has been started on its course all control over it is
gone. There is no way of tempering the injury done. Whoever
stands in the way will suffer mutilation and possible death. Gas
is a weapon the effect of which can be controlled. Tear gas can be
used to disperse a mob with the certainty that no one will be
injured. If the tear gas is not sufficiently effective then a toxic
smoke can be used. If the opposing force is so well trained and
protected that these two gases are not sufficient, then it is not a
mob but an organized army. Mustard gas may even then accom-
plish the purpose with a relatively small loss of life. Perhaps the
time will come when it will be considered barbarous to use rifles,
machine guns and explosives against a mob, or against some un-
organized or uncivilized nation, when the situation could be con-
trolled by the use of gas without loss of life. These facts make it
improbable that any general agreement for the complete abolish-
ment of gas warfare will ever be reached.
A nation fighting on the defensive generally fights at home.
The use of chemicals, a~roplanes and submarines tends toward
equalizing fighting ability among civilized nations. They are
relatively cheap weapons; the raw materials required are abun-
dant; and no large number of fighting men are required. For a
variety of reasons, moreover, as the distance from a secure base
increases there is a decrease in the possibility of using these
weapons effectively. The diminution of the power to fight suc-
cessfully at a distance seems likely to tend strongly towards
peace among the nations. Thus it is possible to prophesy that
the new and powerful weapons of war made possible by science
may be a gain to the world.
Gas warfare is particularly powerful as a defensive weapon.
This fact arises primarily because mustard and similar gases can
be used to prevent the occupation of the homeland by a foreign
foe. They also can be used by a retreating army, but their use by
an army on the offensive would block that army's own advance.
These considerations require most careful attention at the
hands of those who are dealing with the vexed question of arms
limitation. If gas warfare were outlawed, a nation on the defensive
would in all probability be the heaviest sufferer from such limita-
tion in time of war. Moreover, any treaty requiring the signa-
tories to array themselves against a nation using gas in warfare
would be dangerous, for such a provision might easily require the
448 FOREIGN AFFAIRS
signatories to join against a nation using gas only as a means of
defense against some aggressor. No treaty should forbid a nation
the right to use any weapon whatever within its own territory.
Is chemical warfare a menace to civilization? Terrifying pic-
tures have been drawn of possible uses of gas against cities. It
has been stated that twelve large bombs of Lewisite could annihi-
late the population of a city the size of Chicago or Berlin. As a
matter of fact, Lewisite is not quite twice as toxic as mustard gas
and is not today considered to be nearly so effective a warfare
agent. This is because Lewisite is destroyed by moisture or by
rain, and Lewisite vapor does not penetrate clothing to the same
extent that mustard gas does. During the World War one ton of
mustard gas caused on the average about thirty casualties. If the
inhabitants showed proper care, twelve large gas bombs would
probably injure few people more than a hundred yards distant from
their bursts, while many close at hand could escape without any
injury whatever. So let us temper imagination with reason.
The power of all chemical warfare gases to injure depends
upon two entirely separa:e and distinct factors. One is the con-
centration of the gas in the air, and the other is the time of ex-
posure. The injury is proportional to the product of the concen-
tration and the time of exiposure.
Warfare gases with high boiling points (low vapor pressure)
cannot be obtained in the air in high concentrations, for according
to well-established laws high concentrations of such gases con-
dense out immediately and deposit as a liquid, which falls to the
ground and evaporates slowly. Both mustard gas and Lewisite
belong to this type of gas. The average mustard gas casualty
reported to the First Aid Station about eight hours after ex-
posure. Immediate danger with these gases arises only from the
liquid or close to the she'll or bomb burst.
If a volatile gas such as phosgene or hydrocyanic acid were
used in an attack upon a city, high concentrations from a chemi-
cal warfare standpoint could be produced, not indeed by a few
bombs, but by the use of many tons of gas. A gas concentration
of only one part by weight in ten thousand parts by weight of air,
over an area five miles by five miles, to a depth of thirty feet,
would require eighty tons of gas. Gas in this concentration would
be fatal if breathed continuously by an unprotected man for
about an hour. Many immediate fatalities would indeed result
and there is no intention of minimizing the horror of such an at-
 CHEMICAL WARFARE 449
tack. But the bulk of the population could save themselves by
going at the first intimation of danger into any ordinarily tight
room and closing the doors, windows and ventilators, for a vola-
tile gas is blown away by the wind and even a four-mile-an-hour
wind takes the gas away very quickly and dissipates it into the
upper regions ofthe air.
Certain and complete evacuation of the civilian population of a
city could be compelled by the use of tear gas, without the produc-
tion of any casualties. There is no military necessity for the use
of lethal gas' against civilian populations, and those who are
tempted to make such use of it will probably be dissuaded by the
fear of retaliation and the fear of the condemnation of all right-
thinking and civilized peoples. As Professor Nolf, President ofthe
Belgian Red Cross, said at the opening of the International
Congress of the Red Cross at Brussels in January 1928: "I be-
lieve it my duty to declare that the principal safeguard of civilian
populations appears to me always to be that primordial rule
that the operations of war between civilized peoples must be
limited to the armed forces alone. If in the future a belligerent
nation breaks this rule and attacks the population of defenseless
cities back of the front, and submits them to the horrors of death
by asphyxiating gases, it deliberately places itself under the ban
of civilized peoples and exposes itself to the harshest and most
justifiable reprisals."
Nevertheless we should consider whether it is possible to take
effective steps to limit the manufacture of lethal gas and its use in
war. Certain technical facts must first of all be understood.
Table salt, water, coal, sulphur and starch or sugar are the only
raw materials needed for the production of two of the most pow-
erful war gases. Add to these lime, phosphate rock, arsenic ores,
bromides and bauxite, and you have almost completed the list of
materials needed for the manufacture of chemical warfare agents.
The list should also include titanium and zinc compounds, which
are used in the production of smoke screens. All of these raw
materials find numerous uses in everyday commerce. To super-
vise or limit their production or sale is obviously impossible.
In the process of manufacturing the actual gas a number of
so-called "intermediates" are produced. The list of intermediates
is rather long, but the most important will be mentioned here be-
cause it has been proposed to limit or supervise the production of
such intermediates "for use in war." The list includes chlorine,
450 FOREIGN AFFAIRS
sulphuric acid, hydrochloric acid, caustic soda, benzol, alcohol,
acetic acid, acetone, calcium carbide, bleaching powder, alumi-
nium chloride, sodium nitrate, sodium cyanide, chlorhydrin,
diphenylamine, thiodiglycol, sulphur monochloride and arsenic
trichloride. Every compound mentioned except the last three is
an important industrial compound and is inlarge everyday-use. No
industrial expert would consider it remotely possible to control
their manufacture or sale. The last three compounds are, or may
be, used in the manufacture of mustard gas and Lewisite; but no
gain would result from an agreement to regulate their manufacture.
The whole situation is well illustrated by the history of mus-
tard gas. This compound had been known for years before the
war, but large-scale manufacture was considered impossible until
the Germans produced it from chlorhydrin, which they used in
making indigo. The Allies had no supply of chlorhydrin and only
after strenuous effort lasting a year did they succeed in the manu-
facture of mustard gas. Two new processes were found; neither of
them required chlorhydrin. Thiodiglycol and sulphur monochlo-
ride may be used in the manufacture of mustard gas but they are
not necessary. Arsenic trichloride is so easily manufactured that
regulation of its production in time of peace would have no effect
on the supply available in time of war.
After the war, an inter-Allied commission of chemists visited
Germany to learn her secret processes for the manufacture of
chemical warfare agents; they were shown the factories, but they
learned almost nothing new. The factories were the same factories
that for years had manufactured harmless products, such as
dyes, perfumes and medicines. "It took forty years and more to
develop these factories. Yet forty days saw many of their plants
producing huge tonnages of poison gas, and as many hours were
sufficient for others." Whether a chemical factory is to turn out
beneficial medicines or death-dealing poisons depends upon the
will of the operator. Generally speaking, the same retorts, filters,
stills, centrifugals, boilers and machinery are as necessary and as
useful for the one as for the other, and almost the same raw
materials. In fact, the task of producing containers such as shell
and bombs for use with gas would in all probability cause more
delay in preparing for extensive chemical warfare operations than
would the task of adapting chemical factories to the manufacture
of war gases.
If in writing regulations for the manufacture of chemical war-
 CHEMICAL WARFARE
fare agents and intermediates we insert the words "for use in
war," how could we discover the use which is really intended?
The task would be hopeless. Often the manufacturer does not
know who his customer will be and often he could only guess at
the use to which the product is to be put.
This whole technical discussion is rendered almost useless by
the fact that nations do not in the least care to manufacture and
store chemical warfare agents in time of peace. Storage is trouble-
some and expensive; and it is easy enough to arrange to manu-
facture them beginning with the date of mobilization. Any nation
with a well-developed chemical industry possesses ipsofacto the
means to manufacture chemical warfare agents. The size and
character of the factories will be determined by the extent and
nature of the nation's industries and not by treaty. Statesmen
may decree that the product of these factories shall not be used in
war, but they cannot diminish the size or equipment of the fac-
tories themselves. In other words, neither statesmen nor treaties
can limit the real weapon - the power to manufacture gas.
Nor is it possible by abolishing chemical warfare to limit re-
search for new poisonous compounds. They are a necessity of
modern civilization. They play a necessary part in the develop-
ment of insecticides, fungicides, germicides, disinfectants, pre-
servatives, fumigants and medicinals. It has been estimated that
the destruction caused by insect and animal pests in the United
States reaches the astounding total of more than two billion dol-
lars a year. The bubonic plague in India alone cost 8,ooo,ooo lives
in the first ten years of this century. Eliminate the rat, mosquito,
flea and louse, and such diseases as malaria, bubonic plague, yel-
low fever and typhus would disappear from the face of the earth.
It is certain that the death toll inflicted by these pests has far
exceeded that of all the wars of all the centuries. Poisons form the
chief weapons used in combating them, and we may therefore
conclude that research upon poisonous compounds will certainly
continue, and that it is essential that it should continue. Why fear
increasing knowledge? It brings new powers as well as new
responsibilities.
Efforts to agree to limit peace-time expenditures for chemical
armament seem futile. For the fiscal year 1931 the total appro-
priation for the military establishment of the United States was
$34,05o,664, of which sum the Chemical Warfare Service's
allotment was $i,295,215. Thus only 0.38 percent of the total
 FOREIGN AFFAIRS
appropriation of the army was given by special appropriation
to the Chemical Warfare Service. During the World War 19.39
percent of the total casualties produced in the American army
were gas casualties. The appropriations for chemical warfare
made throughout the worl.d today are probably actually insuffi-
cient to provide adequate protection o the armed forces now
maintained by the nations, and therefore could not wisely be
subjected to further limitation.
Certain clauses in the Treaty of Washington and the Geneva
Protocol are purposely worded so as to prevent the use of tear
gas. But since it is now generally recognized that tear gas is a
humane weapon, and can be effectively used to control mobs or
an enemy not equipped with gas masks, it has been suggested
that the term "poisonous gases" be substituted, apparently with
the idea of permitting the use of tear gas. At this point it is neces-
sary to make one of those statements which appear so contradic-
tory to readers who are not familiar with chemistry. Most tear
gas compounds are in themselves very toxic and poisonous. The
most effective and harmless tear gas known is probably equally
as poisonous, weight for weight, as phosgene, one of the most
deadly of warfare compounds. The fact that the tear gas never pro-
duces fatalities or serious casualties is due to its physical properties,
which are such that only very low concentrations can be obtained
in the air under field conditions of use. These low concentrations
are irritating to the eyes, but do not cause serious injury.
There is an old argument that any treaty which forbade the
use of gas, and which would be observed and could be enforced,
should be extended to other weapons, with the result that war
itself would be prevented. Without answering this argument,
which has some merit, the writer suggests that a treaty attempt-
ing solely to limit the use of gas should, if adopted, be worded
somewhat as follows: "The signatory powers bind themselves
not to use beyond the limits of their own territory gases or other
chemical agents capable of producing fatalities in the concentra-
tions used." This would permit the use of tear gases and also
would allow a nation to use any chemical warfare agent what-
ever within its own territory. The use of chemicals as a means of
defense would not be prohibited. And since no nation would use
gas in a way to injure its own non-combatant population, a
provision so worded would protect civilian populations against
gas to the extent that such protection can be afforded by treaty.
 SOVIET ECONOMY IN A NEW PHASE
By Bruce Hopper

RONICALLY enough the capitalist countries have obligingly

tobogganed into the depths of the depression just in time to
give the Bolsheviks a breathing spell when they need it most
- to consolidate their gains in a period of slackened tempo, to
arouse fresh enthusiasm among the industrial troops by giv-
ing more attention to human needs, and to hasten the training
of personnel for the plant already constructed. Further, as if to
give point to the contrast between their labor shortage and the
"panic of unemployment" elsewhere, the Bolsheviks - adopting
the grand manner- have attempted in recent months to raise
the standard of living and to promote "world revolution," not
by aggression, but by example.
This does not mean that Soviet Russia has entirely escaped
the depression. It does mean, however, that the Bolsheviks have
continued their advance, though more slowly than anticipated,
despite the derangement of their export-import plans caused by
falling world prices. Abroad, meanwhile, a number of academic
groups and governments are studying the feasibility of adopting
planning in emulation of Russia. But even a cursory examina-
tion discloses that the Bolsheviks have created in Russia three
factors which do not exist to like extent elsewhere: a. a great
national objective: to socialize and industrialize a backward
country; b. a foreign trade monopoly: to shut off the planning
system from the disastrous fluctuations of currency exchange;
c. a coercive power, the centrally controlled police: to combat
economic individualism and other forms of opposition to what the
plan lays down as essential. Moreover, the development of Rus-
sia's economic life, year by year, is scientifically planned. Through
all the cycles, whether marked by socialistic or capitalistic
methods, constant revolutionary ends are kept in view -
the achievement of a socialized economy, unified in plan and
control, operating in a class-less society, and the attainment of
prosperity and a high cultural level for society as a whole.
Can we recognize in the recent extension of capitalistic methods
in Soviet Russia the beginnings of a new cycle? The evidence does
not indicate that it is the end of the transition period and the true
beginning of socialism, as proclaimed in Moscow. Nor, on the
454 FOREIGN AFFAIRS
other hand, is it a retreat to capitalism, as alleged by the foreign
press. Rather is it a period of consolidation, following naturally
the periods of destruction, rehabilitation, and feverish recon-
struction through which the revolution has passed. To understand
it we must understand those previous periods, in which the alter-
nation in emphasis was somewhat as follows:
First cycle, Military Communism, r917-2,. Emphasis of state policy on
socialistic methods; intense class war, centralization of control, prohibition of
individualism, attempt at morteyless accounting; destruction of the capitalist
order.
Second cycle, NEP, 921r-28. Emphasis of state policy on capitalistic meth-
ods; abatement of class war, decentralization of control, semi-toleration of
individualism (competition between the socialized and private sectors), return
of money and commercial accounting; rehabilitation of economic life.
Third cycle, Socialist Offensive,. 1928-3r. Emphasis of state policy on social-
istic methods; reintensification of class war, recentralization of control,
renewed attempt at moneyless accounting within the socialized sector;
reconstruction along socialistic lines.
The first Five Year Plan called for concentration of effort on
plant and producers' goods; the welfare of Soviet citizens was
sacrificed. The Bolsheviks claim that the country has now been
transferred from a predominantly agricultural to a predominantly
industrial basis; that the stage is now set for socialism (by which
they mean that economy, is mostly socialized, planned, and con-
trolled, and that society i.s practically reduced to one class with a
new gradation based, not on possessions, but on service to the
state); and that, therefore, the first part of the original program
is substantially realized. Stalin announced last summer that
"the main problem of the revolution has been solved." This
accomplished, there came another turn of the wheel.
Presentperiod, since r937. Emphasis of state policy on certain capitalistic
methods; relaxation of class war, decentralization of control in industry, semi-
toleration of individualism outside the socialized sector, renewal of strict
money basis in accounting; consolidation, and advance toward socialism by
capitalistic means.
The second Five Year Plan, to go into effect January I, 1933,
has two characteristics of its own. It turns with new energy
toward the development of Asia; and, without slowing up the
building of plant, it gives much greater attention to the human
element, to the welfare and training of citizens, the objective of
the second part of the original program.
While the above generalizations omit much that is important,
 SOVIET ECONOMY IN A NEW PHASE
such as the effect of the international situation at any given time,
we can, with this background in mind, try to form an opinion
as to whether the revolution is in a new phase, if not actually a
new cycle.
II. REASONS FOR MILDER METHODS

By 1931 it was realized that the rapid tempo set by the Five
Year Plan overtaxed the capacities of certain basic industries,
notably coal, iron and transport. More important still, it was
found that machinery could be installed at much greater speed
than raw peasants could be transformed into skilled operators.
The cost of production has not come down, nor has the produc-
tivity of labor gone up, as rapidly as planned. Nor has the gen-
eral quality of Soviet manufactures, though constantly improved,
attained the standard expected.
The problem was declared to be one of labor deficiency and
mismanagement. On June 23, 1931, Stalin summarized for a
conference of industrial managers the six new conditions of in-
dustrial development which called for new methods. Since then
the government has issued innumerable decrees calculated to
correct the defects of labor and management. The general result
seems to be a change in temper from the militant restrictions of
the Socialist Offensive to the milder methods of the NEP.
In passing, it should be noted that conditions now are basically
different from those at the beginning of the NEP. In i92I the
government had but little industrial plant, and the peasants'
demand for a quidpro quo, goods for grain, brought business to a
standstill. The government now has a huge industrial organiza-
tion at its command, but lacks skilled manpower. The industrial
proletariat has failed to keep the required pace in training. Also,
in I92i, when the pressure was lifted, the country revived by
consumption of the fat laid by during tsarist times. In 1932
increased consumption means inroads on accumulated socialist
stores.
In terms of social engineering, both the NEP and the present
period of change represent concessions, voluntary or forced, to
the human beings who operate the machine, as distinct from the
machine itself. It must be remembered, however, that even in
their rosiest pictures of the future the Bolsheviks have always
maintained tat communism is impossible until human nature
has been transformed, until work ceases to be merely the means
 FOREIGN AFFAIRS
to support life, and becomes the first necessity of life. The "in-
termediate stage" of socialism is to be that time when the trans-
formation takes place. Obviously it cannot yet be assumed that
human beings find work as essential as eating and sleeping.
Under the propulsion of organized enthusiasm for a distant
objective they are capable of immense sacrifices. But the satis-
faction of immediate wants cannot be too long neglected, the
working strength exhausted by the first Five Year Plan must
be restored, and the monotony of labor which continues to be
primarily a means to support life must be relieved. Catering
to the human weakness of mankind is probably the best way to
describe the seeming relief which has now been given the workers
of Soviet Russia.
III. MATERIAL INCENTIVES FOR SKILLED WORKMEN

For the purpose of this article we need describe the shift in

methods only in general terms. Stalin's trump card in correcting
the deficiencies of labor is to increase the material incentive to
skilled workmen.
A system of organized incentive, called "socialist competi-
tion," developed with the first Five Year Plan. Labor groups are
divided into rival units, matching their strength and skill. Dis-
tinction is awarded to the best group or individual, judged by
quantity and quality of Output. Red boards are set up for posting
the names of the deserving, black boards for the reverse. Also,
there are the shock brigades, or pacemakers, whose business is to
put through special jobs in record time, and to demonstrate to
the less enthusiastic the speed at which particular types of work
can be done. The system has possibilities. But wit so many
shock brigades springing into existence this last year, the dis-
tinction of being a pacemaker began to wear thin. Nor did work
seem to be the first necessity of life to all members of the shock
brigades. Moreover, because of the labor shortage many workers
were wont to behave as most humans do when in great demand.
They tried to pick out factories which offered more favorable
contracts. In some factories the labor turnover rose to 40 per-
cent every six months.
Stalin diagnosed the ailment as caused by "left-wing" the-
oretical equalization of wages. As a matter of fact, actual equality
of wages has never existed. But there was an equalizing tendency,
whipped on by the trade union leaders, who were supported by
 SOVIET ECONOMY IN A NEW PHASE 457
the unskilled proletariat, by whom and for whom the revolution
was said to have been fought. The difference between skilled and
unskilled labor was beginning to disappear. The natural human
result was that unskilled workmen lost what incentive they might
have had to become skilled by taking the free training offered at
night schools.
To remedy this situation, and to stimulate incentive for train-
ing, it was decreed that the wages of skilled labor, including the
professions, be raised on an average of 30 percent, beginning
October I, 1931. In the metal and coal industries some of the in-
creases are as high as ioo percent. The skilled workmen are
likewise given special privileges in food supply and living quar-
ters. The piece-rate system has been reorganized so as to mount
in geometric progression. Since last April the collective farms
have been operating on a piecework system, with norms fixed
according to the degree of difficulty in different types of
work, and to the amount of skill and experience required. And
all economic organs are ordered to increase the percentage of
profits which they set aside for prizes, for training employees,
and for other forms of reward, such as educational excursions.
The significance of this official differentiation is that service to
the state supersedes class origin as the criterion of any one
citizen's worth to the revolution.
Now, merely raising the wages of skilled workmen would not
produce the desired incentive. There must be an equivalent op-
portunity to spend the enlarged income on things other than
government bonds. Therefore, hundreds of old stores have been
reopened, and hundreds of new ones established, in the campaign
to meet the fourteen-year-old demand for consumers' goods.
Even collective farms are invited to maintain retail stores of their
own in the cities. It is expected that the physical volume of food
on the market will be swelled by 25 percent in 1932, including
one billion cans of preserved food, double the figure of 193 1. And
manufactured goods will be 2o percent more abundant. Carrying
the grand manner still further, the government has ordered stores
to lower their prices on an average of 30 percent. The enforce-
ment of this decree is entrusted to Price Control Bureaus in all
the large towns, backed up by the Workers-Peasants Inspection.
Of special interest in this scheme is the reliance placed on the
kustarny, or handicraft workers. According to some estimates
these small producers before the revolution supplied about 5o
4S8 FOREIGN AFFAIRS,
percent of the commodities used by the peasants and town labor-
ers, roughly four-fifths of the entire population. With the liquida-
tion of the private sect.or after 1928, they were taxed out of
existence as producers, or made to work for the state. By the
new decrees tmey are exempted from one-third of their taxes, and
are even supplied with tools and raw materials as encouragement
to produce as of old.
The government has likewise greatly extended the housing
program. New construction of dwellings has been under way for
some years. But because of the natural increase of population
and the shift to new industrial centers the pressure for living
quarters continues. A psychologically bad contrast is presented
to the average worker between the new, well-lighted and well-
ventilated factory where he spends his days and the dark, un-
sanitary rabbit-warren of pre-war construction which still serves
him as a dwelling. The recent constructions reflect the social
principle that group life, rather than family life, is to be desired.
The sleeping quarters are invariably small, while the communal
dining halls, clubrooms, assembly halls, etc., are very spacious.
And city planning seems to have seized the Russian imagination.
To co6rdinate this national effort a new All-Union Council of
Municipal Economy was organized in November and given wide
powers to hasten the construction of dwellings and to bring the
standard of living conditions up to that of the new working con-
ditions as rapidly as possible.
Thus the Bolsheviks are attempting systematically to raise
the standard of living from the "sacrifice level" deemed neces-
sary to carry out the first Five Year Plan. Soviet citizens enjoy
more creature comforts, or are beginning to enjoy them. The
effort of the last three years has been exhausting, the iron rations
have been low. But even if no other factors had come into play
the decline of sales abroad would in any case have meant an in-
crease in the supply of food and goods at home. Now, whether
the Bolsheviks in their wisdom have deliberately relieved the
pressure, or whether they have been forced to do so, the result
is the same for the mass of people. Granted the continuance of
these conditions, it seems likely that the Bolsheviks will have
under their control a greatly refreshed army of toilers, more
capable of the Han necessary for carrying through the second
Five Year Plan than would have been possible without the
timely respite provided by the depression in capitalist countries.
 SOVIET ECONOMY IN A NEW PHASE 4S9

IV. INDIVIDUAL RESPONSIBILITY

Remarkable, also, is the tendency away from group responsi-

bility and toward individual responsibility in economic enter-
prises.
Most factories and other institutions are directed by colle-
giums, of which the department chiefs are members.
Moreover,
the management is subject to frequent inspection by financial
agents, by the Workers-Peasants Inspection, by the G. P. U.,
by trade unions, by workers' committees, all of them instructing
it how to run the enterprise. The discovery has now been made
that this sort of group responsibility has drawbacks. It checks
abuse of power by individuals, but it also gives the individual a
feeling of irresponsibility. Stalin declared that irresponsibility,
or "depersonalization," had become the scourge of industry.
He round the principal source of trouble in this case to be the
continuous week of five days, which was ado pted wholesale in
1929 to abolish Sunday and to keep the machinery turning all
the time. It was a high-pressure system. Experience showed that
the continuous five-day week was not feasible for all types of
enterprise. For one thing, there were not enough experts to insure
that the right technical control was constantly on the job. If the
motor of a small factory broke down when its one electrical ex-
pert was having his rest day, the manager would have to suspend
operations until the following day. And workmen and managers
alike developed an impersonal attitude toward the equipment
they used in common. In general, no one person was solely re-
sponsible for any one thing. This led to an alarming increase
in carelessness, violations of discipline, breakage, and other
forms of waste. More than that, the arrangement was not con-
ducive to co6rdinated effort to raise the productivity of labor
and to lower production costs.
The upshot was a series of decrees ordering institutions, other
than those engaged in distribution, to abandon the continuous
week, and to establish a weekly schedule of six days. On the
sixth day all the personnel rests and the machinery is idle. This
makes a month of five weeks, but does not bring back Sunday.
Typical of the move to fix responsibility on individuals is the
decree which makes deliberate injury to machinery a criminal
offense. If a machine is neglected, some one person or crew can be
made to answer for it. There is likewise a new individual respon-
46o FOREIGN AFFAIRS
sibility vested in the directors and managers, whether members
of the party or not. This emphasis on the importance of mana-
gerial skill is interesting. Marx, in his labor theory of value,
seemed to deprecate the share of scientific management in pro-
duction. And the Bolsheviks have probably relied too much on
the native ingenuity of ordinary workmen to rise to the require-
ments of their tasks. At any rate, the manager has been clothed
with new authority, and becomes a citizen of prime importance
in the eyes of the Soviet state.
V. INITIATIVE

So much, briefly, for the new emphasis on material incentive

to skilled workmen, and on individual responsibility. Let us turn
now to a still more baffling problem which planning has brought
to light, that is, the search for the proper balance between cen-
tralized dictation and local autonomy. In other words, with the
managers of trusts not much more advanced toward the Com-
munist ideal than are the workmen, how much initiative must be
granted them to obtain the best results?
This has been a constant problem. Under Military Communism
the ideal was a "single state factory." State enterprises then
conducted their business on a non-commercial basis by docu-
mentary transfers through the treasury. With the reentry of
private business under the NEP, the unwieldy state enterprises
were decentralized into autonomous trusts and were instructed
to make profits. In 1927, however, they were ordered to adhere
strictly to the plan assigned them from the center, whether
profits accrued or not. After the Socialist Offensive began they
were again recentralized, this time into huge, vertical combines,
some of which united as many as two hundred enterprises. In
1931 the process of decentralization was once more put in motion.
This alternation between centralization and trust autonomy
can be explained by the difficulties of socialist financing. The
underlying problem is one of capital accumulation, since, in the
absence of financial aid from abroad, the Bolsheviks have been
compelled to rely on means within the country for developing
industry. During the decade when the socialized sector was com-
peting with the private sector there was a constant flow of capi-
tal from agriculture into industry, from light industry into heavy
industry (from consumers' goods into producers' goods), all
directed and planned. This pumping of capital from the private
 SOVIET ECONOMY IN A NEW PHASE
sector into the socialized sector mounted year by year until -
the peasants having been brought for the most part into col-
lectives, and private producers likewise having been forced
to abandon their activities - the private sector has been re-
duced to insignificance.
But, with these sources exhausted or socialized, the suction
pumps of taxation, state loans, and state-controlled prices on
consumers' goods no longer produce the huge net accumula-
tions which in recent years have poured through the single funnel
of the financial plan, to be expended as the state chose. In
view of this Stalin declared that heavy industry, the main
beneficiary of the redistribution of capital in the past, can
no longer rely on these subventions, and must share in the ac-
cumulation of surplus capital. Bad management must therefore
be corrected, the huge combines must be split up into workable
units, and group control must give way to the individual control
of a head director. Further, all economic organs must be trans-
ferred to a cash basis (khozrazchet, or Economic Accounting).
This new system of financing is one of the keys to the present
period.
It will be remembered that the Credit Reform of January 1930
abolished commercial credit between state enterprises, and re-
placed it exclusively by bank credit, with the State Bank acting
as a clearing house. The bill of exchange was to be no more. The
State Bank cleared transactions simply by deducting the price
of goods from the credit of the purchaser and adding it to that
of the seller. The Credit Reform was expected to reduce the need
for money, as business within the socialized sector would be con-
ducted mostly by bookkeeping. It promised an original way of
freeing at least one part of the world from the slavery to gold.
However, defects of this "left-wing banking" immediately
became apparent. Assured that their credit would be replenished
from the state budget, the trusts indulged in uncontrolled pur-
chasing. This led to "automatic crediting." Also, as the State
Bank paid for goods whether they proved satisfactory to the
purchaser or not, the sellers became careless in regard to quality.
Worse still, the individual producers could not profit by their
accumulations, which went into the general funds. Consequently
they were deprived of tangible rewards for initiative in reducing
production costs, etc. The result was financial disorder, which
came to a climax early in 1931.
462 FOREIGN AFFAIRS
The commercial basis of accounting, which had been used dur-
ing the NEP, was restored. The new Economic Accounting sys-
tem, decreed March 20, 1931, makes it necessary to fix a credit
limit for each enterprise. The State Bank now issues funds only
on the presentation of documents over the counter to show that
contracts have been fulfilled -goods produced, delivered, and
accepted. Evidently there was some opposition on the part of the
trusts, for by a decree of October 21 they were given until
November I to change their credit system from a single to a
double account- one for their own funds and accumulations,
and one for the funds loaned by the State Bank which must be
paid back by the term date. Two weeks later the Supreme Court
of the Soviet Union ruled that violation of the Economic Ac-
counting instructions is a criminal offense. Capitalistic money
relationships are thus resumed after a year's trial of socialistic
bookkeeping.
But other questions arise. If trusts are to be denied further
credit because they have not fulfilled their quotas under the
plan, then what becomes of the plan? If this situation should be-
come general, if the tempo set proves too fast, then how will the
planning system fare as a whole? How to grant the trusts enough
initiative to serve as an incentive, without jeopardizing the plan,
continues as a problem for the future.
VI. TOLERATION

Last to be noted, but in many ways most significant, is a relaxa-

tion of the terroristic methods which marked the drive for col-
lectivization. The Bolshevik leaders feel more secure. Visible
opposition has been liquidated and the atmosphere seems now to
be less tense than it has been at any time since 1924. There are
many indications of the change in temper." Privateers" can again
be seen, handicraft workers, and small traders in the illegal market.
And Stalin, in declaring that the proletariat must create its
own intelligentsia, urged that non-party workers be given the
same opportunities for promotion as party members, so as to
prevent the growth of a closed caste system. He likewise de-
manded that the party wipe out discriminations against those of
the old technical intelligentsia who co6p erate loyally. The purpose
is to use all the available brains of the country in the cam-
paign for training industrial personnel. So those who were "dan-
gerous" yesteryear (many of them were deprived of citizenship
 SOVIET ECONOMY IN A NEW PHASE 463.

because of their class origin) are now granted the same rights in
housing, food, schools for their children, and social insurance,
which are accorded to the proletariat.
VII. MAN AND. THE MACHINE

What we see'going on in Russia today is an attempt to readjust

the relationship between man and the machine. The' mechanical
equipment, prerequisite to the proposed industrial civilization,
has been created at an unprecedented rate. But the human
equipment, equally essential, has been relatively slow in arriving
at the stage of efficiency and skill which the machinery on hand
demands. The methods used by the Bolsheviks to stimulate the
human advance, as described above, may be considered capital-
istic. The appeal is to workmen and managers as individuals.
But this does not entail a return to capitalism. Private ownership
in the means of production remains abolished. It entails, rather,
that the pendulum has again swung away from over-rapid cen-
tralization to a compromise with the industrial troops (to whom
work is still a means of support, and not a first necessity of life);
away from class war as a driving force to a semi-toleration of the
human beings who are compelled to live under the agis of planned
economy.
The present period may be but a demonstration of tactics in
the military science which, according to Lenin, inspires the
directives necessary to reach the Marxian goals of collectivism.
From this point of view, early 1931 marked the "culminating
point of the attack," the time to consolidate the positions taken,
to refresh the shock troops of assault, and to restore the morale.
Is this the start of the fourth cycle, set to begin when Soviet
Russia has become economically and politically secure? Or is
it merely another zigzag, a prelude to stricter control than ever
before? That depends somewhat on the sharpness of the inter-
national competition after capitalist countries have recovered
from their present economic troubles.
According to statements from Moscow, the industrial produc-
tion mounted 2o percent in 1931 (a substantial advance, but not
the 40 percent increase planned), the crop was better than aver-
age, but the foreign trade showed an unfavorable balance of 125
million dollars. While exact figures are not made public, the
foreign commitments of the Soviet Government are estimated by
the Amtorg at 400 million dollars. In some quarters it is believed
 FOREIGN AFFAIRS

that the Soviet Government will follow the lead of other govern-
ments, and default. To meet the payments the State Bank claims
to have 329 million dollars of gold in the vaults, which is augmented
by a marked increase of gold production in Siberia. Whether or
not any of these gold holdings are already earmarked for inter-
national payments is not indicated. But even though the pros-
pects for increased income through sales abroad are not promising,
and granted that anything is possible in Russia, default by the
Soviet Government does not seem likely at present.
So, while we must wait for time and events to show whether
or not the revolution definitely entered a fourth cycle in 1931,
two conclusions are possible at present. The first is that regi-
mentation has enabled Soviet Russia to weather the depression
with fewer apparent economic dislocations than those which
have ishaken the capitalist world. The second is that the Bolshe-
viks are taking advantage of the -breathing spell to shift their
emphasis from the machine to the human beings who operate the
machine. Moreover, since they repudiated pre-war and war
debts alike, and do not participate in reparations, they are not
faced with the financial dilemma which confronts other great
nations. Nor are they troubled by frozen assets. Similarly, the
present international military situation is not unfavorable to
them. All in all, they feel free to take definite steps to improve
the welfare of their people and to advance "world revolution" not,
as'they have threatened in the past, by open aggression, but by
example.
 1931
By Shepard Morgan
THE UNITED STATES IN WORLD AFFAIRS. An Account of American
Foreign Relations, 193 1. By WALTER LIPPMANN, in collaboration with WILLIAM
0. SCROGGS. New York: Published for the Council on Foreign Relations by

TH
Harper and Brothers, 1932, 375 PP. $3.00.

IS book is the chronicle of a year, not the history of a

period. Its starting line is a date and its finish is twelve
months later. It does not, by reason of these time limita-
tions, cover any rounded-out movement - a rise, development
and decline. It is a faithful and stirring record of the events of a
single year, which itself is barely ended; in its treatment it gives
only such references to the past as are necessary to create per-
spective and it ventures no speculation as to the future. It is the
first of a series to be published annually hereafter, differing from
the Survey formerly published each year by the Council on
Foreign Relations in that it is a running narrative of events as
they occurred, whereas the Survey dealt topic by topic with
individual phases of American foreign affairs. The difference
between the two is the difference between the horizontal and the
vertical method of treatment.
If Mr. Lippmann had attempted to deal with the events of
1931 according to the vertical method his work would have lost
its moving quality as an installment in a continued story. More-
over, the vertical method presupposes that the sequences discussed
shall already have reached an end or at least a stopping-place.
No end and no stopping-place to the movements whic dom-
inated foreign relations in 1931 are yet in sight. Nor would it
have been any more possible for him to have segregated our
foreign relations into classes or groups. If the year demonstrated
nothing else, it made it clear beyond peradventure that politics
and economics, for example, act and interact upon each other,
and that the political and economic history of this time is not
capable of differentiation. The record of 1931 to be understood at
all must be studied as a whole, for a study of the parts gives no
more clue to the total complication than does the isolation of a
germ give understanding ofthe sum of human illnesses.
To give weight and value to events and forces while they are
still in process furnishes a task midway between journalism and
466 FOREIGN AFFAIRS
historical analysis. This task was admirably suited to Mr. Lipp-
mann's peculiar gifts. He has succeeded, in collaboration with Mr.
Scroggs, in fitting the developments of the year into an ordered
perspective. He draws few conclusions, relying rather on the
force of his exposition to guide the reader to judgments identical
with his own.
The twelve months which the book covers begin with the
opening of Congress in December 193o and close with the opening
of the new Congress in December 193 1. A year of crisis in domes-
tic affairs, it was no less a year of crisis in our foreign relations.
Overshadowing both, and in part responsible for decisions made
and unmade, was the economic depression; it has scorched and
flattened every field of constructive human endeavor and has
released political forces hitherto dormant. On the foreign policy
of the United States it has exerted an influence which will prob-
ably continue long after the world has recovered from the paraly-
sis and confusion into which it has been thrown. More than our
share in the war, more than our desire to establish the peace,
with inexorable logic the: economic depression is countermanding
the caution of Washingt:on's farewell address and nullifying our
policy of isolation.
The issue has been clarifying itself almost imperceptibly,
partly because measures of self-containment have thus far failed
to pullus back to the st~andard of prosperity we conceive to be
ours, and partly from the pressure of developments abroad.
Among the early efforts to preserve or restore our prosperity
independently of foreign conditions were, of course, the Hawley-
Smoot tariff, the operations of the Farm Board, and the restriction
of immigration. Even before the ineffectiveness of these measures
to raise prices and wages had become manifest, a movement was
initiated which ran headlong into the principle of self-contain-
ment. This had its origin in the plight of silver. The United States
is a surplus producer, and the causes for the collapse of prices
centered in the Far East and in Europe. The Senate, acting upon
a resolution reported by the Committee on Foreign Relations,
requested the President :o call an international conference on the
status of silver. It was thus made clear that the Senate had no
doubts that self-containment, in the case of silver at all events,
would not bring back the price. While this conference was never
held, negotiations looking toward the control of production and
marketing by international action were undertaken in other
 1931 467

directions, contravening the theory of self-containment. Ameri-

cans, official or private, participated during the year in negotia-
tions on wheat, sugar, nitrates, copper and other products. The
negative results achieved up to now are a matter of common
information; the thing to be observed here is that international
action on American initiative or with American participation
was attempted at all.
The disordered market for raw commodities was of course
particularly burdensome upon the countries of Latin America,
since they rank among the largest producers of primary materials.
While the revolutionary movements of 193o and 1931 are often
interpreted as the result of a widespread aspiration toward
liberalism in government, it is nevertheless true that it remained
for the economic pinch to awaken the mass of the people to a
sense of political wrong. These disturbances were significant for
the foreign policy of the United States, because in dealing with
them the Department of State returned to the recognition policy
of Thomas Jefferson, that is, an acceptance of the fact that
every nation has a right to determine its form of govern-
ment, thus tacitly abandoning the "moral approval" policy
which Secretary Bryan inaugurated in respect of Mexico in
1913.
Another phase of our Latin American relations furnished at
once a prelude and a contrast to the acute problems which
developed in Europe. In both cases there was a vast investment
of American capital; the contrast lies in the measures taken to
protect it. During the first ten years after the war, South Ameri-
can countries, like many others, as well as like our own states and
cities, rapidly expanded the public debt. The size of the loans was
often too large and on the whole they were too numerous; they
were based on a false conception of prosperity which the loans
themselves helped to create. Most of these loans were sold to
American investors, and under the stress of revolutions and the
economic depression many of them passed into default. For the
protection of the immense investment of American capital repre-
sented in them there was little which the Department of State
could do. It had assumed no responsibility toward the American
public for the repayment of the loans, and above all it had no
measures of relief which it could apply to the debtor states so
that they could continue to meet their obligations in the face of
local distress. Its attitude became therefore that of a benevolent
 FOREIGN AFFAIRS
bystander, and the initiative for protection passed to the inter-
ested bankers or the bondholders themselves.
Similar in origin, in that they also marked the first ebullient
phase of America's experience as an exporter of capital, were the
American investments in Germany. But the sequel was very
different, and this difference was due mainly to the existence of
the inter-Allied debts. The debts indeed furnished the occasion
for the most dramatic departure from isolationist principle which
the record of the year affords.
This was the Hoover moratorium. The background to the
proposal can be briefly told. Just as in 1914, the trouble which
led up to the June 1931 crisis in Germany started in Austria, or
rather as a phase of the long process of dissolution of the Austro-
Hungarian Empire which began in 1848. Whether, as the Ger-
mans say, the Austrian Government declared itself unable to go
on without a customs union and threatened to conclude one with
another neighbor if Germany refused, or whether, as others say,
Chancellor Briining felt the need of a diplomatic victory in
foreign policy and seized upon a prelude to the Anschluss as the
means, at all events we are accustomed to date the acute diffi-
culties of 1931 from March 21, when the official announcement
was made that Germany and Austria had agreed to form a
customs union.
These difficulties had been foreshadowed in the German elec-
tion of September 1930, when the parties of the extreme Left and
Right took nearly 43 percent of the seats in the Reichstag. But in
February i931 the Nationalist Party seemed to be disintegrating,
the National Socialists (Hitlerites) had discredited themselves
by walking out of the Reichstag, and the Communists, who had
the fewest seats, were not, by themselves, a menace. Then came
in March the customs union proposal, with its darkening of the
political horizon, particularly between Germany and France.
What part the customs union proposal played in precipitating
the collapse of the principal Vienna bank, the Oesterreichische
Kredit-Anstalt, cannot with certainty be said now. But that
collapse undermined confidence not only in Austria but in Ger-
many also, where the financial structure had been none too secure
since 1929. Recurrent budget deficits, rising unemployment, poor
conditions in business, the practical cessation of American long-
term lending, and a vast volume of short-dated debt which for-
eigners could call home on short notice - all these left Germany
 1931 469

peculiarly vulnerable. Her position, furthermore, became clear to

the world in July when the Chancellor, Dr. Briining, issued his
third emergency decree calling for still higher taxes and further
drastic cuts in the budget. This decree was published on the eve
of his week-end visit to Chequers, which by coincidence or other-
wise was so timed as to take on the appearance of a last-minute
appeal to Germany's creditors. Seepage of short-term funds away
from Germany now became a flood, and the collapse of the entire
German economic system was in sight unless prompt steps were
taken to prevent it. This was the situation, fully verified by Secre-
tary Mellon who chanced to be in London, which brought Presi-
dent Hoover face to face with the necessity of using any means at
his disposal for bringing relief.
Quite apart from any humanitarian or theoretical inducements
which may have influenced the President to intervene in Europe,
the practical considerations were overwhelming. German long-
term loans issued in the United States, including the two Govern-
ment loans offered in connection with the Dawes and Young
Plans, amounted to about $1,25o,ooo,ooo. These bonds were very
widely held, by individuals, corporations and banks - the latter
mostly small banks in country districts. As for the German short-
dated debt, the American share in it at the middle of June was
certainly not less than $75o,000,000 - and probably more-
and was held on the whole by upwards of one hundred city
banks from New York and New England to California. In addi-
tion, American industry to some extent before the war, and to a
large and increasing extent during the ten years after it, had
established factories in Germany or purchased interests in Ger-
man concerns. The Department of Commerce estimates the
value of this investment at nearly $25o,ooo,ooo. All told, then,
the American financial interest in Germany at the time of the
moratorium was around two billions and a quarter, and much of
it was widely distributed throughout the country.
The Federal Government had of course done nothing to en-
courage this vast investment on the part of private citizens, and
its direct responsibility under the prevailing code was therefore
nil. But Mr. Hoover was confronted with the fact that the in-
vestment existed and that its loss might cause repercussions
more formidable still. He had yet another practical considera-
tion. This was the fact, not theretofore admitted in principle,
that practically all of the $246,ooo,ooo due in the financial year
470 FOREIGN AFFAIRS
1931-32 to the United States Treasury from foreign governments
came directly or indirectly from Germany. Obviously, if the
German economic structure collapsed, Germany could not pro-
vide thes sums, and the question would then arise whether her
creditors and our debtors could or would provide them out of
their own resources. It was therefore the part of good business to
bring about the postponement of a portion of Germany's obliga-
tions in the hope that the major collective interest of the Ameri-
can people in Germany would be protected. As Mr. Hoover re-
marked in his public statement explaining the moratorium
roposal, it was a suggestion "to the American people that they
e wise creditors in their own interest and be good neighbors."
The proposal, however, had one flaw which almost proved
fatal to it: it did not fit into the framework of the Young Plan.
It was natural that France, as the principal beneficiary under the
Young Plan and as a relatively small holder of German private
debt, should hold out until the legal fabric of the Young Plan
was fully respected. During the negotiations the run on Germany
was resumed, and the German economic system was called upon
to pay in a few weeks rather more than the moratorium was de-
signed to save it through a full year. In consequence of this run,
the principal banks in America and England entered into an
informal understanding among themselves to let their German
credits stand. This understandingwas later made formal in two
successive "standstill agreements," entered into by all of Ger-
many's important banking creditors in response to a request of
the governments represented at the London Conference of July,
in which the Secretary of State of the United States officially
participated.
The element which was present in the case of Germany and
wanting in the case of Latin America, the factor which deter-
mined the whole course of the moratorium affair, was the inter-
Allied debts. They furnished the Federal Government with a
handle which it could use for the benefit of Germany and hence
for the protection of Germany's creditors. This leads to the con-
clusion, ironical to anti-cancellationists who are also isolationists,
that it was the inter-Allied debts which determined the fact of
intervention in Europe.
Mr. Hoover subsequently withdrew somewhat from the posi-
tion which circumstances had thus forced him logically to take.
Far from utilizing the debts to induce a lasting settlement in
 1931
Europe, he fell back on the isolationist principle that Europe
should settle its own affairs. In this he undoubtedly acted in
accordance with the prevailing mood of Congress. The upshot
of his conversations with M. Laval the following October was
that the initiative with respect to intergovernmental obligations,
which include reparations, "should be taken at an early date by
the European Powers principally concerned within the frame-
work of the agreements existing prior to July I, 1931." At the
same time, through Senator Borah's interview and other chan-
nels, it was made evident that our official and public opinion
would become less intransigent if equitable political readjust-
ments were made in Europe. M. Laval thus got a free hand,
but on the understanding that before we would be ready to con-
sider putting a capstone on the building we must be satisfied
that the foundations were sound. The debts thus passed from an
active to a passive part in the program, but remain potent never-
theless to intrude upon our isolation.
The question of arms limitation does not appear to have
involved isolationist policy one way or the other. Disarmament
presents just that combination of idealism and practical benefit
which to us as a people is the final seal of rightness. Some writers
are wont to point to the Washington Conference, the six prepara-
tory disarmament conferences and the present conference at
Geneva as signs that we are emerging from our isolation. Looked
at closely, this does not seem to be so. The various kinds of dis-
armament conferences do not look to continuing collaboration;
on the contrary, when an agreement shall have been arrived at,
then in theory the nations shall disband (save for a possible dis-
armament commission which shall see whether the agreements
are kept) and return each to his own business. In entering into
collaboration on disarmament, therefore, we leave the door open
behind us.
Nor does our rapprochement to the League of Nations indicate
any real change of policy. As Mr. Lippmann points out, this rap-
rochement since the election of Mr. Harding has been due
argely to changes in emphasis within the League itself. Article
XVI, providing for the use of force to maintain peace, has gradu-
ally subsided into the background, and the League has evolved
"from a League to enforce peace into a League for conferring
about methods of preserving peace," an evolution in the direction
of American methods. Our other participations in the League -
 FOREIGN AFFAIRS
on scientific, economic and social welfare commissions, to the
extent of some three hundred American members- do not in
any real sense violate the isolationist policy; on the contrary, this
form of collaboration is a compromise, for it permits our citizens
to contribute to the solution of world problems without involving
the United States.
One significant exception to the practice of co6peration with-
out commitment occurred. at the end of 1931, and it is interesting
that it occurred as the direct result of an American plan. The
Kellogg Pact was expressly designed to mobilize the moral senti-
ments of the nations without in any way involving their material
resources. Yet as a result of the tacit violation of the Kellogg
Pact by Japan in September the United States permitted its
consul in Geneva to sit with the Council of the League for the
purpose of discussing the application of the Pact. The move in
itself was abortive, partly because it was a purely occasional
matter and partly because, being taken under the egis of the
Kellogg Pact, action was necessarily confined to protest. At this
stage it is impossible to say how far this piece of codperation
which does not involve commitment will lead us. We are deeply
concerned in the Far East, not only commercially but tradi-
tionally as a champion of China from the days of the Open Door
Policy to the Nine Power Treaty, and in any action we may take
in that particular theatre of disturbance we shall inevitably find
ourselves acting in international co6peration. Aside from any
importance which our action may prove to have had in shaping
events in the Far East, the fact should not be overlooked that the
Secretary of State has worked out and inaugurated a method by
which this Government can collaborate with the ranking body of
the League of Nations.
It is due Mr. Lippmann to say that the emphasis placed here
on the question of isolation is not characteristic of his book. It
derives rather from the logic of the events which he narrates.
He lets his narrative speak for itself, and points few general
morals; in default of them the following observations will serve.
It is as well known abroad as it is here that such sallies as we
have made from the isolationist position have been made reluc-
tantly. They have been sallies in the strict sense of the word, not
only because the way of retreat has always been kept open but
because they have been ventured upon as exceptions to an other-
wise fairly consistent policy of defense. But isolationists are not
 1931 473
confined to the United States; they are symptomatic of the
revival of nationalism, itself a product of the antagonisms en-
gendered by the war and a reaction of alarm against the way in
which the modern world is being drawn closely together. To an
extent, also, the policy of isolation has found advocates abroad in
imitation of ourselves; if high tariffs and industrial self-contain-
ment coincided with post-war prosperity in America, it was
argued that they might produce the same happy result elsewhere.
For our own part, we in the United States have attempted to
wall ourselves in as an economic unit, safe from foreign attack,
while at the same time keeping the outlet open for the distribu-
tion of our exuberant production of goods and capital. In order to
make this practice consistent with the principles of political isola-
tion, we have developed the compromise theory that economics
and politics occupy separate spheres, that we can do business
with foreign countries without involving political relations. The
trouble is that the. compromise does not work. Time and again
we have seen politics cross the frontier of economics, and econom-
ics invade the field of politics. Never has this been so clear as in
1931, when the depression has sharpened human impulses and
diminished powers of resistance. Political difficulties have had
their main origin in economic dissatisfactions and economic
difficulties are insoluble without political revisions. Thus is the
union complete.
International economic conferences and financial agreements,
the moratorium, arms limitations and Manchuria, these are all
part of an endless chain of sequences. It is useless to pretend that
when the problem of reparations and the debts shall have been
solved we can settle down to a simple business relation with
Europe, useless to suppose that arms limitation, once achieved,
can be dismissed from international politics, or that the trouble
in the Far East is the last case in which our interests and com-
mitments will force us to intervene abroad. As surplus producers,
both of goods and credit, our network of business is cast over
the whole world, and it is a world in which the unequal degrees
and kinds of civilization, like the uneven cooling of the earth's
crust, are always casting up disturbances.
 THE PROTECTION OF AMERICAN
FOREIGN BONDHOLDERS
By .4/len W. Dulles
HE activities of our bankers in sponsoring the sale of
foreign securities in. the American market is now under
investigation. This is not surprising when we consider that
out of a total of approximately eight billion dollars of foreign
loans floated here during the past ten years, almost one billion
are either in default or will. shortly be in default as a result of the
moratorium legislation which has been adopted by various foreign
debtor countries. In addition, many other foreign issues are
selling at a fraction of the price at which they were originally
marketed. The American investor is a newcomer in the field of
foreign financing and his first and possibly natural reaction is to
place the blame for this situation upon the bankers who have sold
the securities. Granted that there was over-lending during the
past few years, and that other mistakes have been made, we
nevertheless are perhaps inclined to exaggerate the bankers'
share of responsibility. The foreign loans sponsored by the most
experienced of the European bankers have suffered in much the
same way as our own and they have been partners with our bank-
ers in many of the foreign issues which originated in the United
States. It is true that we have recently been the largest lenders to
foreign countries, but this is largely accounted for by our posses-
sion of available capital seeking employment rather than by any
fundamental difference in policy between the European and the
American houses of issue.
Where there have been widespread defaults on foreign issues
the direct cause, both in the past and at the present time, can be
traced to a world-wide depression. For example, it is calculated
that the North and South American securities listed on the
London Stock Exchange depreciated over $Soo,ooo,ooo during
the five years preceding 1895, and the British investor had a
somewhat corresponding loss in the years following the depression
of 1873. These depressions were no more predictable than the
present one; the consequences to the investor were much the
same, and it is hardly fair to saddle the bankers with sole re-
sponsibility for failing to forecast and provide against such
conditions.
 AMERICAN FOREIGN BONDHOLDERS
Even though the European bankers may not have been much
more astute in the selection of foreign investments than our own
bankers, their long experience in dealing with foreign financing
has enabled them to develop a special technique in the handling
of defaults on foreign issues. We should not overlook the lessons
of their experience. It is clearly desirable to investigate the mis-
takes of the past in order to prevent a repetition oFthem, so far
as they are avoidable; but it would be unfortunate if at the same
time we did not make a careful study of the most effective means
of curing existing defaults on foreign issues, or at least of sal-
vaging for the American holder of foreign securities the maximum
that can be obtained.
When domestic issues go into default there is a time-honored
method of procedure for the bondholder to follow. A protective
committee is formed, generally on the initiative of the bankers
who sponsored the loan, bonds are deposited with the committee,
and the .debtor (unless a municipality or other public body is
involved) is forced to reorganize his business and adjust his
capital structure, or his assets are liquidated and distributed to the
bondholders. If a domestic municipal obligation is involved, the
procedure may be somewhat more cumbersome and less under
the control of the bondholders; but generally remedies are avail-
able and there is a reasonably clear course to follow.
Cases of default under a foreign bond issue, where a foreign
government, state or municipal bbligation is involved, present a
very different type of problem. And it is this type of default which
is involved in most of the foreign dollar issues on which payment
has recently been suspended. Here there is no effective remedy at
law. Even where the general laws of a foreign country permit suit
to be brought, and this is rarely the case, legal action would be
futile. In most cases specific moratorium legislation, or legislation
preventing the transfer from domestic to foreign currency, makes
any effective recovery at the present time impossible. The only
course for the bondholder in such cases is through negotiation
with the debtor. It is obvious that such negotiations cannot be
carried on by the individual bondholders. Any hope of success
depends upon concerted action through some agency which has
authority to speak for, and to conclude arrangements on behalf
of, the bondholders. The initiative for such concerted action can
hardly be left to the widely scattered holders of this or that
particular issue.
476 FOFEIGN AFFAIRS
Before considering the: particular problems presented by the
default on foreign issues recently floated in the United States, we
may find it helpful to review the precedents which have been set
by England, France and certain other European countries.
The Corporation of Foreign Bondholders was founded in
England in i868 and was reconstituted in 1898 under Act of
Parliament. The Council of the Corporation consists of twenty-
one members, of whom six are nominated by the British Bankers
Association and six by the London Chamber of Commerce, with
nine members nominated by the other twelve. The British Bank-
ers Association is composed of representatives of the commercial
banks, rather than of the houses of issue. The original funds of the
Corporation were obtained through the subscription of £ioo
each by i,ooo individual holders of defaulted foreign state securi-
ties. This fund has been increased from time to time from various
sources; and at the present time the invested funds of the Cor-
poration amount to about £2oo,ooo. The objects and scope of the
British Corporation as summarized from its Charter are:
To watch over and protect the rights and interests of the holders of foreign
securities; to collect and preserve statistics, reports and data; to adopt meas-
ures for the protection, vindication and preservation of the rights of the holders
of foreign securities, either on any default or upon breach of any condition
under which the securities have been issued; to negotiate, or to assist'in nego-
tiating, resumption of payment or settlement, of issues in default; to convene
meetings of holders of public securities for the purposes of concerting with them
the requisite measures to be adopted on their behalf; to organize and despatch
representatives to carry out direct negotiations with the defaulting obligor;
to render assistance to, and support measures and enterprises calculated to
maintain and promote public credit; and to benefit the holders of foreign
securities.
In the event of default on a British issue placed abroad, the
British Corporation usually calls a meeting of the interested
bondholders, suggests a particular committee to deal with that
particular default, and then lends its facilities and services to the
committee to help in negotiating a settlement. The issuing bank-
ers are generally represented on this committee. The expenses of
the committee are met out of the funds of the Corporation and
recovered when a settlement is made, either from the state con-
cerned or by a pro rata charge upon the bondholders concerned.
The members of the Council have no interest in this fund, which
is administered by the Council of the Corporation on behalf of the
general interests which it represents and not for profit. In cases
 AMERICAN FOREIGN BONDHOLDERS 477
which do not seem to call for the formation of a particular com-
mittee, the Council of the Corporation acts directly on its own
initiative in defense of the bondholders. In a recent letter de-
scriptive of the Council it was pointed out that the British issuing
bankers are thus saved the necessity of choosing between offend-
ing a foreign state by strong protest or offending the bondholders
by inaction. During the sixty odd years of its existence the Cor-
poration has been concerned in the settlement of debts aggre-
gating approximately 5,ooo,ooo,ooo.
The French Association- Association Nationale des Porteurs
Franfais de Valeurs Mobilieres - was organized in 1898 by the
Paris Stock Exchange at the request of the French Minister of
Finance. While authorized by its Charter to protect the holders of
domestic as well as of foreign issues, the Association has largely
exercised its functions on behalf of the latter. The purpose of the
association was to serve as a center of information and as an
organization for the defense of the interests of the bondholders.
It is administered by a Council composed of nine members - at
present including representatives of the Stock Exchange, of two
of the larger commercial banks, a leading professor of law, and a
former representative of the Minister of Finance. The Association
is financed by the Stock Exchange and by contributions from
other subscribers. The activity of the Association is very similar
to that of the British Corporation of Foreign Bondholders; that is,
the Association takes the initiative in determining whether the
formation of a protective committee for a particular issue in
default is desirable. Several other European countries have insti-
tutions somewhat similar to those existing in England and France,
although of course as those two countries have done the bulk of
the foreign financing originated in Europe the need for elaborate
organizations has not been as keenly felt elsewhere.
In considering the question as to whether there should be an
American association of the above type for the protection of the
holders of foreign bonds, three questions naturally arise: Is there
a real need for it, which is not otherwise met? What should be the
character and duties of the association? How could the association
be financed?
Obviously there is no reason to follow blindly the lead of other
countries, even though the institutions they have established
have proved useful in their cases. The American banking system
differs in many respects from the European. Foreign financing in
478 FOREIGN AFFAIRS
the United States has been in the hands of a large number of
banking institutions with diversified and often conflicting inter-
ests, and these banking institutions in most instances have indi-
cated a willingness to watch out for the interests of the holders
of defaulted bonds which they have sponsored. In England and
France the number of issuing houses is relatively restricted and
their cooperation with a protective association can be easily
arranged. In Europe the governments have guided the policy of
the bankers to a degree unknown in this country. These are only
a few of the points of diff.rence. We should examine the American
situation de novo before deciding whether under conditions as
they exist in this country a protective association could fulfil a
useful function and whether it is necessary, in view of existing
organizations. We already have the Foreign Securities Committee
of the Investment Bankers Association, and the Institute of
International Finance which is conducted by the Investment
Bankers Association in co6peration with New York University.
The Institute has performed a very useful work in collecting and
disseminating data about the financial situation of various foreign
states which have borrowed largely in this market and about the
action taken by countries in default to preserve their credit. The
Institute may consider enlarging its functions, and take the
initiative necessary to bring about the formation of protective
committees. It is already, committed to opposing the further issue
of securities by a country in default when this would be detri-
mental to the holders of that country's obligations.
Notwithstanding the particular character of our banking
system and the existence of the Institute of International Fi-
nance, there are reasons which justify giving the fullest consider-
ation to the organization of an American association for the
protection of foreign bondholders somewhat along the lines of
the British Corporation, provided proper personnel and adequate
financial backing can be found.
In many cases the issuing bankers are those logically indicated
to take the initiative in protecting the holders of defaulted foreign
issues which they have sponsored. Often, however, this is not te
case, and there are other occasions where the bankers, although
able and possibly willing to take action, are not the best qualified
under the circumstances to be of help to the bondholders. There
are also situations where the bankers have other interests which
make it difficult or embarrassing for them to act. For example,
 AMERICAN FOREIGN BONDHOLDERS 479
several of the American houses which originated foreign issues
have passed out of existence since 1930, or have entirely with-
drawn from the type of business which qualifies them to act
effectively in the foreign field. There are other cases where the
bankers have sponsored the issue of bonds of a certain obligor,
and have subsequently purchased and now hold the short-term
obligations of the same debtor. When only a limited amount of
foreign exchange is available, it obviously places the bankers in an
embarrassing and difficult position to make representations as to
how that foreign exchange shall be allocated as between the short-
term obligations which they hold, and the long-term bonds which
they have sold to the public. In some countries the issuing bankers
are the'fiscal agents for the obligor in default, or have local busi-
ness interests in the country in default which are dependent upon
the cultivation of good relations with that country's authorities.
In either case it may be embarrassing for them to take the vigor-
ous action which might be required to enforce the rights of bond-
holders. In some instances the bankers have negotiated their bond
issues with a governmental r6gime which has been overthrown by
revolution, and hence the bankers have become persona non grata
to the present authorities in the debtor country. In all of these
cases an independent organization directly representative of the
bondholders and not controlled by the issuing bankers might
render the bondholders effective help.
Holders of defaulted bonds readily become critical, and in
many cases unfairly so, of the banking house which sold the
bonds. They often incline to discount the representations of the
bankers as to the steps which they are taking to cure the default,
to be dissatisfied with the activities shown on their behalf, and
even to ascribe to ulterior motives any representations by the
issuing bankers that the time for action on their behalf has not
yet arrived. This state of mind often makes the bondholders an
easy prey for exploitation by unqualified persons who, acting
primarily in their own self-interest, offer their services in the
guise of a protective committee.
Where a foreign state has placed its bonds with various Amer-
ican banking houses, the organization of separate committees for
each issue, without some coordinating agency, may lead to
conflict between the different classes of bondholders, and retard
collection by any of them. Further, in many cases the bonds of a
foreign state have been placed simultaneously in the American
480 FOREIGN AFFAIRS
and in European markets. A central American organization
would afford a more effective means of co6perating with similar
organizations in England or France, for example, than would be
possible if such co6peration were solely through diversified groups
of bankers. This will be particularly true if negotiations for the
resumption or readjustment of the debt service require collabora-
tion with other creditor nations which have centralized organiza-
tions to deal with such situations.
Customarily the governmental machinery of European coun-
tries is exerted on behalf of their nationals' claims abroad more
vigorously than is the cse under our system of government. In
this situation the effective protection of American holders of
foreign bonds will require the utmost vigilance to counteract
ressure of a political or economic character which may be
rought to bear by foreign governments whose nationals are
likewise the holders of defaulted foreign obligations. This will be
particularly true in connection with the defaults in Central
European countries. In England and France,* for example, the
central organizations representative of the bondholders enjoy the
confidence of the governments in those countries, and this will
tend to facilitate co6peration between the government and rep-
resentatives of the bondholders in protecting investments which
those countries have made. In most cases of default there will be a
limited amount of foreign exchange available to meet the service
of bond issues and even assuming that no outside pressure is
brought to bear, it will be no easy task for the state in default to
decide how that excharLge should be allocated. Obviously the
claims of English and French bondholders, represented as they
are by a central organization in each country and with govern-
ment co6peration, will be in a particularly favorable position to
urge their claims for the lion's share of available foreign exchange.
Our Department of State and our representatives abroad are un-
doubtedly anxious to exercise their good offices to prevent any
discrimination against American bondholders, but they may
often find it difficult to make this co6peration effective on behalf
of a large group of American bankers who may themselves have
conflicting interests and who may be tempted to play lone hands
in the hope of securing special privileges for their particular bond-
holders. Certainly the co6peration of the Department of State and
of our representatives abroad could be more easily obtained on
behalf of our bondholders if our government could deal with or
 AMERICAN FOREIGN BONDHOLDERS

through some central organization of high repute, not organized

for private gain and acting solely in the interest of the American
investor.
As things are at present in this country it is often difficult to
secure sufficiently prompt co6peration among our bankers to
prevent decisions being taken abroad which are favorable to the
bondholders of other countries and detrimental to American
bondholders as a whole. This can best be illustrated by considera-
tion of what has recently happened in the case of Hungary. The
Government of Hungary has enacted moratorium legislation,
which means that there will be default on many of the Hungarian
securities held abroad. In a statement regarding the moratorium
the Hungarian Government has listed certain issues which are to
receive priority in securing foreign exchange. This list includes
eight loans as to which, in the aggregate, European rather than
American interest is overwhelmingly predominant. As a sop to
American sentiment the United States Government Relief Loan
to Hungary is listed second; but as the service on this Loan, now
suspended by the Hoover moratorium, is in any event only about
$ioo,ooo per annum, this is not a costly exception when con-
trasted with the disregard of other Hungarian dollar bond issues
on which the annual service charge is approximately $7,ooo,ooo
per annum. The favorable treatment afforded certain European
creditors of Hungary is probably due in no small measure to their
ability to act promptly and in a concerted manner and thus to
secure the support of their governments. In fact the Hungarian
Minister of Finance has suggested that American creditors should
appoint representatives, following the example of the English
creditors, to discuss the treatment of Hungarian dollar bond
obligations. The incident should serve as a warning that with the
European bondholders organized as they are and enjoying the
support of their governments, they will be in a position to obtain
more consideration from foreign debtor governments than we
obtain unless American bondholders are organized to exert prompt
pressure, with proper support from Washington.
It is always easier to describe the theoretical advantages to be
derived from a new organization than to indicate exactly how it
should be constituted and precisely what it would do. If a bond-
holders' protective association is to be of value it is essential to
find qualified persons with the necessary prestige and authority
to form the council of the association. Unless this council enjoys
 FOREIGN AFFAIRS
the complete confidence of the bondholders, and is in a position
to secure the willing co6peration of the bankers, the association
would do more harm than good. Further, the sponsorship of the
association would have to be such that our government authori-
ties would feel free to co6perate with it and lend it full support.
In England the British Corporation is organized under a special
Act of Parliament; in France the Association was constituted on
the initiative of the Minister of Finance. Any corresponding
American association would be more effective if it had similar
government support or approval.
A large group of American citizens and American institutions
are very vitally interested in the proper handling of their claims
under defaulted foreign bond issues, and delicate questions of
international relations may be involved in the adjustment of
debts involving foreign governments. There is, therefore, a legiti-
mate national interest in the situation which would justify the
initiative of our government in arranging for a committee of
eminent private citizens to study the situation and recommend
whether an association should be formed and, if so, what char-
acter it should take. Much publicity has already been given to the
legislation proposed by Senator Johnson to control future foreign
financing. For the moment, at least, this is an academic problem,
as economic conditions in general and the burnt fingers of recent
investors in particular constitute a more effective brake on foreign
lending than any amount of legislation. The immediate problem
before us is to adjust past operations to present conditions in a
way to avoid international complications and to promote the
normal flow of trade and of capital between countries, and while
domestic legislation dealing with the machinery for clearing up
past defaults would be inappropriate, some government initiative
would certainly seem justified.
An American association should not be composed primarily of
representatives of the issuing bankers nor should it be organized
for profit. The size of the council of the association would depend
upon the number of really qualified men who would consent to
serve. Probably a council of between five and ten persons would
be sufficient. Persons should be selected who have no conflicting
banking or commercial interests and whose time is not so com-
pletely taken up with other matters that they would be unable
to give attention to the activities of the association. Probably the
head of the council should give it his entire time, should receive
 AMERICAN FOREIGN BONDHOLDERS 483
adequate compensation, and should have a small permanent staff.
Members of the council, as in the case of the British Corporation,
should receive a fixed fee for attendance at meetings. It would
not be easy to find the right men to act as members of such a
council, but until the attempt has been made one cannot say
that it is impossible.
The functions of the council of the association would probably
be somewhat similar to those of the corresponding British and
French associations. It would propose, probably in codperation
with the issuing bankers, the organization of particular com-
mittees to deal with particular defaults. If the issuing bankers for
one reason or another failed or were unable to take timely action,
the council would take the initiative alone. In many cases the
council would be able to take action'in situations of general
interest to American bondholders where committees had not yet
been formed, or where it might be deemed premature to form
such committees.
Obviously the council of the association would not have any
authority to commit the bondholders or in any sense to represent
the bankers, unless specifically authorized to do so. It would help
the bondholders to organize for their own protection, where this
had not already been done, and would facilitate co6peration
between the bankers in situations where the general interests of a
diversified group of bondholders were at stake. In this way the
association would not usurp any existing functions but it would
furnish the motive force necessary to get proper action started;
it would co6rdinate different agencies and it would bring to the
attention of both bankers and bondholders any situations which
might be calculated to prejudice the claims of American holders
of foreign securities.
An attempt to form an American association would be useless
unless there were prospects that it could be properly financed
during a trial period of a few years. The financing would have to
be adequate to permit the payment of the permanent staff,
including the executive head of the association, and to provide
for running expenses. In the case of the British Corporation, for
example, the ordinary running expenses average about Li2,0oo
per annum. This is apart from expenses incurred in litigation or
the special negotiations of the various committees. Certainly
several hundred thousand dollars should be available before any
American association is launched. Once given an adequate start,
 FOREIGN AFFAIRS
the American association (as has proved the case with the British
association) could probably care for current expenses out of the
proceeds of the settlement of claims and at a very small cost to
the bondholders. As the bankers would certainly be saved con-
siderable expense by such an association, they possibly would
provide some of the funds; and the New York Stock Exchange,
which should certainly be represented on the council, might also
be a possible contributor. Chiefly, however, the initial financing
should be sought from those for whose benefit the association
would be established, namely, the holders of foreign bonds, and
probably largely from institutional rather than individual hold-
ers. There is a possibility, too, that the public character of the
association would justify philanthropic foundations in giving
their support. The cost of the association would be negligible as
compared with the amount of outstanding foreign bonds in
default, and if the advantages which the bondholders might
derive therefrom could be brought home to them, it does not
seem unreasonable to expect that funds would be forthcoming.
Despite the blow which foreign financing in the New York
market has received in consequence of recent events, we shall
again be lending money abroad before many years. Certainly this
will be true if we are to maintain any considerable foreign trade.
The experiences of both England and France, which in the past
have suffered like losses on their foreign investments, show that
a reverse such as we are now witnessing is not a permanent
deterrent to foreign investment. However, before further American
capital goes abroad, existing defaults must be settled, complicated
negotiations will have to be carried through, and in connection with
such negotiations refunding operations will probably be necessary.
The restoration of our prosperity is in no small measure de-
pendent upon the restoration of conditions which will permit
credit to pass more normally between the nations. In working
out a general settlement of foreign defaults, then, the activities
of an American association for the protection of foreign bond-
holders, properly constituted and adequately financed, should
be of great assistance - to the bondholders, to the bankers and
to the country at large.
 JAPANESE FINANCE SINCE THE WAR
By 4. Andreades

N OUR day even a victorious war is followed by great finan-

cial difficulties, either because the state is obliged to liquidate
its short-term debts and other obligations contracted during
the hostilities or because many states are prone to allow them-
selves to be dragged into great social expenditure. Often both
reasons operate. This has been the case in Japan; but there the
post-war period has been a time of even greater difficulties than
elsewhere for a third reason - one peculiar to the Empire of the
Rising Sun - namely, that since 1895 each successive war won
by that Empire, instead of assuring a period of peace, has brought
in its train the anticipation or fear of a still greater war.
Thus, on the morrow of the Treaty of Shimonoseki (April
1895) Japan was forced by the intervention of Russia, backed by
France and Germany, to renounce the continental territories
ceded to her by China. To the irritation caused by this interven-
tion were soon added the fears inspired by Russia's acquisition of
Port Arthur and by the completion of the Trans-Siberian railway.
The consequence was that Japan quintupled her ordinary
budgets for the military services -from 12,402,000 yen' in 1894
to 6o,865,ooo yen in 1903-04 - and in addition, during the period
between 1896 and 1904, devoted to these services extraordinary
expenditure to the amount of 421,440,000 yen. This sum was
considerably in excess of the 365,529,o67 yen paid by China as
war indemnity. Hence Japan's public debt rose from 295,807,000
yen in 1895 to 552,I8I,OOO in 1903, while during the same period
the existing taxes were increased and new taxation was created.
The ordinary state revenues, which in 1894-95 did not exceed
89,700,ooo yen, reached the figure of 221,200,ooo in 1902-03.
The Treaty of Portsmouth was followed by apprehensions
similar to those caused by the Treaty of Shimonoseki. In the
course of the Portsmouth negotiations Russia had shown herself
firmly resolved to accept no limitation of her naval power in the
Far East. The Japanese were convinced that this attitude be-
trayed a hidden purpose of revanche; and they considered that a
fresh war was the more to be feared in proportion as they them-
' Except where noted all figures in this article are in yen. The par value of the yen is just under
half a dollar, i.e., $.4984.
486 FOREIGN AFFAIRS
selves would be less prepared for it. Therefore they proceeded to
make enormous extraordinary expenditures for their army and
navy. Concurrently, the new expenditure entailed by Japan's new
position in Korea and Manchuria had to be met; and in Japan
itself the greater part of the railways exploited by private com-
panies were bought up by the issue of s percent bonds. All this
explains why nearly all the: new taxes voted after hostilities began
had to be maintained, even though they were very heavy and
even though it had been expressly stipulated that they were to be
levied only for the duration of the war.
The economy resulting from the conversion of the war-loans
and the conviction that Russia had turned her eyes in other
directions persuaded the rulers of Japan to think of alleviating
the Japanese taxpayer's burdens. But this alleviation was carried
out only on a small scale, being confined to certain items of direct
taxation (the land tax, the business tax, the inheritance tax).
As regards indirect taxation, the reductions of about i5percent
on the duties on sugar, textiles and salt were more than offset by
the increase of the duties on alcohol and tobacco. Whereas the
budget for 1902-03 (on the eve of the Russo-Japanese War)
estimated the revenues at 297,34,000 yen, the budget for
1912-13 estimated them at 687,392,000 yen.
Toward the close of the year 1918 - a time rife with prophecies
- I had heard it said in Paris that Japan would be one of the
few belligerent cou~ntries that would find the post-war period
easy. It was not denied that the Empire had made great sacrifices,
that its budget had risen from 648 million yen in 1914-15 to 1,017
millions in 1918-I 9. But it was argued that nearly all the expenses
of the war had been covered by the automatic increase oftaxa-
tion, while the public debt had been reduced; to be sure, some
war-loans had been floated, but the intensive operation of the
sinking fund had withdrawn from circulation bonds representing
a sum exceeding the aggregate of the new loans. It was pointed
out that such an achievement, rare in history, of a great war
carried through without increase either of taxation or of the
public debt, was to be attributed to the "boom," which followed
1914. It was added that even if the causes which had brought
about this "golden age' should cease to operate,, Japan had
' During the war the belligerents hatd ceased their exportations to Japan and had utilized the
Japanese merchant marine. Simultaneously, the monopoly of trade in Asia had been abandoned to
Japan and had become all the more profitable, as the rise in the price of silver had increased the
purchasing power of countries in which the silver standard prevailed, notably China.
 JAPANESE FINANCE SINCE THE WAR 487

nevertheless had time both to renew and to extend her indus-

tries and to accumulate capital. She therefore emerged from
the war as an economic power of the first order. And Im-
perial Russia's collapse seemed to obviate the necessity of new
armaments.
All these forecasts, like so many others enunciated during
the Peace Conference, were belied by the events. The post-war
years were marked by great financial difficulties for Japan and
these have persisted up to the present day. Here one must dis-
tinguish between the decade from i919 to 1928 and the years
1929-1931.
THE 1919-1928 DECADE

Ordinary expenditure doubled during the decade I919-I928,

rising from 502 million yen to 1,184 millions. Extraordinary ex-
penditure, which in I919 stood at 669 millions, was never reduced
perceptibly in the following years of peace; even in 1928-29 it
amounted to 630 millions. The total budget of expenditure
amounted to 1,172 millions for I919-2o, to 1,521 millions for
1923-24 and to 1,814 millions for 1928-29. This makes, for the
decade in question, an increase of public expenditure of over 50
percent.
The external public debt meanwhile remained at about the
same figure: 1,446 millions in 1929-3o as against 1,424 millions in
i92o-2I. On the other hand, the internal debt increased formida-
bly: 4,512 millions as against 1,819 millions. Thus, the total
public debt has risen from 3,244 to 5,959 millions - an increase
of over 8o percent.
These facts show clearly that the increase in expenditure was
met almost entirely by new debts; and one need not be an ex-
perienced financier to see that such methods in a period of peace
are not in keeping with the principles of sound finance.
The resulting manifestly unsound financial situation must be
attributed on the one hand to mistakes on the part of the govern-
ment, and on the other hand to a series of unfavorable circum-
stances - chiefly diplomatic complications, the earthquake of
1923, and a prolonged economic crisis. Let us examine these four
points in succession.
The government's chief mistakes grew out of its attempt to
accomplish too much and on too grand a scale. The army and
navy, education, industry, communications, harbors, water-
488 FOREIGN AFFAIRS
works, the postal, telegraph and telephone services - all were to
be brought up to the level of perfection. The war period had, as it
were, intoxicated both government and people. They forgot that
especially in finance it is necessary, as Gambetta put it, "to
arrange the questions in their proper order." They also forgot
(like many other governments) that there exists a sure and
automatic means of effect~ing economies, namely, the reduction of
prices. If the budget of Great Britain was reduced from 1,618
millions sterling in 1919-20 to 790 millions in 1924-25, this was
rendered possible largely by the fact that during the interval the
index-number fell from 310 in 1920 to 166 in 1924. In Japan, on
the contrary, prices rose between the years 1918 and 1921; and
although since 1921 they have gradually fallen, they remained
for a long time at a much higher figure than during the war. The
index-number, which was 194 in 1917-18, reached 343 in 1920-21
and was still at 273 and 225 in 1924-25 and 1927-28.
Turning to the unfavorable circumstances which beset Japa-
nese finances, we notice first that for Japan the morrow of the
Peace of Versailles resembled that of the Treaty of Shimonoseki.
The United States, China and Soviet Russia demanded that
Japan renounce the territories and privileges which she had
acquired by her victories., Lengthy negotiations ensued, and it
was only after the Washington Conference that the questions
touching China and the Pacific were settled; the settlement of
the Sakhalin question with Russia took even longer. During all
these years Japan felt the necessity of reinforcing her military
position, the more so since she could no longer count on her
alliance with England.
The Washington Conventions forestalled the possibility of
an immediate conflict and brought about a reduction of Japan's
expenditure. This relief came from the agreement to limit the
size and number of capital ships and aircraft carriers. But the
arrangements at Washington failed to clear up the situation
entirely. Public opinion in Japan, much embittered at first by
the renunciation of nearly all the fruits of victory, was not
really calmed down until the recent Naval Treaty of London.
All this explains how it came about that for the year I921-22
Japan's military expenditure was nearly double that of the year
1918-19 and why even in 1928-29 it was maintained at a higher
level than during the last year of the war, although it absorbed a
smaller proportion of the budget. The following table, taken from
 JAPANESE FINANCE SINCE THE WAR 489
the last annual supplement of the Asahi, shows the trend of
military expenditure from the last year of the war up to 1930.
Year Military expenditure Percent
(in dollars) of th, budget
1918-1 9 ................ 183,993,000 ............... 36
1919-20 .... ............ 268,344,000 ............... 46
1920-21 .... ............ 364,880,000 ............... 48
1921-22 .... ............ 365,284,000 ............... 49
1922-23 ................ 302,401,000 ............... 42
1923-24 ................ 249,536,000 ............... 33
1924-25 .... ............ 227,597,000 ............... 28
1925-26 ................ 221,904,000 ............... 29
1926-27 ................ 217,125,000 ............... 27
1927-28 ................ 245,820,ooo ............... 28
1928-29 ................ 258,619,000 ............... 29
1929-30.... ............ 244,5 14,000 ............... 29
The terrible earthquake of September 1923 is still fresh in the
memory of all. The devastation it wrought was completed by
fires; that which ravaged the capital seems to have been the
reatest in history. 3 The wealth destroyed by the earthquake and
y fire has been estimated at 5,5o6 million yen. Nothing reflects
more credit on Japan than the method and rapidity with which
Tokyo and Yokohama were rebuilt and other losses repaired.
But this work of reconstruction entailed heavy sacrifices, both
immediate and indirect. The government, the municipalities of
Tokyo and Yokohama, and the provincial authorities of Tokyo
and Kanagawa were obliged to disburse a total of i,8oo million
yen.
The public treasury found itself unable to resort exclusively to
the 5 percent treasury bonds, which in the post-war years were
its chief instruments of credit, and was forced to apply to foreign
capital. The situation of the world's money-market at that time
imposed infinitely more onerous conditions than in the past.
Whereas Japan's last pre-war loans had been issued at 95 and
bore 4 percent interest, the two big loans of 1924 were issued at
New York at 822 and 87 , although they bore interest at 6Y
and 6 percent respectively.
The repercussion of the catastrophe on the yield of taxation
was considerably less than had at first been feared, in part be-
cause the regions affected were centers of consumption rather
than of production. Nevertheless, for the fiscal year 1923-24 the
3 The Tokyo fire covered 33.4 square miles, as compared with izxi square miles at San Francisco
in 09o6, 8.5 at Chicago in 187o and 1.7 at London in 1666.
490 FOREIGN AFFAIRS
public revenues fell short of the estimates by 130 million yen and
during the four following fiscal years it was found necessary to sus-
pend the collection of certain direct taxes in the devastated regions.
The "Japanese Financial Year Book" for 1926 pointed out
that the effects of the earthquake were no longer percepti-
ble. But this satisfaction was premature. At the time of the
disaster, in addition to a provisional moratorium, rendered
necessary by the fact that 74 out of the 84 banking offices in
Tokyo had been burned down, large facilities were decreed for
the rediscounting of "earthquake drafts," i.e., bills payable in
the devastated regions. These bills were estimated at two billion
yen; a part of them were never paid, and even in 1927 they bore
so heavily upon the credit establishments that they constituted
one of the principal causes of the crisis of that year. Thus the
indirect burdens due to the 1923 earthquake, while they cannot
be estimated with precision, were certainly very considerable
and were prolonged over a number of years.
Japan's unprecedented. prosperity during the war was due to
transient circumstances and necessarily ceased with the passing
of those circumstances. It would have been prudent for Japanese
economy to reduce sail in anticipation of this event. But the
Japanese people, like their government, were intoxicated by
prosperity. Encouraged by the fact that everything seemed to
continue to prosper during the year following the armistice, the
industrial and commercial world increased the impetus already
given to all enterprises; and the Japanese banks, which have long
showed a tendency (at once their strength and their weakness) to
place themselves at the head of enterprises, failed to put a suffi-
cient check upon them. Meanwhile conditions became as un-
favorable as they had previously been propitious. European and
American competition were not long in reappearing. The protec-
tionist spirit and fiscal necessities led the British Dominions to
raise their tariffs. The United States followed suit, besides rigor-
ously closing its doors to Oriental immigration. China was in the
throes of civil war. And to cap these misfortunes, silver, the rise
in which had been of such advantage to the Japanese export
trade in Asia, began rapidly to depreciate.
That Japanese economy, as a whole, succeeded in meeting the
storm shows that it rests; upon much more solid foundations than
its detractors would have us believe. It is, nevertheless, equally
true that the years which we are here studying were years of un-
 JAPANESE FINANCE SINCE THE WAR
interrupted difficulties. They were also marked by two crises.
The first occurred two years after the armistice and affected
particularly the iron and shipbuilding industries. Energetic
measures prevented the crisis from becoming general. Neverthe-
less, its effects, combined with the disasters of the earthquake,
made themselves felt over a number of years. It was not till 1926
that the number of workmen employed in these industries rose
again to the 1921 figure. Nor was this the end of the era of
difficulties.
In the spring of 1927 the fall of the Suzuki consortium and the
revelation of the fact that all "earthquake bills" had not been
paid sufficed to precipitate a veritable bank panic. Thirty banks,
including the Bank of Formosa and the Bank of Peers, closed
their doors; from the other banks deposits were withdrawn
wholesale. To put a stop to this panic, the state was obliged to
guarantee the discounting of commercial bills to the amount of
777 million yen. This measure caused the fall of the Wakatsuki
cabinet, but it proved efficacious. The public regained confidence;
sixteen of the banks were enabled to resume business; and the
emissions of the Bank of Japan, which in April 1927 had reached
the unprecedented figure of 2,659 million yen, fell by the end of
the year to 1,683 millions. The crisis, properly speaking, was
ended. But the situation resulting from the over-expansion of
business during the years 1917-1920 was not yet completely
normal. And as we shall see later on, Japanese economy was
about to enter upon a new period of depression.
In crises like those just described, there could be no question
of a return to the policy of relieving the burdens of taxation,
which had been eagerly expected before the war. In fact, the
reorganization of Japan's fiscal system aimed at a more equal
distribution of burdens, not at reducing them. The few taxes that
were abolished were of little importance in themselves and were
replaced by others. In addition, there was a heavy increase of
customs duties; the tariff assumed a clearly protective character
and a law passed in 1924 laid a duty of IOO percent on I2o luxury
articles. The following table shows the trend of the revenue
situation during the decade (the figures are in yen):
Ordinary Revenues Extraordinary Revenues Totals

.. ,o63,I20,I90
1919-20 ........... 745,512,294 1,8o8,633,204
.. 1,438,640,171
1924-25 ........... 688,751,I53 2,127,391,324
1928-29 ........... ,505,0i2,997 5oo,678,107 2,oo5,691,I04
492 FOREIGN AFFAIRS

THE YEARS 1929-1931

It has been shown how from i92o to 1929 the Japanese public
debt increased by 2,71' million yen, in other words, that to
balance the budget it was found necessary to borrow on an av-
erage 271 millions per annum. Everyone felt that such a situation
could not last; and as there could be no question of increasing
taxation, which was already excessive, everyone realized the
necessity of entering upon a period of retrenchment. In 1929 the
Tanaka cabinet adopted this policy, but in a timid manner; and
public opinion was much disquieted to see the new budget fore-
casting a large deficit and new loans amounting to 172 million
yen. The cabinet was therefore forced to retire. At the beginning
of July 1929 the Minseito Party returned to power, with the late
Mr. Hamaguchi as Prime Minister and Mr. Inouye as Finance
Minister. Their program can be summed up in two principal
points: a return to the gold standard, and a policy of retrenchment.
The exportation of gold and silver had been prohibited by
ministerial decree in September 1917. The result of this measure
was practically to suspend the convertibility of Japanese bank-
notes. This result made itself felt soon after the conclusion of
peace. The measure was denounced as playing havoc with the rate
of exchange and as being responsible for the maintenance of prices
at an artificial level. And in truth, whereas ioo yen at par are
equivalent to $49.84, in the years between I919 and 1928 their
value fluctuated between $52.oo (i919) and $38.63 (1925). In
1928 it stood at $46.75. As for prices, the index-number continued
to stand as high in i925 as it was in 1921 ; and though it fell later,
it remained considerably higher than in Europe.
These incessant fluctuations of the rate of exchange disturbed
the country's economic life and encouraged speculation. Hence
the business world, which at first had been opposed to the raising
of the aforesaid prohibition, in view of the protection afforded by
a high rate of exchange, finally demanded the return to free ex-
portation. As for the rise in prices, it weighed not only upon con-
sumers but also on employers, who found themselves unable to
cut down their pay-rolls. The state suffered even more acutely
than private individuals, because the fluctuations in the rate of
exchange created additional burdens in paying the service of the
public debt, and because the rise in prices constituted an obstacle
to the policy of retrenchment. From the moral standpoint it was a
 JAPANESE FINANCE SINCE THE WAR
humiliation for both government and citizens to see that, while
all the other great states had returned to the gold standard, Japan
continued to have "an anomalous currency."
Under these conditions public opinion greeted with satisfaction
the taking over of the Ministry of Finance by Mr. Inouye, who by
speeches and pen had long been the champion of financial reform.
And in truth, the new minister carried out the return to the gold
standard with great skill. Not content with the gold reserve of the
Bank of Japan, which exceeded a billion yen, he took advantage
of the exceptionally favorable commercial balance in i929 to
accumulate funds in London and New York amounting to $5o,-
ooo,ooo. And it was not till after the ground had been carefully
prepared that a decree was issued on January Ii, 1930, whereby
the free exportation of gold was once more permitted.
The two principal aims of this important reform were im-
mediately attained. The yen regained its nominal value without
difficulty. The fall in prices was no less rapid; in June 1931 prices
were at exactly the same level as in May 1916.
Notwithstanding these apparently splendid results, a portion
of public opinion considered the measure as premature. And
as time went on bitter criticisms were heard. We shall examine
them later when we deal with the abandonment of the gold
standard in December 1931.
The policy of retrenchment initiated by Mr. Inouye had to
be pursued by three means: first, no new bonds for the general
account were to be issued, and the loans already planned for the
special accounts were to be reduced; second, no new enterprises
were to be undertaken; and third, expenditure was to be rigor-
ously curtailed. This government was, no doubt, in earnest.
Whether in the end they would have been able to balance their
budget solely by reducing expenses was always a debatable
question and soon became a platonic one. A policy of retrench-
ment requires time. It must be pursued through a series of budgets.
Now, before a year had elapsed, Japan was plunged into an eco-
nomic crisis more virulent perhaps than the one raging in Europe. 4
4 In addition to the general causes operating throughout the world, this crisis had a series of
special causes. The first was the crisis in the United States, Japan's best customer, where there
was a falling-off in the demand for silk. Another was the,depreciation of silver, affecting China,
Japan's next best customer. This depreciation acted in China both as a protective tariff and as
a bonus on exports; Chinese industry was thereby enabled to produce cotton goods more cheaply
than the Japanese looms, and the American market found it more profitable to turn to China for
raw silk. A third cause is traceable to the high fiscal tariffs adopted by the British Dominions. The
Gandhist home-industry agitation in India further reduced Japan's export trade in textiles.
 FOREIGN AFFAIRS
Attacked from all sides, Japan's foreign trade fell off 30.9
ercent during 1930-a greater decline than was experienced
y the trade of any other country in the world. The diminution
was even greater in Japanese exports alone -31.6 percent.
Three-fifths of this loss was in the export of silk and textiles, but
a number of other articles were affected. There was a general
slump in prices.
Notwithstanding the stupendous power of resistance shown
by the country, such a crisis was bound to have its repercus-
sion on public finance, for two reasons - one general, the other
peculiar to Japan. Every crisis causes a falling-off in revenue
from taxation and especially from those taxes which .apply to
consumption and circulation. Japan could not hope to escape
this law. But the crisis has not only affected her revenue; it has
also increased her expenditure. The Japanese Empire is a pater-
nalistic state; except for brief intervals, production has always
developed under government care. It was but natural, therefore,
and in harmony with national tradition, that in the present crisis
the Treasury should come to the aid of the classes chiefly affected.
This aid took the form of plans for stabilizing the prices of silk and
rice, bonuses on exportation, state guarantees for bank advances
and even direct loans to whole classes of citizens. These measures
have entailed sacrifices on the part of the public treasury.
But we shall understand the last phase of Japanese finance
better by studying the budgets appertaining thereto:
BUDGET OF 1929-3o
Revenue (in yen): Estimated Realized Diffeencte
Ordinary ................. 1,504,7o6,757 1,481,143,304 -23,563,453
Extraordinary ............ 176,354,177 345,301,447 + 168,947,270
Totals ................. 1,68I,O6O,934 1,826,444,751 " 145,383,817
Expenditure (inyen):
Ordinary ................ 1,223,689,070 1,212,726,86o - 1o,962,1 1o
Extraordinary ............ 457,371,864 523,590,195 +66,218,331
Totals ................. 1,68 i,o6o,934 1,736,317,o55 +55,,256,12i
These results were satisfactory in appearance only. The expedi-
tion of troops to China and other charges caused expenditure to
exceed the estimates very considerably, while the yield of the
principal taxes showed a falling-off, though not a very great one.
' From the "Japanese Financial Year Book" for 1930.
 JAPANESE FINANCE SINCE THE WAR
The apparent surplus of revenue was due to new loans or to the
remainder of the loans of the previous year. Nevertheless, this
budget marked a step forward in the sense that, in comparison
with the preceding year, it showed a reduction of 78- millions on
the total expenditure.
As regards the budget of 1930-31, actual results are not yet
to hand. According to an article in the Transpacific of July 2,
1931, the revenues of that fiscal year had in April last reached
1,259,687,000 yen, or 249,687,000 less than the estimates; nearly
all taxes on consumption and circulation, as well as the revenues
from state domains and state enterprises, were falling off. Ex-
penditure, in spite of a reduction of 126,ooiooo yen, still amounted
to 1,429,487,000. Thus, there was a deficit of 171 millions,
covered almost entirely by Treasury bills. On the other hand, the
Government anticipated that in the May-July quarter revenue
would exceed expenditure by 132 millions. This would reduce the
ultimate deficit to 37 millions only, which could be covered
by the remainder of the "earthquake" loan. Yet it must be
admitted that if the fiscal year does not show as large a deficit
as was feared, this was due to care in reducing expenditure;
expenses amounted to 1,589,487,000 yen as against 1,681,06o,934
of the previous year.
It is more than ordinarily difficult to forecast the results of the
current fiscal year (budget of 1931-32), because since April last
(which date marks the commencement of the new fiscal year) the
economic crisis has already forced the government to make re-
eated retrenchments in the budget of expenditure. The situation
as been complicated further by the political crisis between
China and Japan, which has necessarily entailed considerable
expense.
Leaving aside the financial repercussion of events in Man-
churia, in regard to which some time must elapse before we can
be enlightened, and confining ourselves to the period ending.
September 30, 1931, we may sum up the situation as follows:
The budget for 1931-32 was submitted to the Imperial Diet on
January 22, 1931. The Minister of Finance, in a long speech,
emphasized the fact that the government's financial situation
both as to revenue and as to expenditure was dominated by the
economic situation of the country. The index-number had fallen
27.5 percent in the eighteen months since June 1929, and the
prices of the staple articles of export and import had undergone a
 496 FOREIGN AFFAIRS
veritable collapse, in consequence of which the customs, excise
and income-tax receipts and revenue in general had fallen off
considerably. The total amount of this falling-off was estimated
at 149 millions. The aggregate revenue was estimated at 1,428
millions - the lowest on record since the budget of 1917. At the
same time, the fear lest unemployment should spread forced the
government to make certain special expenditures. Thus, public
railway works, estimated at first at S6 millions, had reached 92
millions. It was further decided to give advances amounting to
95 millions to the classes most keenly affected by the crisis,
namely, small traders, agriculturists and fishermen. In order to
balance the budget without having recourse to credit on a large
scale, it was proposed to contract certain small loans, destined
for publit works, and to press the policy of retrenchment. Mr.
Inouye announced a number of economies, amounting to i29
millions. In addition, he reduced to a minimum the sums originally
estimated for naval repairs and limited the tax reductions already
promised. By these means the aggregate expenditure was brought
down to 1,40I millions - the lowest figure Japan has known
since 1922, and 400 millions lower than the budget of 1927-28.
In January 1931 it was thought that these sacrifices would be
sufficient and, combined with some small loans, would even yield
a small surplus. But on the one hand, supplementary estimates
brought up the expenditure to 1,488 millions, while on the other
hand, the rapid aggravation of the crisis had an immediate reper-
cussion on public revenue. It soon became evident that the esti-
mated surplus would be replaced by a deficit, which by the end of
spring was put at 6o millions at least, with a prospect of reaching
an even higher figure.
Everyone was agreed as to the necessity of rigorous economies
but everyone in his heart wished to maintain the credits which
affected himself or his caste. There was constant newspaper talk
.of reducing expenditure. The political parties and the press
elaborated plans of economies on a grand scale. The Government
proposed measures to the same end. But the economies actually
realized amounted only, to a few millions.
A single instance will suffice to illustrate what happened.
The reduction of the salaries of public servants had been de-
manded since 1929; it was especially justified since 193o by the
fall in prices. Nevertheless, when it was finally decided to put it
into force from June i., 1931, it was found necessary to make so
 JAPANESE FINANCE SINCE THE WAR
many concessions that out of 710,277 public functionaries only
45,6I3 were affected by the reduction and the amount saved did
not reach io million yen. The project of amalgamating certain
ministries and services and the proposed restriction of military
expenditure also met with lively opposition.'6
These remarks must not be understood as disguised criticism
of the Japanese people, whose patriotism is unsurpassed by that
of any other nation, nor of Mr. Inouye, who had succeeded in
reducing public expenditure from 1,736,ooo,ooo yen in 1929-3o to
1,488,000,000 in 1931-32 and to whom much praise is due for
that achievement, even though his adversaries attribute it solely
to the fall in prices. If there is any criticism it would have to be
addressed to both political parties which have governed Japan
since the war and which have failed to arrest the country on its
course down the slippery incline of what Vilfredo Pareto called
la finanza allegra - "merry finance."
THE LATEST PHASE

Nevertheless, the months passed and autumn brought in its

train events of which I shall speak directly and which were not of
a nature to redeem the situation. The drafting of the new budget
was delayed because in view of the intensity of the economic crisis
it was impossible to foresee with any precision where the falling-off
of revenue would stop. When at last the budget was drawn up
it placed expenditure at 1,479,900,000 yen and revenue at
1,307,800,000 yen, leaving a deficit of 172,100,000 yen. This was
to be redressed by the following measures: increase of taxation,
30,930,000 yen; increase of customs duties, 9,i4o,ooo yen; and
various internal loans, 132,030,000 yen.
The new budget was made known on December 8. One week
later, the Wakatsuki Cabinet was a thing of the past and its place
was taken by one from the Seiyukai Party. Yet there was no
connection between the two events. The ministerial crisis was
precipitated by disagreements which for some time past had
made themselves felt in the Cabinet. The summons to Mr. Inukai
to form the new Cabinet was dictated almost entirely by mone-
tary considerations. Not that the new budget did not supply the
Opposition with weapons against the Government. It was easy
I Thus, the military chiefs agreed to the suppression of four army divisions, but demanded that
the credits liberated be spent on the renewal of armament. The final estimates provided for a re-
duction of i,247,ooo yen for the navy and an increase of 8oS,ooo yen for the army.
498 FOREIGN AFFAIRS
to remind the Minseito Party of its electoral platform of 1929.
In spite of their slogan "No loans!" they had already contracted
loans of more than ioo millions during 1931, and although the
public debt had passed the six billion figure, they were planning to
issue still larger loans. The slogan "No loans!" was, in its turn,
abandoned at a time when public revenue had fallen off by 20
percent and when the existing taxation already bore too heavily
upon all classes of society.
Yet these criticisms were not a sufficient ground for appealing
to an Opposition that waLs in acknowledged minority in the Diet,
inasmuch as the Seiyukai Party had no alternative budget policy
to suggest. On the other hand, however, it could put forward a
program radically different from that of the late Government in
the monetary field, because for some time past it had been
strenuously advocating the departure from the gold standard.
This sufficed to open to the Party the road to office.
I have already explained above with what facility the return
to the gold standard was accomplished and how rapidly it had
produced the two results expected of it, namely, exchange at par
and a fall in prices. But in the chant of triumph there were from
the very start some discordant notes. As a matter of fact defla-
tion, however prudently carried out, must necessarily have its
victims; that, indeed, is one of the reasons why inflation should
be avoided at all costs. Furthermore, in the case at hand, the
times which followed hard upon the return to the free exportation
of gold were a period of acute crisis. From that moment there was
no lack of critics to declare that the reform was premature and
that prices were falling quite enough without it. And it was
pointed out that under the free exportation of gold considerable
quantities of the precious metal had left the country and that the
gold reserve was sinking.
In spite of all this, it was generally thought that the advantages
of the reform outweighed its disadvantages and that the gold
reserve was adequate, since it covered more than two-thirds of
the fiduciary circulation. In a word, the gold standard did not
seem to be in danger. But from the end of September public
opinion began to be seriously uneasy. More than once the foreign
press announced that Japan was about to follow the example of
Great Britain and so many other countries. The Minseito Govern-
ment took certain steps to control the export of gold and twice
advanced the discount rat~e. But on the question of principle Mr.
 JAPANESE FINANCE SINCE THE WAR 499
Inouye showed himself inflexible. He held that the situation
presented a different aspect in Japan than in England (in Japan
there are no big short-term deposits that might be withdrawn
overnight), that the balance of trade was in equilibrium, and that
the suspension of the gold standard would upset the country's
economic life. He succeeded in persuading the business world
of Japan to share his point of view, as is shown by a resolution
adopted at a meeting on November 7, at which the principal banks
were represented. And the yen remained very nearly at par.
Nevertheless, Japanese public opinion became more and more
nervous. Mr. Adachi, Minister of the Interior, openly preached
the necessity of forming a National Government after the pat-
tern of the new MacDonald Cabinet in Great Britain. When his
resignation forced the Government to retire, Prince Saionji, last
survivor of the Elder Statesmen of Japan, advised the Emperor
to call the Seiyukai Party to power. The new official Cabinet was
at once formed, with Mr. Inukai as Prime Minister and Mr.
Takahashi as Minister of Finance. 7 This Cabinet's first official act,
on December 13, was to prohibit the exportation of gold. In addi-
tion, the inconvertibility of bank-notes was immediately pro-
claimed.
This should suffice to make it clear that it was the currency
policy that lay at the bottom of the change of Cabinet. That re-
course was had to the minority to take over the government of the
country in spite of serious foreign complications and the practical
impossibility of proceeding to an immediate dissolution of the
Diet, shows that a considerable section of public opinion favored
a return to the embargo on gold exportation. What were the rea-
sons that lay behind the development of this sentiment?
The situation was already bad in consequence of the steadily
increasing economic depression, aggravated on the one hand by
the poorest rice harvest in thirteen years and on the other by the
Chinese boycott, which dealt a heavy blow not only to the export
trade but also to the Japanese merchant marine. Prices crashed.
In October alone there was a fall of 2.7 percent, which brought
the index-number down to SS percent of the average prices of the
years 1921-24. As for the foreign trade, the returns for October
I This statesman, who is of advanced age, enjoys great authority and possesses great financial
experience. Like Mr. Inouye, he has served as president of the Yokohama Specie Bank and as
governor of the Bank of Japan. He was Prime Minister in 1921-2 and was created a Viscount but
renounced the peerage in favor of his son. He is familiar with the foreign money-markets, for it
was he who as Financial Agent negotiated a part of the big loans of x9o5 and i9o6.
500 FOREIGN AFFAIRS
were the lowest since August 1917 for imports and the lowest
since October 1915 for exports.
In times of acute distress faith in economic principles is apt to
be shaken. A death-blow seemed to have been dealt to economic
orthodoxy by the suspension of the gold standard in Great
Britain. The repercussion of this measure was very great in
Japan. In Japanese eyes London has always appeared in the light
of an economic Mecca; the reform realized in 1925 by Mr. Winston
Churchill had greatly contributed toward Japan's return to the
gold standard. Great Bri:ain's suspension of the gold standard
had an even greater effect, in the contrary sense, because the
temporary boom which followed the return to an inflation policy
by Great Britain and others that imitated her manifested itself'
partly at Japan's expense. Japan, one-tenth of whose merchant
tonnage was already lying idle, saw the British merchant marine
offering freights in depreciated sterling; she saw Lancashire
exports supplanting her own goods in the Middle Eastern and
Far Eastern markets, and certain Canadian and Swedish indus-
tries (such as the paper industry) competing with her own even
in Japan itself.
Another preponderant factor was the escape of gold. The gold
reserve, which had already become reduced from 1071 millions
in January 1930 to 825 millions in the summer of 1931 was shrink-
ing visibly. On the day when the free export of gold was sus-
pended, it had sunk to 52c millions and an important bank was on
the point of exporting another 30 millions. Now a reserve of 500
millions is generally considered in Japan as the minimum - as
the "safety level," below which it must not be permitted to go.8
What hopes do the Japanese found upon the decree of Decem-
ber 13? Well, about the same as those hopes manifested in Eng-
land - the restoration of economic activity and, above all, the
relief of their two main industries, silk and textiles.
Government circles anticipate that the price of raw silk in yen
will rise in proportion to the depreciation of the yen, and this will
be an encouragement not only to the agricultural element so
intimately bound up with this industry, but also to the capitalists
and working-classes engaged therein. Similar advantages are
8Still another reason is given in the leading article of the London Times of December 14: "Large
financial and commercial interests were reputed to have indulged in heavy speculation in dollars
in anticipation of the fall of the yen. Mr. Inouye's shipments of gold to America converted their
hopes of profit into fears of heavy loss. Their attacks upon Mr. Inouye were supported by the
industrialists."
 JAPANESE FINANCE SINCE THE WAR

expected for the cotton industry, the merchant marine and all
branches of production in general.
The Transpacific of December 17, 1931 points out that the im-
mediate effects of the embargo seem to be satisfactory but has-
tens to add: "Whether a policy of inflation is in the long run
beneficial to any country is open to much doubt." That is also my
opinion.
Forced circulation may perhaps be a necessary evil; it is never
a remedy._The-su-pension of the gold standard may bring tem-
porary relief; but in the long run it generates numberless evils.
Even at the end of 1931 people in Japan had begun to be aware
of this. To be sure, the shares of steamship companies and textile
industries advanced considerably and silk prices remained firm,
despite their heavy fall in the United States. On the other hand,
the yen followed the pound sterling in its drop. This depreciation
affected all salaries and generally speaking all persons having a
fixed income. It also was disquieting for the equilibrium of the
budget. The new Government apparently intends to hold to the
budget submitted on December 8, with the proviso that the new
taxes will be replaced by a reduction of the sinking fund. But at
the present rates of exchange it would seem difficult to hope that
expenditure will remain at the figures of the estimates. The
service of the foreign debt alone will absorb 3o percent more yen
than heretofore; the same will be the case with all purchases
effected abroad, and home prices in their turn will surely rise.
Recourse to credit, also, will be more costly.
At the beginning of 1932, as this article is being finished,
Japan's financial situation is much more difficult than it was a
twelvemonth earlier. A huge effort will be necessary to balance the
budget and to stabilize the national currency in one way or an-
other. But it is not the first time that Japan finds herself in a
straitened financial position. This is the fourth, at least, since the
days of the Great Reform in I868. The history of the past sixty
years permits the hope that the Japanese people will once again
show their financial patriotism, and that once again they will
surmount the difficulties that beset them.
 THE AMERICAN INVESTMENT
IN LATIN AMERICA
By William 0. Scroggs
HE financial difficulties olF the republics of Latin America during 1930
and 1931 were of especial interest to the people of the United States
because of the large and growing American investment in that part of the
world. According to a careful estimate by the United States Department of
Commerce, the long-term investment of American capital in Latin America
at the end of 1930 was slightly larger than the American investment in all of
Europe. The estimated total for Latin America was about 5,350 million
dollars; that for Europe was about 4,900 millions.1
While the amount of capital from the United States placed in Latin America
exceeds by only a small margin the amount placed in Europe, there is a wide
difference in the character of the respective investments. About two-thirds of
the investment in Europe is in the form of securities. Barely one-third of the
investment in Latin America is of that type; the rest is a direct investment in
properties. Not only do securities form a small part of the total Latin Ameri-
can investment, but most of them have either been issued directly by the
governments or are supported by a government guarantee. According to the
Department of Commerce, 98 percent of the Latin American bonds held by
investors in the United States are of this description, and only 2 percent have
been issued solely on the credit of private corporations. On the other hand,
2o percent of the European securities offered for public subscription in the
United States have been issued by private corporations without any govern-
ment guarantee.
The flotation of Latin American securities on a large scale in the United
States began in i92i and reached its climax in 1926. There was a slight de-
crease in 1927 and 19i28 and a sharp decline in 1929, when the boom in the
American stock market destroyed the appetite of American investors for
foreign bonds. In 1930 there was a temporary revival of interest in the bond
market in New York, and a number of new foreign issues were floated. The
total amount of Latin American issues at this time was slightly larger than in
1929, but it was still much below that of the three preceding years. With the
deepening of the depression in 1931 the market for foreign bonds in the United
States was still further restricted. Most of the financing by foreign govern-
ments in the United States in 1931 was merely to refund obligations maturing
that year. Dr. Max Winkler's latest estimate shows that net Latin American
government and corporate offe:rings in 1931 were about 75 percent less than
they were in 1930.2
The fluctuations in the amounts of Latin American securities offered
I "A New Estimate of American Investments Abroad." U. S. Department of Commerce,
Trade Information Bulletin No. 767, 1931. An estimate by Dr. Max Winkler shows somewhat
larger amounts for these two regions because of a different method of compiling the data; but
it conforms with the computation of the Department of Commerce in giving the same relative
positions to Latin America and Europe.
2"American Foreign Investments in i93i." Foreign Policy Reports, Vol. VII, No. 24.
 AMERICAN INVESTMENT IN LATIN AMERICA 503
annually in the United States since 192o, with refunding issues deducted, are
shown in the following table:
(In thousands of dollars)
Year Government* Corporate Total
1920 ............................... 49,050 49,050
192i ............................... 187,486 42,142 229,628
1922 ............................... .59,775 63,899 223,674
1923 ............................... 67,5oO 47,191 114,691
1924 ............................... 114,555 72,399 186,954
1925 ............................... 109,951 48,825 158,776
1926 ............................... 238,490 84,690 368,18o
1927 ............................... 277,o8I 62,619 339,700
1928 ............................... 283,198 91,88o 330,078
192 9 ............................... 65,548 109,402 174,95o
1930 ............................... 177,112 17,338 194,450
* Including government-guaranteed.

Owing to the extent to which conditions throughout Latin America vary,

it is impossible to generalize regarding investments there. For example, while
only about 32 percent of the total American investment consists of securities,
55 percent of the American investment in Argentina is in the form of bonds.
Moreover, all the Argentine bonds have been issued by the national, provincial,
or municipal governments. At the other extreme stands Venezuela, whose
government has no external debt. American investments in Venezuela are in
properties rather than in securities, and are largely concentrated in the
petroleum industry.
In the case of Brazil and Peru we find another striking contrast. Sixty-two
percent of the American investments in Brazil are in securities and 38 percent
are direct. In Peru the figures are exactly reversed. These differences are
due to the character of the leading industries in the respective countries.
Argentina and Brazil, being mainly agricultural, have not attracted direct
American investment as have the mineral-bearing regions of Chile, Bolivia,
Peru and Venezuela. On the other hand, Cuba, which is also an agricultural
country, differs from Argentina and Brazil in that it has attracted a vast
amount of direct investment from the United States. Cuban securities con-
stitute only about 15 percent of the total American investment in the island.
Cuba has absorbed over i,ooo million dollars of American capital, and now
ranks first among the countries of Latin America as a field for American invest-
ment. It has not always held the lead. Before the World War the amount
of American capital employed in Mexico was several times larger than that in
use in Cuba. The war curtailed the production of beet sugar in Europe and
gave a stimulus to the Cuban cane-sugar industry. This resulted in a heavy
flow of American capital into the island. About the same time Mexico became
less important as a field for American investment largely because of the
exhaustion of its oil resources, and possibly to some extent because of the
unsettled political conditions prevailing there.
The approximate proportions of direct investments and of security invest-
ments by Americans in the leading countries of Latin America are indicated
in the following table:
504 FOREIGN AFFAIRS
Total (in Direct Investments Security Investments
thousands qf dollars) (percent) (percent)
Cuba ................ Io66,S5i 85 is
Mexico ............... 810,571 85 is
Argentina ............ 807,777 45 55
Chile ................. 700,935 63 37
Brazil ................ 557,001 38 62
Colombia ............. 301,692 43 57
Venezuela ............. 247,238 10
Peru................ 200,085 62 38
Bolivia .............. 1 6.043 53 47
All others ............ 551,878 76 24

Total............... 5,359,771 68 32

During 1931 the drastic decline in the prices of principal Latin American
products, along with the decrease in the export demand for these commodi-
ties, led to defaults by several :Latin American governments on their external
debts. The budgets of these countries were peculiarly susceptible to the effects
of the world-wide economic depression, due to the fact that the governments
have relied for revenue mainly on import and export duties; the sharp decline in
the prices of products subject to ad valorem rates would have curtailed their
income even if the volume of shipments had been maintained. After the de-
pression began this volume of course was not maintained, and revenues were
consequently reduced by the decline in both the value and the volume of im-
ports and exports. In 1930-31 the deflation in the chief products of Latin
America ranged from 50 to 75 percent. Under such conditions the treasuries
faced deficits, and the unfavorable trade balances made it increasingly difficult
for the governments to obtain the foreign exchange needed for maintaining
service on their external debts.
Even in normal years this debt service absorbed from 20 to 40 percent of
the revenues of the debtor governments. Payment on most of the foreign
debts had to be made in gold, and with the depreciation in the exchanges of
some of these countries, gold commanded a heavy premium. This increased
still further the proportion of the government income required for service on
the external debts. Furthermore, the governments and their political subdi-
visions in a number of cases had borrowed too freely, possibly at the urgent
solicitation of foreign bankers, and the loans were not always spent produc-
tively. Given these conditions, the deepening of the economic depression
inevitably brought defaults. Bolivia suspended the payments on its external
debt which fell due on January I, 1931. Peru followed in March, and Chile in
July. In September the federal government of Brazil and some of the states
and municipalities defaulted on most of their bonds. Several other South
American municipalities were reported in default at the end of the year. The
total amount of Latin American debt which went into default during 1930-31
has been estimated at approximately i,2oo million dollars. The American
share has been estimated as approximately two-thirds of the total. The heavy
loss from these defaults has been largely responsible for the investigation of
foreign loan flotations now being made by the Senate Finance Committee.
 OBSTACLES TO HUNGARIAN
RECONSTRUCTION
By L. Laszlo Ecker
M ORE than five years have elapsed since Mr. Jeremiah Smith of Boston
wrote his Twenty-fifth Report which terminated his tenure of office
as Commissioner-General of the League of Nations at Budapest. That marked
the completion of the League's second experiment with monetary reconstruc-
tion. The League initiated its activity in this field in 1922 with the preparation
of a plan for the financial reconstruction of Austria. At that time the method
was untried. When, eighteen months later, Hungary was subjected to the
same experiment, the risks were considerably less. The League had evidence
to show that inflation could be stopped abruptly without more serious disloca-
tion than already existed, and that it would be possible to persuade the people
to submit themselves to heavy fiscal charges as well as to submit the adminis-
tration of their government to complete reorganization. The experience de-
rived from the Austrian case was especially helpful in the later problem since
the ailments in the case of Hungary were similar to those of Austria, both
being largely a result of the same process of deterioration.
The League's plan called for a final settlement of the reparation charges;
the stoppage of inflation and the return to the gold standard; the creation of a
national bank and the flotation of an international loan; the preparation of a
national budget for the next two years, and the appointment of a Commissioner-
General to execute and supervise the program; and finally, the creation of a well
organized centralized system for the collection of revenues and the distribution
of expenditures. The reconstruction period lasted two years and at its com-
pletion Mr. Smith's report struck a particularly high note of optimism.
League adherents hailed the Hungarian experiment as concrete evidence of the
organization's serviceability. Nor was this enthusiasm unfounded. ByJune 1926
Hungary had a clean slate: a balanced budget and a stable currency. A present
survey, needless to say, warrants less optimism. Everywhere in Hungary
today an observer encounters popular dissatisfaction, complaint and pessi-
mism. Conditions are especially deplorable among the merchant class and the
peasant farming class. Statistical trends are discouraging. The improvement
which was in evidence during the reconstruction period and the year immedi-
ately following has ceased.
Many are of the opinion that Hungary's present plight is but a logical con-
sequence of the international situation. That view is not a surprising one if
we recall that Hungary is essentially an agricultural country, with 55 percent
of the population engaged in that field of activity, contributing 47 percent of
the national income. But that agriculture does not tell the whole story is
revealed if we attempt a little forecasting, if we ask whether Hungary's prob-
lem will disappear when once the world agricultural depression has become a
thing of the past. To this question the present writer's answer is decidedly in
the negative, for reasons which will now be developed.
Hungary's present state of affairs is a result of pre-war evolution. By terms
 o6 FOREIGN AFFAIRS
of the Ausgleich (1867), Hungary and Austria formed a customs union. The
two were complementary states, Hungary growing agricultural products and
exchanging them for Austria's manufactures. Hungary was responsible for
8o percent of Austria's imports, and in turn received a similar part of
Austria's exports. Tariff walls were maintained high enough to keep foreign
goods out of the Empire. But with the dissolution of the Empire in 1918 the
duality was extinguished. Hungary lost her Austrian markets. The situation
was rendered more precarious by the Treaty of Trianon, which deprived
Hungary of two-thirds of her territory and population. The division was so
arranged that Hungary retained most of her agricultural areas but lost her
mineral resources - especially coal, iron and oil - and her lumber. The
Succession States - Czechoslovakia, Rumania and. Jugoslavia - were of
course unwilling to*give Hungary more favored terms than they gave other
agrarian countries. In fact, because of the tense political situation there were
temptations for them to discriminate against Hungary. Witness, for instance,
the recent friction with Czechoslovakia over tariff agreements, which to this
day remains unsettled. The result is that Hungary is producing, or at least has
facilities to produce, as much wheat as she did in the pre-war days while her
market is about one-seventh of its former size - present-day Hungary being
one-seventh the size of the old Austro-Hungarian Empire. The situation was
well described to the writer recently by a fellow Hungarian, who wrote:
"Poor Hungary is experiencing the saddest phase of her economic crisis:
she is in the absurd condition of drowning in her own grease." For illustration
he enclosed the following newspaper advertisement, indicative of hundreds
appearing daily in the local Hungarian journals: "Tomatoes to be had free
for the picking on the Szatmary estate near the Sodrony factory." The pro-
prietors invite anyone to pick the produce in order to avoid the expense of
having it done themselves, and are even willing to go to the additional ex-
pense of paying for advertisements. That is the state of affairs in Hungarian
agriculture, and agriculture accounts for the major part of the country's
activity. Obviously a depression in agriculture involves the whole country in
a depression.
As already implied, Hungary's problem is not a temporary and cyclical
one, which after making its periodic appearance is due to make its exit with the
upward swing of the agricultural curve. Hungary's problem is further to seek.
Much of the country's fertility is devoted to wheat and corn, commodities
in the marketing of which she is competing with the United States, Australia,
Canada and Soviet Russia. It such competition Hungary must inevitably be
the loser. She is.fighting a twentieth-century battle with the weapons of the
Middle Ages. She lacks modern agricultural machinery, and the lack of capital
makes it impossible to remexy the situation. What is more important, all
enterprise proceeds on a small scale - individual farms and estates are small
- and the co6perative idea is contrary to the Hungarian's eastern spirit.
The entire country has a population of eight million; consequently its market-
ing facilities, in comparison with those of its competitors, are somewhat like
a country general store in comparison with a nation-wide system of chain
stores. Those who are acquainted with the situation cannot avoid concluding
that Hungary's wheat and corn enterprise is not promising, and that a remedy
OBSTACLES TO HUNGARIAN RECONSTRUCTION 507
must be sought elsewhere. This is in accordance with the writer's view that the
amelioration of the world agricultural crisis will not bring in its trail the dis-
appearance of Hungary's difficulty. But the problem is not without solution.
Hungary must turn her production facilities in other directions. She must pro-
duce goods at a price attractive to other countries. The buyer goes to the man
who sells at the lowest prices.
If Hungarian wine is not wanted - it is at present selling at a few cents the
liter - Hungary will have to learn what every merchant has long learned by
experience, that when the inventory contains articles for which there is no
demand, these articles must be disposed of very quickly, at a sacrifice if neces-
sary, and replaced with stock that can be sold. The Hungarians must divert
their wheat fields and vineyards to vegetable gardens and grazing fields.
Hungary is a country with approximately the population of the state of
Illinois. She could easily devote herself to a few agricultural specialties which
would find a ready market in the neighboring countries. Let her produce
vegetables, fruits, poultry, eggs and cattle. These she can produce on equal
terms with others. Hungary cannot abandon agriculture, since her natural
resources are in that field. Only 6.4 percent of the total area is classified as
waste land. She no longer has coal, iron, oil and lumber, which means that she
cannot resort extensively to manufacture. Nor does she have water power
of any importance.
The solution of the Hungarian problem is not so simple as we are wont to
think it. The portion of the Hungarian population engaged in agriculture is
predominantly static and unwilling to make a change. To do so would involve
abandoning the profession of their grandfathers, abandoning tradition, and
abandoning their store of machinery, chaotic as it may be. Tradition is almost
as characteristic of the Hungarian as it is of the English. Furthermore, it
would involve additional outlay for new tools, machinery and seeds, for which
no funds are to be had. Those Hungarians who can analyze the difficulty and
know where the solution lies, are the merchants and generally literate people,
who are comparatively few in number and have little contact with and in-
fluence on the peasant farmer. The writer had a discussion recently with a
member of the pre-war landowning class, a member of the Hungarian aris-
tocracy, whose experience may cast some light on the present problem. Before
the war he was one of the large landowners in the Empire. Two-thirds of his
land was confiscated during the Revolution. Previously he had been devoting
all his energies to wheat and wine. Eight years ago he initiated a change by
selling the larger part of the land he still possessed, and with the receipts he
purchased chickens, cows and machinery. Today he has abandoned wheat
entirely and is producing horse-radish, sugar beets, milk and eggs, and is one
of few prosperous Hungarians. It is an individual case, and a rare one. If that
transformation could be applied to Hungary in general the problem would be
solved.
The situation at present is similar to that in 1861. At that time the govern-
ment believed that the future of the country depended upon the development
of modern industry and proceeded to make itself responsible for the process.
Consequently laws were passed in 1861, 189 o , 1903 and 1907 providing for a
variety of tax exemptions, subventions, cash grants, subsidies, bounties, low
 FOREIGN AFFAIRS
railway rates, the construction of workmen's dwellings, and, finally, directing
that all contracts, in so far as possible, be assigned to citizens of the Empire.
One need only compare figures for the 'nineties with those of 1913 to get an
idea of how successful was this process of industrialization. Today the same
sort of treatment should be applied to special phases of agriculture, the purpose
at present being not so much to bring about an increased production as to divert
activity into proper channels.
Take the case of the above-mentioned Hungarian wines which cannot be
marketed at any price. Many will testify that Hungarian wines are among the
best. Why, then, the lack of demand? The answer is readily found. Wines in
Hungary are made by the individual owners of the vineyards, whose operations
are small and unstandardized. The result is that no two barrels ever taste
alike, and the buyer takes "a. pig in a poke." Much the same situation exists
with regard to Hungarian fruits, which are among the best grown in Europe.
Yet Vienna, Berlin, and even Budapest buy fruits from overseas because
Hungarian farmers have not acquired skill in packing, have not standard-
ized their products, and have no refrigeration facilities for their shipments.
Eggs furnish still another example. When one buys a dozen Hungarian eggs,
some of them will be white, others brown, some small and others large, some
round and others oblong, and, finally, some fresh and others old.
The possibility for profitable enterprise is not confined to farm products.
Tourist trade is a point at hand. Opportunities for the development of the
manufacturing industry are also encouraging, although it is at a disadvantage
so long as nearly sixty percent of the population, the agriculturalists, have
little or no consuming power., There has recently been a decided tendency to
concentrate on the manufacture of those products for which the country is
really adapted. Hungary has an advantage in cheap labor. This, however, is
outweighed by several disadvantages, among them lack of capital, the high
tariff walls of her neighbors, and a certain lack of what we colloquially term
business sense.
In this situation some responsibility rests with the government, which has
several spheres of useful action open to it. It may encourage and in some cases
actually bring about the diversion of interests outlined above. It ought to
show the way for the multitude to follow. The government possesses large
tracts of land which are at present lying idle or operating at a net loss. It
may convert these into model vegetable gardens and cattle ranches and invite
the farmers to inspect them. It ought to experiment to discover those products
for which the fertile Hungarian soil is best adapted, and it should then in-
augurate publicity campaigns to spread this information to as large a portion
of the populace as possible. It may extend loans, give favorable terms of short-
time credit, give bounties, make railway rate discriminations, and even set
discriminatory tax reductions, in order to encourage the transformation. The
government should co6perate with capitalistic enterprise, Hungarian and
foreign, and leave no stone unturned to reach its vital goal: to endow the
Hungarian with western idea;, and to rout out his eastern feudalism and his
prejudice against what he is accustomed to call "mercenary exploitation."
A development such as is here outlined faces several obstacles. The Hun-
garians have not resigned themselves to the terms of the Treaty of Trianon.
OBSTACLES TO HUNGARIAN RECONSTRUCTION 509
They are hoping for its revision, which would return to Hungary some of its
former markets. The sooner they accept the present situation as permanent,
the sooner can their economic development be on its way. There are frequent
political controversies with the other Succession States - especially Czecho-
slovakia and Rumania - the very countries with which cofperation is im-
portant. Consequently the tariff walls of the Succession States are higher than
those of others. This opens a new field for activity by the League of Nations,
which should try to induce these Danubian countries to attend conferences and
make mutual concessions.
To sum up. Those who foresee an improvement in the Hungarian situation
when world agricultural conditions improve neglect to consider JIungary's
position in the world agricultural sphere. They fail to recognize that Hungary
is fighting a losing battle. Hungarian wheat and corn cannot compete with the
products of the great agrarian countries on the world markets. Playing a
small r6le on a hippodrome stage, she can never advance beyond the status
of an "extra-hand." No degree of world agricultural prosperity can alter the
situation. Hungary must turn her energies to the specialized production of
those commodities in which she has a comparative advantage. A few random
possibilities have been pointed out. The transformation can be fostered by
government assistance and co6peration. Although at present the government's
activity in this field is decidedly retarded by political factors, domestic and
foreign, these can be overcome. We shall then be in a position to adopt a more
optimistic view regarding the future of Hungary's economic life.
 SOME RECENT BOOKS ON
INTERNATIONAL RELATIONS
By William L. Langer
NOTE -FOREIGN AFFAIRS will supply its readers, postfree, with any book published in the
United States, at the publisher's regular list price. Send orders, accompanied by check or money
order, to Book Service, FOREIGN AFFAIRS, 45 East 65th Street, New York City.

General InternationalRelations
SURVEY OF INTERNATIONAL AFFAIRS, 1930. By ARNOLD J. TOYNBEE. New
York: Oxford University Press, 1931, 614 pp. $7.00.
Among the topics discussed in this latest volume of the important annual survey
issued by the Royal Institute cf International Affairs are the naval disarmament
conferences, the Palestine embroglio, and the American policy in Latin America.
DOCUMENTS ON INTERNATIONAL AFFAIRS, 1930. By JOHN W. WHEELER-
BENNET. New York: Oxford University Press, 1931, 276 pp. $4.00.
A companion volume to the "Survey of International Affairs," giving texts of impor-
tant agreements and negotiations, also significant speeches and statements of policy.
POLITICAL HANDBOOK OF THE WORLD, 1932. EDITED BY WALTER H. MAL-
LORY. Published for the Council on Foreign Relations. New York: Harpers, 1932, 208
pp. $2.5o.
The year 1931 witnessed significant political changes throughout the world, including
five revolutions, more than a score of general elections, and important cabinet shifts
in a number of other countries. The results are recorded in the current edition of this
valuable handbook, which is revised as of January 1,1932.
KRIEGSVERHOTUNG UND SCHULDFRAGE. BY GEORG COHN. Leipzig: Noske,
1931, 200 pp.
A study devoted chiefly to the concept of neutrality before the war, and the prohibi-
tion of war in recent international law.
THE UNSEEN ASSASSINS. BY SiR NoR AN ANGELL. New York: Harpers, 1932,
349 PP. $3.00.
In his latest book this well-known author is concerned less with the discovery and
communication of new viewpoints than with stressing our inability or failure to make
proper use of existing knowledge 'in ordering our social relationships. The peoples of the
world follow aims and apply policies without realizing that they imply war. These
"unseen assassins" must be brought to the ken of the average man before real progress
can be made towards peace. The: author's problem, then, is primarily an educational
one, and his book is an examination of the ways and means by which the dangerous
implications of the doctrines of sovereignty, nationalism, etc., can be brought within
the range of everyday consciousness. The book is one of the most important of recent
months and should be widely read.
INTERNATIONAL RELATIONS. BY R. B. MOWAT. London: Rivington, 1931, 18o
pp. 3/6.
A brief popular introduction.
WHAT EUROPEAN AND AMERICAN STUDENTS THINK ON INTERNA-
TIONAL PROBLEMS. BY HEBER R. HARPER. New York: Teachers College, 1931,
268 pp. $2.5o.
A digest of opinion.
L'ENSEIGNEMENT DE L'HISTOIRE ET L'ESPRIT INTERNATIONAL. BY
J. L. CLARAPhDE. Paris: Presses Universitaires, 1931, 1o5 pp. Fr. 1O.
 SOME RECENT BOOKS 511
A stimulating essay on the important problem of history instruction as the basis for
the development of internationalism.
DIPLOMATISCHES HANDELN. By R. FINGER. Stuttgart: Wirtschaft und Verkehr,
1931, 331 pp. M. 12.
Fifty rules and pointers for the practical diplomat, based on the history of diplomacy
during the last thousand years.
LE CHOC DES PATRIOTISMES. By EDMOND PRIVAT. Paris: Alcan, 1931, 18o pp.
Fr. 5.
One of the League's experts discusses the conflict of separatist and federalist princi-
ples in world politics.
DIE INTRASYSTEMATISCHE STELLUNG DES ARTIKELS XI DES VOEL-
KERBUNDPAKTES. By JosEF L. KuNz. Leipzig: Noske, 1931, 143 pp.
A keen analysis of Article XI of the Covenant, which the author regards as crucial
for the prevention of war.
THE WORLD COURT, 1921-1931. By MANLEY 0. HUDSON. Boston: World Peace
Foundation, 1931, 245 pp. $2.50.
This is the most up-to-date handbook of the Court. The author, an authority on the
subject, gives the essential facts of the history of the Court, its composition and working.
The bulk of the space is devoted to reviewing all the cases that have come before the
tribunal, together with an analysis of the advisory opinions rendered. The book is thor-
oughly documented throughout, and contains the most important instruments relating
to the Court.
THE WORLD COURT. COMPILED BY HELEN M. MULLER. New York: Wilson, 1931,
252 pp. 9o.
A good reference book, with an admirable bibliography.
NEMZETKOZI BIR6SAGOK HATASKORE. By BARTHOLOMAUS GECZE. Buda-
pest, 1931, 335 PP.
An important study of the jurisdiction of international tribunals in theory and prac-
tice, written by a man who has often represented Hungary in international litigation.
LA R9FORME DE LA COUR PERMANENTE DE JUSTICE INTERNATIO-
NALE. By PEREIRA DA SILVA. Paris: Sirey, 1931, 251 pp. Fr. 40.
The author discusses chiefly the protocol of i929 and Cuba's veto.
THE INTERNATIONAL LABOUR ORGANISATION. Boston: World Peace
Foundation, 1931, 382 pp. $3.5o.
This account of the organization and work of the Labor Office was written by offi-
cials with first-hand knowledge and experience. It is a companion volume to the ten-
year survey of the League's work, recently published, and should prove very useful to
all those interested in this important phase of international co6peration.
SOLIDARITAT. By W. MfiNZENBERG. Berlin: Neuer Deutscher Verlag, 1931, 527
pp. M. 6.8o.
Another competent survey of the work of the Labor Office during the last decade.
INTERNATIONAL COMMUNICATION. By HERBERT N. SHENTON, EDWARD
SAPIR AND Orro JESPERSEN. London: Kegan Paul, 1931, 120 pp.
A symposium on the problems of an international language.
THE DISARMAMENT CONFERENCE. By W. ARNOLD-FOSTER. London: National
Peace Council, 1931, 91 pp. 9 d.
A catechism of the facts and issues involved in the conference at Geneva.
DIE RECHTSGRUNDLAGEN FOR DEUTSCHLANDS RECHT AUF ABROGS-
TUNG SEINER VERTRAGSGEGNER. By V. B8HMERT. Berlin: Ebering, 1931,
59 PP. M. 2.40.
512 FOREIGN AFFAIRS
Designed to prove Germany's claim that the Versailles Treaty obligates her former
opponents to disarm.
DIE WELTABRYSTUNG UND DEUTSCHLAND. By ERICH GLODKOWSKI. Ber-
lin: Junker und Dfinnhaupt, 1931, 6o pp. M. 2.8o.
Disarmament as viewed by a German military man.
LE DfSARMEMENT ET LA FOLITIQUE DE BELGRADE. By LAZARE MARCO-
vITCH. Paris: Soci~t6 g~n6rale d'Imprimerie, 1931, Fr. 2o.
The Jugoslav view, expounded by the Jugoslav delegate to the preparatory con-
ference.
DAS UNTERSEEBOOT. By ADMIRAL BAUER. Berlin: Mittler, 1931, 144 pp.
The former German commander of the submarine service discusses the naval value,
international status and probable future development of this weapon.
LO SPAZIO ATMOSFERICO NEL DIRITTO INTERNAZIONALE. By G. EN-
RIQUES. Padua: Cedam, 1931, 18,, pp. L. -22.
A technical monograph on the international law of the air.
LA COMMISSION EUROPtENNE DU DANUBE. ANONYMOUS. Paris: Pedone,
1931, 534 PP. Fr. 300.
An elaborate non-political study of the organization and work of the famous Danube
Commission from i8S6 to 1931.
DIE FREIZONEN. By R. GEISIdA. Leipzig: Noske, 1931, 85 pp. M. S.
This monograph on the free zones deals primarily with the Franco-Swiss dispute.
ENDKAMPF UM DIE REPARATION. By L. HORWITz. Leipzig: Historisch-politi-
scher Verlag, 1931, 94 PP. M. 2.20.
A.historical survey, with admirable diagrams, stressing the economic effects of the
Young Plan on Germany.
DAS TRIBUTPROBLEM UND SEINE LOSUNG. By ALBERT VON MiHLENFELS.
Berlin: Junker und Dfinnhaupt, (931, 138 pp. M. 6.
A technical analysis of the reparations tangle, expounding the familiar German view.

InternationalRelations of the United States

THE UNITED STATES IN WORLD AFFAIRS, 1931. By WALTER LIPPMANN IN
COLLABORATION WITH WILLIAM 0. SCRocs. Published for the Council on Foreign Re-
lations. New York: Harpers, 1931, 390 pp. $3.00.
This important survey of the course of American foreign relations during 1931 is
reviewed at length elsewhere in this issue of FOREIGN AFFAIRS.
THEODORE ROOSEVELT. B-' HENRY F. PRINGLE. New York: Harcourt, Brace,
1931, 637 pp. $5.00.
Based upon unpublished Roosevelt papers, this is perhaps the most important
biography of the former President now available.
WOODROW WILSON, LIFE AND LETTERS. By RAY S. BAKER. New York:
Doubleday, Doran, 1931, two volumes, $1o.oo.
Volumes III and IV of the st:andard biography, based on the former President's
papers. These volumes, covering the period from 1910 to 1914, throw some interest-
ing light on his Mexican policy and on the question of the Panama Canal tolls.
CROWDED YEARS. BY WILLIAM G. McADoo. Boston: Houghton Mifflin, 1931,
552 pp. $5.00.
Recollections of the former Secretary of the Treasury; an important contribution to
the history of the United States in the World War period.
 SOME RECENT BOOKS 513
LOOKING FORWARD. By NICHOLAS MURRAY BUTLER. New York: Scribners,
1932, 418 pp. $3.00.
In these essays and addresses the president of Columbia University ranges over a
wide field of national and international problems, setting forth the internationalist
view on such matters as security, patriotism and disarmament.
EMOTIONAL CURRENTS IN AMERICAN HISTORY. By J. H. DENISON. New
York: Scribners, 1932, 420 pp. $5.00.
An interesting attempt to show how ideas and emotions have swept the American
people along in certain channels.
LE PRASIDENT HOOVER ET LA POLITIQUE AMARICAINE. By FRANQOIS DE
TESSAN. Paris: Baudiniare, 1931, Fr. m2.
A none too friendly estimate of American life and policies.
LE CANCER AMtRICAIN. By ROBERT ARON AND ARNAUD DANDIER. Paris: Rieder,
1931, 240 pp. Fr. 15.
The authors regard the Yankee mentality, with all it implies, as the root factor of the
world crisis.
L'IMPtRIALISME ]CONOMIQUE AM1tRICAIN. BY PIERRE LAURENT. Paris:
Sirey, 1931, 252 pp. Fr. 32.
A vigorous indictment of our particular brand o*f imperialism.
SAM, A VOTRE TOUR, PAYEZ. By ANDR9 CHfRADAME. Paris: Victorion, 1931,
Fr. IS.
The well-known French publicist, using American arguments, proves to his own
satisfaction that the United States owes France a larger sum than that advanced to
France during the war.
LA VIE AMItRICAINE ET SES LECONS. By MARCEL BRAUNSCHVIG. Paris: Colin,
1931, 384 pp. Fr. 35.
A serious attempt to interpret American life - literary and artistic as well as eco-
nomic - to the French people.
THE UNITED STATES AND GREAT BRITAIN. By CARL R. FisH, SIR NORMAN
ANOELL AND ADMIRAL CHARLES L. HussEY. Chicago: Chicago University Press, 1932,
235 PP. $1.50.
Essays published under the auspices of the Chicago Council on Foreign Relations.
Brief and to the point, they form a convenient symposium.
AMERICAN RELATIONS WITH TURKEY, 1830-1930. By LELAND J. GORDON.
Philadelphia: University of Pennsylvania Press, 1932, 402 pp. $4.00.
Based in part upon unpublished material, this monograph deals not only with diplo-
matic relations but stresses the economic and philanthropic aspects of American ac-
tivities in Turkey!.
DOCTRINA DE MONROE Y COOPERACI6N INTERNACIONAL. By CAMILO
BARCIA TRELLES. Madrid: Compafiia General de Artes GrAficas, 1931, 741 pp. Pes. io.
An exhaustive.investigation of the Monroe Doctrine and its place in world affairs.
ESTADOS UNIDOS Y LAS ANTILLAS. By TULIO M. CESTERO. Madrid: Compafila
General de Artes Gr~ficas, 1931, 232 pp. Pes. 5.
The author makes a systematic study of the American Caribbean policy.
DER AMERIKANISCH-HOLLANDISCHE STREIT UM DIE INSEL PALMAS.
By WALTHER FUOLSANG. Berlin: Stilke, 1931, 148 pp. M. 7.
A technical work on the Palmas Island dispute.
TRAILING TRADE A MILLION MILES. By JAMEs A. THOMAS. Durham: Duke
University Press, 1931, 314 PP. $3.;o.
514 FOREIGN AFFAIRS
Observations of a successful American merchant in the Orient, and a document of
real value for the student of American interests abroad.
AMERICAN PARTICIPATION IN THE CHINA CONSORTIUMS. By FREDERICK
V. FIELD. Chicago: Chicago University Press, 1931, 198 pp. $2.oo.
This monograph, published for the Institute of Pacific Relations, shows how, in act-
ual practice, the difficulties of international co6peration present themselves in the
economic sphere.
THE AMERICAN TARIFF AND ORIENTAL TRADE. By PHILIP G. WRIGHT.
Chicago: Chicago University Press, 1931, 177 pp. $2.00.
Another publication of the Institute, valuable as showing scientifically the effects
of the tariff in a concrete instance.
INITIATION A LA VIE AUX t'TATS-UNIS. Paris: Delagrave, 1931, 313 pp.
A co6perative survey of American life published under the auspices of the Comit6
France-Amerique. It is written by a number of well-known French scholars, including
Siegfried, Viallate, Cestre, Roz and, others, and is intended to give the Frenchman going
to the United States all the information he needs in order to observe intelligently and
understand the life about him. The book is extraordinarily well done, and is not over-
weighted in the direction of politics. There are excellent chapters on artistic and social
life, as well as on all economic aspects of American civilization. One cannot help but
contrast a volume like this with the many ill-informed and ill-tempered books on Amer-
ica appearing in France. Americans will read this volume with pleasure and it is to be
hoped that it enjoys a wide distribution in France.

The World War

ENGLAND AND THE INTERNATIONAL POLICY OF THE EUROPEAN
GREAT POWERS 1871-1914. By ALFRED F. PRIBRAM. New York: Oxford University
Press, 1931, i56 pp. $3.00.
A series of lectures by the foremost Austrian authority on pre-war diplomacy. They
give in succinct form all the essentials of British continental policy in the period between
the two great wars.
GERMANY NOT GUILTY IN 1914. By M. H. COCHRAN. Boston: Stratford Press,
1931, 244 PP. $2.00.
A competent criticism of Prof. Bernadotte Schmitt's "The Coming of the War."
MEMORIES OF A DIPLOMAT. By CONSTANTIN DUMBA. Boston: Little, Brown,
1932, 354 PP. $4.00.
The original German edition of these memoirs of the former Austrian ambassador to
Washington has already been listed.
VERDUN. By RAYMOND POINCARL. Paris: Plon, 1931, 355 pp. Fr. 30.
The eighth volume of Poincar6's valuable memoirs covers the year 1916.
DIE JUGOSLAWISCHE FRAGE UND DIE JULIKRISE 1914. By ERNST ANRICH.
Stuttgart: Kohlhammer, 1931, 166 pp.
A reexamination of the South Slav question and its r6le in Austrian foreign policy
before the war.
DIE SCHULD DER ANDEREN UND DER BETRUG VON VERSAILLES. By
HERMANN MiuLLER-BRANDENBURG. Berlin: Schlieffen, 1931, 14,2 pp. M. 3.
A series of lectures on war guilt and the war guilt clause of the Versailles Treaty.
LE TRIOMPHE DE L'IDtE. By GENERAL F. GAsCoUIN. Paris: Berger-Levrault,
193 1, 64 pp. Fr. 5.
A critique, from the military standpoint, of the factors which decided the course of
events in 1914.
 SOME RECENT BOOKS 51S
TIME STOOD STILL, 1914-1918. By PAUL COHEN-PORTHEIM. New York: Dutton,
1932, 23S pp. $3.00.
The author of "England, the Unknown Isle" reviews his four years in a British
prison camp; a remarkable psychological study.
STRANGE INTELLIGENCE. By HECTOR C. BYWATER AND H. C. FERRABY. New
York: Long and Smith, 1931, 308 pp. $3.00.
An account of the working of the British naval intelligence before and during the
war, by former members of the staff.
LES DESSOUS DE L'ESPIONNAGE ALLEMAND. By ROBERT BOUCARD. Paris:
Hachette, 1931, 256 pp. Fr. 12.
Another sensational book on espionage. One wonders if things were really like that.
ENDLESS STORY. By TAFFRAIL. London: Hodder and Stoughton, 1931, 451 pp.
21/.
An account of the work of the British destroyer squadrons.
ALBERT, KING OF THE BELGIANS, IN THE GREAT WAR. By LIEUTENANT-
GENERAL GALET. London: Putnams, 1931, 341 pp. 25/.
The military adviser of the King reviews the first three months of the war. An im-
portant contribution to the story of the Belgian accomplishment and the relations of
Belgium with France and England.
FOCH: THE MAN OF ORLEANS. By B. H. LIDDELL HART. London: Eyre and Spot-
tiswoode, 1931, 532 pp. 21/.
A facile British military writer reconsiders the career of the generalissimo, bringing
his work into a new perspective.
L'ARM1tE VON KLUCK A LA BATAILLE DE LA MARNE. By LIEUTENANT-
COLONEL KOELTZ. Paris: Charles-Lavauzelle, 1931, 240 pp. Fr. 25.
A French military historian retells an exciting story, using the voluminous recent
material from the German side.
LA D1tFENSE DE LA POSITION FORTIFIItE DE NAMUR EN AOOT 1914.
Brussels: Institut Cartegraphique, 1931, 788 pp. Fr. 8o.
A volume of the Belgian official history.
THE FIFTH ARMY. By GENERAL SIR HUBERT GOUGH. London: Hodder and Stough-
ton, 1931, 355 PP. 25/.
The commander of the army rectifies a number of misapprehensions respecting the
great battle of March 1918.
ERLEBEN IM WESTEN, 1916-1918. By GENERAL MAX VON GALLWITZ. Berlin:
Mittler, 1932, 531 pp. M. 12.5o.
The second volume of the general's reminiscences.
TRANSPORTING THE A.E.F. IN WESTERN EUROPE. By WILLIAM J. WILGUS.
New York: Columbia University Press, 1931, 612 pp. $v2.5o.
An exhaustive technical study by the former director of military railways of the
A.E.F.
WAHRHEIT. FORST BOLOW UND ICH IN ROM, 1914,1915. By KARL FREIHERR
VON MACCHIO. Vienna: Jung Oesterreich Verlag, 1931, 137 pp.
A dispassionate rejoinder to Biilow's accusations, forming an important contribu-
tion to the history of Austrian policy in Italy before the latter's entry into the war.
IL PATIO DI LONDRA. By MARIO ToSCANO. Pavia: Treves, 1931, 133 pp.
A scholarly monograph.
DEUTSCHLAND ALS VERBONDETER. By KARL VON WERKMANN. Berlin:
Verlag ffir Kulturpolitik, 1931, 350 pp. M. 1o.
This volume adds to and corrects our knowledge of the policy of the Emperor Charles.
5I6 FOREIGN AFFAIRS
UNGARN UND DER WELTKRIEG. By EUGEN HORVATH. Budapest: Drachen,
1931, 162 pp. M. 7.50.
An attempt to survey and appraise the sources.
LA VICTOIRE DE MACtDOINE. By GENERAL REVOL. Paris: Charles-Lavauzelle,
1931, 136 pp. Fr. x5 .
A succinct military study of the campaign.
THE RUSSIAN ARMY IN THE WORLD WAR. By GENERAL NICHOLAS N. GOLO-
VINE. New Haven: Yale Univeisity Press, 1931, 306 pp. $3.25.
This volume, in the Carnegie History, discusses the composition of the army, and
the munitions supply, food supply, and transport.
THE UNKNOWN WAR. BY WINSTON CHURCHILL. New York: Scribners, 1931, 411
pp. $5.00.
Churchill has done much, in the various volumes of his memoirs, to leave a living
record of the great conflict. In this new book he departs from the terrain which he knew
well from personal experience, and enters the field of eastern operations. As he says in
his preface, relatively little has been written in English on this phase of the struggle,
and its significance has not been fully recognized. For that reason, if for no other, this
volume would be very welcome. It is the more so coming from one of the most gifted of
contemporary writers. Churchill. has gone through much of the foreign literature, and
his account is well-informed and properly proportioned. It is certainly the most readable
and on the whole the best single book on the campaigns in the East, and takes its
place at once among the outstanding books on the war.
ANTANTA I OCTOBRSKAIA REVOLUTSIA. By A. I. GUKovsKI. Moscow: 1931 ,
xS8 pp.
A popular account of the Allied intervention and its relation to the revolution.
ANGLISKAIA INTERVENTSIA I SEVERNAIA KONTRREVOLUTSIA. By I.
MINK. Moscow, 1931, 256 pp.
A detailed study of the English action in North Russia in 1918.
VON DER WOLGA ZUM AMUR. By MARGARETE KLANTE. Berlin: Ost-europa
Verlag, 1931, 346 pp. M. 6.20.
A doctoral dissertation which is of value in bringing some sort of order out of the
chaos of conflicting accounts regarding the Czech legions in Siberia.
THE COSTS OF THE WORLD WAR TO THE AMERICAN PEOPLE. By JOHN
M. CLARK. New Haven: Yale University Press, 1931, 328 pp. $3.50.
A volume in the Carnegie series which should be carefully read.
LE BILAN DE LA GUERRE POUR LA FRANCE. By CHARLES GIDE AND WILLIAM
OUALID. New Haven: Yale University Press, 1931, 370 pp.
This volume, in the same series, surveys the whole cost of the war, moral as well as
material, so far as it affected Fr,.nce.

WJtestern Europe
AFTER THE DELUGE. By LEONARD WOOLF. London: Hogarth, 1931, 15/.
The first volume of a large-scale study of the evolution of political theory in the nine-
teenth and twentieth centuries. Mr. Woolf deals here, in fascinating style, with the
implications of democracy and nationalism.
NOUVELLE HISTOIRE DE L'EUROPE. By GUSTAVE HERV-. Paris: tditions de la
Victoire, 1931, Fr. 12.
An essay stressing the growth of the revolutionary tradition and the danger of a cata-
clysm unless energetic action is taken by the world's leaders.
 SOME RECENT BOOKS 517
INTELLECTUELS, UNISSEZ-VOUS. By ROGER LEVY. Paris: Riviare, 1931, 237 pp.
An appeal to scholars and teachers for closer co6peration in matters of copyright,
bibliography, museums, etc.
CAN EUROPE KEEP THE PEACE? By FRANK H. SIMONDS. New York: Harpers,
1931, 373 PP. $3.00.
Stock-taking by a newspaperman of long experience. He discusses the weaknesses of
the peace settlement, the outstanding territorial difficulties, the economic motives in
the policies of the Powers, and the efforts made in the direction of peace and co~peration.
His view of the future is dismal, perhaps too dismal. He is at great pains to avoid being
misled by shibboleths and pious hopes. The book deserves wide attention.
THE TERROR IN EUROPE. By HUBERT H. TILTMAN. New York: Stokes, 1932,
413 PP. $3.75.
A study of the European dictatorships, especially in Russia, Poland and Italy.
DE LA PATRIE ET DU PATRIOTISME. By PAUL MIQUEL. Paris: Figuire, 1931,
288 pp. Fr. 20.
An honest effort to reconcile the ideas of patriotism and human brotherhood.
DICTATEURS ET DICTATURES DE L'APRtS-GUERRE. By COUNT SFORZA.
Paris: Gallimard, 1932, 272 pp. Fr. IS.
The French translation of Count Sforza's "EUROPEAN DICTATORSHIPS" con-
tains new material concerning what the author calls "the financial bluff" of the Fas-
cist regime.
DER GROSSE ZUKUNFTSKRIEG. By FRIEDRICH IMMANUEL. Berlin: Offene
Worte, 1932, 164 pp. M. 4.
A realistic military view of the "impending" conflict.
LA PAIX EN PERIL. By JACQUES KAYSER. Paris: Nouvelle Revue Franqaise, 1931,
Fr. IS.
The vice-president of the Radical Socialist Party foresees the danger of war emerging
from the economic crisis, and calls for cancellation of debts, revision of the treaties, and
disarmament.
QUAND ON VEUT LA PAIX. By LIEUTENANT-COLONEL EUGhNE LABROSSE. Paris:
tditions de la Jeune Academie, 1931, 330 pp. Fr. 2o.
"Paix humaine" can be attained only on the basis of present nations, free and strong.
L'UNIFICAZIONE ECONOMICA DELL'EUROPA. By L. DE NovELLIS. Milan:
Treves, 1931, 304 pp. L. 2o.
A scholarly study of the projects put forward for the economic union of Europe.
L'tQUILIBRE DES CONTINENTS. By MARIANO CORNiJO. Paris: Alcan, 1931,
24o pp. Fr. I S.
World politics from a viewpoint far removed from that of Geneva.
GRANDEUR ET SERVITUDE COLONIALES. By A. SARRAUT. Paris: tditions du
Sagittaire, 1931, Fr. 2o.
An important book on general colonial policy, written by a former French colonial
minister, who calls upon Europe to protect her colonial heritage from the assaults to
which it is exposed in the form of national movements.
WELTKRISE UND KOLONIALPOLITIK. By A. Dix. Berlin: Neff, 1931, 347 PP.
M. 6.8o.
Germany's urgent need for colonies if she is again to become a good customer in
world trade.
NATIONALITATEN IN DEN STAATEN EUROPAS. By EWALD AMMENDE.
Vienna: Braumfiller, 1931, 568 pp. M. I8.
518 FOREIGN AFFAIRS
An impressive collection of reports by representatives of all the European minorities,
published for the European Congress of Nationalities.
WAR AND DIPLOMACY IN THE FRENCH REPUBLIC. By FREDERICK L.
SCHUMAN. New York: McGraw-Hill, 1931, 469 pp. $4.00.
The purpose of this volume, as defined in the preface, is to give a "behavioristic
account of all those patterns of social action which underlie French foreign policy and
which have their counterparts in the foreign policies of all other Great Powers." The
book is to be one of a series of studies of European diplomacy, with special reference to
the causes of war. While devoting ft large part of his book to an investigation of French
action in a number of major issues and crises, the author goes beyond the usual diplo-
matic narrative and devotes many chapters to the governance of foreign relations and
the mechanism of French diplomcy, as well as to what he calls the "dynamics" of
foreign policy, that is, the r6le of parliament, the press and patriotic associations.
JOSEPH CAILLAUX. By GASTON-MARTIN. Paris: Alcan, 1931, 2o8 pp. Fr. 15.
Though written by a friend of Caillaux, this book is the work of an historian.
LION BOURGEOIS. By MAURICE HAMBURGER. Paris: Riviare, 1931, 272 pp. Fr. 12.
A good biography of a leading French advocate of international co6peration.
DER RATTENFANGER VON EUROPA. By A. PERSPICAX. Berlin: Brunnen Verlag,
1931, io9 pp. M. 2.80.
Briand deflated.
PIERRE LAVAL. By MAURICE PRIVAT. Paris: Hachette, 1931, Fr. 12.
A popular sketch of the career of the French statesman.
DE SEDAN A LOCARNO. By LUCIEN SoUcHoN. Paris: Fayard, 1931, 322 pp.
Locarno pictured as the fatal step on the road to another Sedan.
ESQUISSE DES PROBLIMES FRANCO-ALLEMANDS. By BERNARD LAvERGE.
Paris: Gamber, 1931, 124 pp. Fr. i 5.
The author warmly advocates economic collaboration.
THE FRENCH COLONIAL ADVENTURE. By CONSTANT SOUTHWORTH. London:
King, 1931, 216 pp. v2/6.
The author comes to the conclusion that the French colonies have not proved a paying
proposition.
THE BIRTH OF THE GERMAN REPUBLIC. By ARTHUR ROSENBERG. New York:
Oxford University Press, 1931, 294 pp. $4.75-
The German original of this competent essay has already been noted.
VON VERSAILLES BIS ZUR GEGENWART. By ALBERT STR6HLE. Berlin: Zen-
tralverlag, 1931, 118 pp. M. i.8o.
A concise account of the Treaty and its effects, supplied with numerous diagrams.
DER AUSWXRTIGE DIENST DES DEUTSCHEN REICHES. By HERBERT
Kaus. Berlin: Stilke, 1932, 12x6 pp. M. 5S.
An elaborate account of the German foreign service, published by the German
Foreign Office.
HINDENBURG. By ALFRED NIEMANN. Leipzig: Koehler, 1931, 229 pp. M. 2.85.
A sympathetic biography, written by a leading protagonist of the monarchy.
AUF DIE BARIIKADEN? By FRITz KERN. Hamburg: Hanseatische Verlagsanstalt,
1931, 116 pp.
The editor of a leading German paper reviews the personalities and currents of mod-
ern Germany and urges a European policy to render a revolution unnecessary.
 SOME RECENT BOOKS 519
DER NATIONALSOZIALISMUS. By WALTHER SCHEUMANN. Berlin: Der Neue
Geist, 1931, 143 pp. M. 3.
One of the best brief accounts of the Hitler movement.
DEUTSCHLAND ERWACHE! By ERNST OTTWALDT. Leipzig: Hess, 1932, 392 pp.
M. 6.
A partisan history of the same movement.
DEUTSCHLAND UND EUROPA. By HERMANN STEGEMANN. Berlin: Deutsche
Verlagsanstalt, 1932, 448 pp. M. 9.6o.
A study of the German problem in its European setting, by a leading political writer.
LE PROBLAME COLONIAL ALLEMAND. By CAPITAINE SALESSE. Paris: Charles-
Lavauzelle, 1931, 130 pp. Fr. 12.
The familiar French argument against the return of colonies to Germany.
EVERY INCH A KING. By PRINCESS PILAR OF BAVARIA AND DESMOND CHAPMAN-
HusToN. New York: Dutton, 1931, 485 pp. $5oo.
Though written by a relative of the King and designed to exonerate him, this biogra-
phy of Alfonso XIII is a serious book that repays reading.
UN CRIMEN DE LESA PATRIA. By HERN.NDEZ MIR. Madrid: Compafiia general
de Artes Gr~ficas, 1931, 36o pp. Pes. 6.
.The verdict of history on the dictatorship, as predicted by a Spanish liberal.
LA REVOLUCI6N ESPAROLA. By RODRIGO SORIANO. Madrid: Claridad, 1931,
244 pp. Pes. 4.
A general account of the recent overturn.
MARCHE, ESPAGNE. By PIERRE DomiNIQuE. Paris: Valois, 1931, 288 pp. Fr. IS.
This is what the French call an "enquete," that is a survey of the present state of
affairs in Spain.
LA JORNADA HIST6RICA DE BARCELONA. By Josi GAYA Pic6N. Madrid:
Castro, 1931, 123 pp. Pes. I.
The author discusses the problem of autonomy as against centralization, and reviews
the Catalan negotiations with Madrid.
THE MAKERS OF MODERN ITALY. By SIR J. A. R. MARRIOTT. New York:
Oxford University Press, 1931, 228 pp. $3.50.
An entirely rewritten edition of a famous book; an excellent brief history of Italy
from Napoleon to Mussolini.
MUSSOLINI. By SIR CHARLES PETRIE. London: Holme, 1931, 186 pp. 5/.
A popular sketch, written with sympathy.
LES DEUX ROME ET L'OPINION FRAN(;AISE. By J. GAY. Paris: Alcan, 1931,
248 pp. Fr. 30.
A review of Franco-Italian relations since 1915, with special reference to the French
attitude in the Papal question.
CIUDAD DEL VATICANO E LA CUESTI6N ROMANA. By PEDRO VOLTAS.
Madrid: Coraz6n de Maria, 1931, 163 pp. Pes. 4.
A Spanish view of the settlement of the Roman question.
VISIONI MEDITERRANEE. By G. ScIuTi. Catania: Etna, 1932, 115 pp. L. S.
The Mediterranean problem as viewed from Rome.
LA POLITICA DEL MEDITERRANEO EN LA POSTGUERRA. By FERNANDO
ALBI. Valencia: Quiles, 1931, 224 pp. Pes. 6.
An historical study of the evolution of Mediterranean questions from 1918 to 1928.
IN DIFESA DELLA CIVILTA ITALIANA A MALTA. Livorno: Guisti, 1931, 147
pp. L. 7.
A collection of articles published in the organ of the National Maltese Party.
520 FOREIGN AFFAIRS
Eastern Europe
LES PROBLMES DE L'EST ET LA PETITE ENTENTE. By EMMANUEL MALYN-
sra. Paris: Cervantes, 1931, 560 pp.
A defense of the Polish r6gime, with special reference to the problem of warding off
Bolshevism.
DIE NACHFOLGESTAATEN UND IHRE WIRTSCHAFTLICHEN KRAFTE.
By GERHARD SCHACHER. Stuttgart: Enke, 1932, 286 pp. M. 13.20.
The author, who has already written an excellent book on the economic resources of
the Balkan states, here surveys Austria, Hungary and Czechoslovakia.
MITTEL UND SODOST-EUROPAISCHE WIRTSCHAFTSFRAGEN. EDITED BY
H. GRoss. Leipzig: B6ttger, 1931, 183 pp. M. 8.50.
A series of essays on the economic life of the Balkans and Turkey.
CHARLES I, EMPEREUR D'AUTRICHE, ROI DE HONGRIE. By J-POME
TROUD. Paris: Plon, 1931, 244 pp.
Really a plea for the restoration of the unity of the Hapsburg dominions.
DAS TSCHECHOSLOWAKISCHE NATIONALITXTENRECHT. By EMIL SOBOTA.
Prag: Orbis, 1931, 461 pp.
The German translation of a complete collection of documentary material bearing on
the nationalities laws of Czechoslovakia.
SLOVAKIA, THEN AND NOW. EDITED BY R. W. SETON-WATSON. London: Allen
and Unwin, 1931, 356 pp. 12/6.
The most complete survey of Slovakian affairs yet published in a western language.
The general discussion by Seton-Watson is followed by statements from twenty-five
Slovak experts, and the whole goes to show that conditions are vastly improved and
generally satisfactory.
ZUM EWIGEN FRIEDEN. By ALEXANDER SZANA. Bratislava: Grenzbote, 1931,
x67 pp.
An historical survey of Slovakia's struggle for freedom.
DAS IST POLEN. By F. W. Vor OERTZEN. Munich: Mfiller, 1932, 241 pp. M. 4.
The evolution of the new Poland as seen by a not too friendly German.
TOUR D'HORIZON. By COMTE LADISLAS SOBANSKI. Paris: Gebethner and Wolff,
1931, 123 pp. Fr. 9.
The European scene viewed from Warsaw.
LA LITHUANIE PENDANT LA CONFtRENCE DE LA PAIX. By HENRY DE
CHAMBON. Paris: Mercure Universel, 1931, 185 pp. Fr. 2o.
This account of Lithuania's resurrection is written by the editor of the Revue Parle-
mentaire and is based upon his own papers.
NATIONALISM IN MODERN FINLAND. By JOHN H. WUORINEN. New York:
Columbia University Press, 1931, 312 pp. $3.7S.
Nothing just like this contribution to the history of modern nationalism has appeared
in any western language. The author has made available a mass of material, unpublished
and published, in Finnish and Swedish.
STALIN. By STEPHEN GRAHAM. London: Benn, 1931, 148 pp. 6/.
A straightforward narrative of the conventional kind adding little that is new.
BOLSHEVISM IN PERSPECTIVE. By J. DE V. LODER. London: Allen and Unwin,
1931, 256 pp. 12/6.
A study of the historical evolution of Bolshevism, with some consideration of its
probable future development.
 SOME RECENT BOOKS 521
DER BOLSCHEWISMUS. By WALDEMAR GURIAN. Freiburg: Herder, 1931, 337 PP.
M. 6.8o.
A comparison of Bolshevist theory and practice, political, economic and social.
THE CONSCRIPTION OF A PEOPLE. By KATHARINE, DUCHESS OF ATHOLL.
New York: Columbia University Press, 1931, 216 pp. $2.5o.
This study, based on Russian and British government documents and on the testi-
mony of refugees, makes out a strong case against the Bolshevist policy of drafting
labor for the timber camps and industry, mines and railroads, the whole amounting to a
system of slavery.
DER STAAT OHNE ARBEITSLOSE. By ERNST GLAESER AND FRANZ WEISKOPF.
Berlin: Kiepenheuer, 1931, 198 PP. M. 4.50.
A richly illustrated survey of the working of the Five Year Plan.
DING GOES TO RUSSIA. By JAY N. DARLING. New York: McGraw-Hill, 1932, 204
pp. $2.5 o .
Keen observations of a well-known American cartoonist, with some clever sketches.
NEW MINDS: NEW MEN? By THOMAS WOODY. New York: Macmillan, 1932,
528 pp. $4.oo.
A well-documented study of the Bolshevist educational system, based upon many
months of careful investigation.
DER MENSCH WIRD UMGEBAUT. By ARTHUR RUNDT. Berlin: Rowohlt, 1932,
198 pp. M. 4.80.
An analysis of the effects of the Bolshevist system upon the individual.
RUSSIA AND OURSELVES. By VIDKUN QUISLING. London: Hodder and Stoughton,
1931, 284 pp. 7/6.
The Norwegian Minister of Defense, who has spent much of his time since 1917 in
Russia, calls for a Scandinavian-British union for resistance to Bolshevism.
ORIENT SOVItTIQUE. By LYDIA BACH. Paris: Valois, 1931, 300 pp. Fr. IS.
A competent French writer pictures the renaissance of Central Asia under Soviet rule.
LE PROBLME DE L'IND1tPENDANCE DE L'UKRAINE ET LA FRANCE.
By E. EvAIN. Paris: Alcan, 1931, 136 pp. Fr. io.
A history of the question by a French deputy.
LA R1tCONSTRUCTION tCONOMIQUE ET FINANCIARE DE LA ROU-
MANIE. By F. MANoLIoU. Paris: Gamber, 1931, 304 pp. Fr. 40.
A volume dealing chiefly with the attitude of the Rumanian parties toward recon-
struction problems.
AUS DEN KAMPFEN UM DEN SELSTANDIGEN STAAT KROATIEN. By ANTE
PAVELI. Vienna: Hblzl, 1931, 127 PP. M. 3.
Pictures and documents of the Croatian struggle.
ANNUAIRE DE L'ASSOCIATION YOUGOSLAVE DE DROIT INTERNA-
TIONAL. Paris: Editions Internationales. 1931. 445 PP.
A new year-book containing interesting papers by Jugoslav authorities on interna-
tional law, with a list of treaties signed by Jugoslavia I919-29 and a useful bibliography.
BANDITS D'ORIENT. BY JEAN PERRIGAULT. Paris: Valois, 1931, Fr. 12.
Highly-colored revelations of the activities of the Macedonian revolutionary com-
mittees.
DIE MAKEDONISCHE FRAGE. BY WALTER JACOB. Berlin: Beltz, 1931, 57 PP. M.
4.80.
A geographical approach to an old problem.
522 FOREIGN AFFAIRS
MODERN GREECE. By JOHN MAVROGORDATO. New York: Macmillan, 1931, 251
pp. $3.oo.
A good introduction to the history of modern Greece, with emphasis on the war and
post-war periods.
LE ISOLE ITALIANE DELL'EGEO. By A. DEslo. Rome: Libreria dello Stato,
1931, 534 pp. L. 45.
An elaborate and richly illustrated descriptive work.

The British Commonwealth of Nations

THE NEW BRITISH EMPIRE. By WILLIAM Y. ELLIOTr. New York: McGraw-Hill,
1932, 519 pp. $5.00.
A book which will be welcome to many who have found it impossible to keep track
of the rapidly changing relationships between different parts of the British Empire.
The book is distinguished by breadth of view as well as by being well grounded as to
facts. Economic, religious and cultural factors are given full consideration, and the au-
thor succeeds in rising above the mere data to some very interesting judgments of the
British system and its place in the general international scene.
NATIONAL SOVEREIGNTY AND JUDICIAL AUTONOMY IN THE BRITISH
COMMONWEALTH OF NATIONS. By HECTOR HUGHES. London: King, 1931, 184
pp. 9/-
A technical investigation of the position of the dominions in the judicial sphere.
VACANT THRONES. By SIR IAN MALCOLM. London: Macmillan, 1931, 22o pp. io/6.
Attractive pen pictures of British statesmen of the past forty years, based chiefly on
personal reminiscences and impressions.
THE ELEMENTS OF IMPERIAL DEFENCE. By A. G. BOYCOTT. London: Gale,
1931, 402 pp. I2/6.
The author examines the available material resources of the empire, the problem of
communications and the ways of coordinating action.
GANDHI: THE DAWN OF INDIAN FREEDOM. By JACK C. WINsLOW AND
VERRlER ELWIN. New York: Rev ell, 1931, 224 PP. $1.50.
Two missionaries give a sympathetic account of Gandhi and his teaching.
MODERN INDIA. EDITED BY SIR JOHN CUMMINO. New York: Oxford University
Press, 1931, 310 pp. $1.50.
Valuable essays on all aspects of the Indian situation, written by English experts.
NATIONHOOD FOR INDIA. By LORD MESTON. New York: Oxford University
Press, 1931, 120 pp. $1.50.
Lectures delivered at Williamstown by a former Indian official.
REBEL INDIA. By HARRY N. BRAILSFORD. New York: The New Republic, 1931,
274 pp. $1.00.
A socialist's observations in Northern India, betraying a strong leaning to the na-
tionalist cause.
INDIEN KAMPFT. By W. BO'SSHARD. Stuttgart: Strecker and Schrader, 1931, 290
pp. M. 9.50.
Penetrating travel observations made during 1930.

The Near East

L'ISLAM ET LA NATIONALITt. By JEAN S. SABA. Paris: Chauny and Quinsac,
1931, i66 pp. Fr. 25.
A keen analysis of the difficulties in the way of nationalism in Islamic countries.
 SOME RECENT BOOKS 523
DER VORDERE ORIENT. K!nigsberg: Grife and Unzer, 1931, 140 pp.
A collection of lectures by authorities, including Bergstriisser, Hartmann and Lohr.
SYRIE ET PALESTINE. By PAUL PIC. Paris: Champion, 1931, Fr. 2o.
The author is concerned primarily with the development of nationalism in Syria and
the reaction against Zionism in Palestine.
ENGLAND IN PALESTINE. By NORMAN BENTWICH. London: Kegan Paul, 1932,
358 pp. 12/6.
An accounting of the British stewardship by a man who was for years a high official
in the administration.
VINGT ANNtES D'IGYPTE. By BARON FIRMIN VAN DEN BosCH. Paris: Perrin,
1931, Fr. IS.
The experiences of an official, dealing primarily with the post-war period, and touch-
ing Syria and Palestine as well as Egypt.
ItTUDES JURIDIQUES DU PROBLtME DE L'1tGYPTE. By I. SALEH HUSSEIN.
Paris: Lac, 1931, 326 pp. Fr. 40.
A legal study of the position of Egypt in its relations with England.
SITUATION INTERNATIONALE DU SOUDAN tGYPTIEN. By E. ROUARD DE
CARD. Paris: Pedone, 1931, 8o pp. Fr. I8.
A compilation of facts and documents by a French authority on things African.

Africa
THE REMAKING OF MAN IN AFRICA. By J. H. OLDHAM AND B. D. GIBSON.
New York: Oxford University Press, 1931, I85 pp. $I.25.
A stimulating discussion of the native problem.
LYAUTEY OF MOROCCO. By SONIA E. HOWE. London: Hodder and Stoughton,
1931, 338 pp. 2o/.
An authorized study which gives a reliable account of Lyautey's career, but lacks the
charm of the Maurois biography.
LE MAROC. By AUGUST TERRIER. Paris: Larousse, 1931, 224 pp. Fr. 30.
A beautifully illustrated descriptive work, written by a French colonial authority.
A LAST CHANCE IN KENYA. By NORMAN LEYS. London: Hogarth, 1931, 173 pp.
8/6.
A new examination of the system of land and labor in Kenya, by a leading pleader
of native claims.

The Far East

FAR EASTERN INTERNATIONAL RELATIONS. By HOSEA B. MORSE AND
HARLEY F. MACNAIR. Boston: Houghton, Mifflin, 1931, 846 pp. $6.oo.
A valuable general text, supplied with an extensive bibliography.
tVOLUTION DES R1tLATIONS DIPLOMATIQUES DE LA CHINE AVEC LES
PUISSANCES, 1587-1929. By TcHAO TcHUN TCHEOU. Paris: Pedone, 1931, 2o8 pp.
Fr. 25.
A brief survey of the foreign relations of China.
LA CHINE ET LE DROIT INTERNATIONAL. By JEAN ESCARRA. Paris: Pedone,
1931, 419 pp. Fr. 8o.
An elaborate treatise by a French professor long a counsellor of the Chinese Govern-
ment.
CHINA. By OTTO MXNCHEN-HELFEN. Dresden: Kaden, 1931, 232 pp. M. 5.
A study of the social structure and the class struggle.
524 FOREIGN AFFAIRS
LA FRANCE A KOUANG TCHtOU WAN. By ALFRED BONNINGUE. Paris: Berger-
Levrault, 1931, 72 pp. Fr. 8.
A compact study of the history of the French leased territory.
JAPAN. By INAzo OTA NITOB9. New York: Scribners, 1931, 398 PP. $5.00.
One of the excellent volumes of the "Modern World" series, giving an historical
background as well as a general survey of Japanese life and conditions.
JAPAN: A SHORT CULTURAL HISTORY. By GEORGE B. SANsom. New York:
Century, 1931, 553 PP. $7.50.
A book that will fill a distinct need, by a member of the British Embassy at Tokio.
WESTERN INFLUENCES IN MODERN JAPAN.. By INAzo NITOB. AND OTHERS
Chicago: Chicago University Press, 1931, 544 PP. $4.00.
A co6perative survey of Japanese life, written by experts.
LE CONFLIT SINO-JAPONA:[S. ANONYMOUS. Paris: Nachbaur, 1931, Fr. 15.
The author deals chiefly with Japanese railway policy in Manchuria and Mongolia.
COLONIAL POLICY. By A. DE KAT ANGELINO. Chicago: Chicago University Press,
1931, two volumes, $i5.oo.
The first volume of this impressive work is concerned with the general principles of
colonial administration; the second deals with the Dutch system in the East Indies.
VAN OVERHEERSCHING NAAR ZELFREGEERING. By SOCRATo NOTO. S'Gra-
venhage: Adi Poestaka, 1931, 16o pp.
An Indonesian leader, educated in Holland, examines the basis for eventual self-
government in the East Indies.
L'INDOCHINE. By ALBERT MAYBON. Paris: Larose, 1931, 198 pp. Fr. 2o.
A descriptive work called forth by the recent colonial exhibition.

Latin America
HAITI UNDER AMERICAN CONTROL. By ARTHUR C. MILLsPAUGH. Boston:
World Peace Foundation, 1931, 266 pp. $2.5o.
i
A well-documented study of the evolution of the Haitian situation between 19 5 and
1930, written by the former financial adviser-general of Haiti.
IN THE WEST INDIES. By JOHN C. VAN DYKE. Chicago: Chicago University Press,
1932, 211 pp. $2.00.
Travel impressions, with some interesting sidelights on political conditions.
MILITARY GOVERNMENT IN THE PANAMA CANAL ZONE. By HARRY N.
HOWARD. Norman: University of Oklahoma Press, 1931, 62 pp. 5o.
A mere outline, but well-documented and impartial.
COLOMBIA Y LOS ESTADOS UNIDOS. COLOMBIA, VENEZUELA, COSTA
RICA, ECUADOR, BRASIL, NICARAGUA Y PANAMA. COLOMBIA Y EL
PERU. By ANTONIO J. URIBE. Bogota: Minerva, 1931.
These three volumes, parts of a doctoral dissertation, cover the whole range of
Colombia's international relations and form an important contribution to the literature
of Latin American diplomacy.
MONETARY INFLATION IN CHILE. BY FRANK W. FETTER. Princeton: Prince-
ton University Press, 1931, 226 pp. $2.5o.
Though this is essentially a financial study, the author does not leave out of account
the political background, so that the book should have considerable interest for all stu-
dents of Latin American affairs.
 SOURCE MATERIAL
By Denys P. Myers
PUBLIC DOCUMENTS OFFICIALLY PRINTED
Documents may be procured from the following: United States: Gov't Printing Office, Superintendent of Documents,
Anderson,
Washington,I Ave.
D. C.Ernest
Great Reyer,
Britain:Paris
British Library
XIV'. of ofInformation,
League Nations, Int.270 Madison Perm.
Labor Ave., New
CourtYork.
of Int.Franc:
Ju~stice Gerda M.
national Institute of Agriculture: World Peace Foundation, 40 Mt. Vernon St.,Oflie, and Inter-
ment Printing Office and London imprints are His Majesty's Stationery Office, Boston. Washington imprints are Govern-
unless otherwise noted. Since 1928 a list of
national Gvernment documents has been printed in the Monthly list of Beaks catalogued in the Library of the League of€
Nations.
AIR COMMUNICATION
AIR NAVIGATION. Arrangement between the United States of America and Italy. Effected
by Exchange of Notes Signed October 3 and 14, 1931. Effective October 3, 1931. Washington,
193I. xI p. 23kg4 cm. (Executive Agreement Series No. 24.) 5 cents.
REGULATIONS to Govern Air Navigation in the Canal Zone. Promulgated by the Secretary
of State, September 22, 931. Washington, 1931. 36 p. 2334 cm. (Publications of the Department
of State, No. 249.) so cents.
INTERNATIONAL TECHNICAL Committee of Arial Legal Experts. Message from the
President of the United States transmitting a Report from the Secretary of State relative to an
Annual Appropriation Amounting to $5,750 for the Purpose of Defraying the Expenses of Partici-
pation of the United States in the Meeting of the International Technical Committee of A~rial
Legal Experts. Washington, 1932. 6 p. 23 cm. (Doe. No. 33, 72d Cong. 1st sess.)

ARBITRATION AND CLAIMS

ARBITRATION of Claims Growing out of the Alleged Detention of the Motorships "Kron-
prins Gustaf Adolf" and "Pacific." Special Agreement between the United States of America and
Sweden. Signed at Washington, December 7, 1930. Washington, 1931. 4 P. 233/4 cm. (Treaty
Series, No. 841.) 5 cents.
CLAIMS. Convention between the United States of America and Panama. Signed at Washing-
ton, July z8, I926. Washington, 193I. 9 P. 233 cm. (Treaty Series, No. 842.) 5 cents.
OPINIONS of Commissioners under the Convention Concluded September 8, 8923, as Extended
by Subsequent Conventions, between the United States and Mexico. October, 1930, to July, 1935.
Washington, 1931. 291 p. 23N4 cm.
THE AMERICAN COMMISSIONER, Mixed Claims Commission, United States and Ger-
many. Decisions Nos. 71-75 • • in the matter of Fixing Reasonable Fees for Attorneys or
Agents Under the Authority of Section 9 of thle "Settlement of War Claims Act of 928." Wash-
ington, 1931. p. 463-497. 23 cm.
ARMAMENTS
ARMAMENTS Truce (Including replies from Governments). Geneva, 1931. 20 p. 33 cm.
(League of Nations, C. 919. M. 484. 1931. IX. 40.)
CONFERENCE for the Reduction and Limitation of Armaments. Armaments Year-Book.
Special Edition. General and Statistical Information in regard to Land, Naval and Air Armaments.
Geneva, 1932. 474 P. 24 cm. (League of Nations, C. 754. M. 352. 1931. IX. 1.)
M. .DRAFT Rules of Procedure. Geneva, 1931. 3 P. 33 cm. (League of Nations, C. I002.
8 193i.
PARTICULARS IX. 42.)
with Regard to ihe Position of Armaments in the Various Countries.
3.
Communication from the French Government. Memorandum of July 15th, 1931, and Annexes
(Complementary Numerical Data). Geneva, 1931. 27 p. 33 cm. (League of Nations, C. 440 ().
M. 187 (I). 1931. IX. 9.)
. 4. Communication from the
Nations, C. 476. M. 203. 1931. IX. lO.)British Government. Geneva, 193. 54 P. 33 cm. (League of
•7. Communication from the Swedish Government. Geneva, 1931. 11 p. 33 cm. (League
of Nations, C. 541.. 22. 191. IX. 13.)

of Nations,.8. C.Communication
549 (i). M. 225from the Austrian Government. Geneva, 1931. 3 p. 33 cm. (League
(1). 1931. IX. 14.)
12. Communication from the Estonian Government. Geneva, 1931. 6 p. 33 cm. (League
of Nations,
A IC.. Communication
564. M. 230. 1931.from
IX.the
18.) Portuguese Government. Geneva, 1931. 24 p. 33
ema.
(League of Nations, C. 6 M. 262. 1931.
119. .Communicationob. IX. 22.)
from the Irish Free State Government. Geneva, 1931. 33 cm.
(League of Nations, C. 667. M. 275. 1931. IX. 26.)
526 FOREIGN AFFAIRS
' 23. Annex (revised) To the Communication from the Government of the Netherlands
Dated August 6th, 1931. Geneva, 193I. 7 P. 33 cm. (League of Nations, C. 483. M. zo6. 1931. IX.
ii. Annex.)
. 24. Communication from the Canadian Government. Geneva, 1931. 9 P. 33 cm. (League
of Nations, C. 698. M. 3o4. 1931. IX. 29.)
. 25. Communication from the Bulgarian Government. Geneva, 1931. 5 P. 33 cm. (League
of Nations, C. 756. M. 354. 1931. IX. 30.)
.26. Communication from the Government of Latvia. Geneva, 1931. 12 p. 33 cm. (League
of Nations, C. 757. M. 355. 1931- IX. 31.)
. 27. Communication from the Government of Yugoslavia. Geneva, 193I. II p. 33 cm.
(League of Nations, C. 763. M. 361.. 1931. IX. 33-)
28. Communication from the Government of the Union of Soviet Socialist Republics.
Geneva, 1931. 1 double p. 33 cm. (League of Nations, C. 762. M. 36o. 193L IX. 32.)
29. Communication from :.he Government of India. Geneva, 1931. 32 p. 33 cm. (League
of Nations, C. 844. M. 423. 1931. IX. 36.)
30. Communication from the Swiss Government. Geneva, 1931. 6 p. 33 cm. (League of
Nations, C. 845. M. 424. 1931. IX. 34.)
.31. Communication from i:he Albanian Government. Geneva, 1931. 5 P. 33 cm. (League
of Nations, C. 850. M. 428. 1931. IX. 35.)
32. Communication from the Hungarian Government. Geneva, 193. 4 P. 33 cm.
(League of Nations, C. 914. M. 480. 1931. IX. 37.)
.33. Annex to the Communication from the Government of the United States of America.
Geneva, 1931. 4 P. 33 cm. (League of Nations, C. 413. M. x69. 1941. IX. 7. Annex.)
34. Communication from the Liberian Government. Geneva, 193L 2 p. 33 cm. (League
of Nations, C. 920. M. 485. 193L IX. 38.)
- 35. Communication from the Government of the Union of South Africa. Geneva, 1931.
24 p. 33 cm. (League of Nations, C. 923. M. 488. 1931. IX. 39.)
37. Erratum to the Communication from the Portuguese Government. Geneva, 1931.
I double p. 33 cm. (League of Nations, C. 65o. M. 262. 1931. IX. 22. Erratum.)
- 42. Communication from the New Zealand Government. Geneva, 1932. 12 p. 33 cm.
(League of Nations, C. 972. M. 535. 1931. IX. 4.)
ANNOTATED Bibliography on Disarmament and Military Questions. Geneva, League of
Nations Library, 1931. 163 p. 22 cm. 5o cents.

BOLIVIA - PARAGUAY
PROCEEDINGS of the Commi.ssion of Inquiry and Conciliation Bolivia and Paraguay.
March 13, 1929-September 13, 1929. Washington (The Sun Book and Job Printing Office, Inc.
Baltimore, Maryland), 1931. 1210 p. maps. 232 cm.
CARTELS
GENERAL REPORT on the Economic Aspects of International Industrial Agreements.
Prepared for the Economic Committee by M. Antonio St. Benni (Italy), M. Clemens Lammers
(Germany), M. Louis Marlio (France) and M. Aloys Meyer (Luxemburg). Geneva, 193 1. 39 P. 24
cm. (League of Nations, E. 736. I9-,I. II. B. 21.)
COMMERCE
BRITISH COMMONWEALTH Merchant Shipping Agreement. Signed at London on xoth
December, ,931. London, 1932. 10 p. 244 cm. (Cmd. 3994.) zd.
COMMERCE. Foreign commer:e and navigation of United States, calendar year 1930.
Washington, 1931. lxxxvii+700 p. 4 . cloth $2.oo.
COMMERCIAL Relations. Provi sional Agreement between the United States of America and
Chile. Effected by Exchange of Notes Signed September 28, 1931. Washington, 3 P. 23Y4 cm.
(Executive Agreement Series, No. 26.) 5 cents.
EXCHANGE OF NOTES between His Majesty's Government in the United Kingdom and the
Government of Salvador in regard to Commercial Relations, San Salvador, August 8, 1931.
London, 1932. 4 p. 24Y cm. (Treaty Series No. 1 (1932) Cmd. 3992.) I d.
INTERNATIONAL Convention Relating to the Simplification of Customs Formalities. Signed
at Geneva, November 3rd, 1923. Application of Article so of this Convention. Third Series.
Geneva, 1931. Io double p. 33 cm. (League of Nations, C. 913. M. 479. 1931. II. B. 24.)
COMMERCIAL BANKS
Memorandum on Commerical Banks 1913-1929. Geneva, 193L 429 p. 274 cm. $3.00.
This publication for the first time presents the detailed statements of the combined banks of 30
countries, with historical notes on the banking systems. An introduction analyzes and compares
the salient features of banking records for the countries reported upon.
 SOURCE MATERIAL 527
COST OF LIVING
AN INTERNATIONAL Enquiry into Costs of Living. A Comparative Study of Workers'
Living Costs in Detroit (U. S. A.) and Fourteen European Cities. Geneva, 9I1. 2o9 p. 24 cm.
(International Labour Office, Studies and Reports Series N (Statistics) No. 17.) $2.oo.
THE SOCIAL ASPECTS of Rationalisation. Introductory Studies. Geneva, 1931. 381 p. 24 cm.
(International Labour Office, Studies and Reports -Series B (Economic Conditions) No. I8.) $2.oo.
COURT OF INTERNATIONAL JUSTICE, PERMANENT
WORLD COURT. A Compilation of Material Relating to the Subject of the "World Court,"
Consisting of Indexes on the Subject, Contained in Volume 64, Part i, of the Executive Journal;
Indexes to the Congressional Records for the Sixty-Seventh Congress, Fourth Session, to and
including the Third Session of the Seventy-First Congress; Reservations, Resolutions, and Amend-
ments Offered or Submitted During the First Session of the Sixty-Ninth Congress, with the Yea-
and-Nay Votes Thereon; the "Protocol" with Resolution of Adherence and Reservations Agreed
to on January 27, 1926; the Present Pending "Protocols," and the So-Called "Root Hearing" held
before the Committee on Foreign Relations on January 21, 1931. Edwin P. Thayer, Secretary of
the Senate, Compiled by L. W. Bailey, Executive Clerk. Washington, 1932. 156 p. 23Y cm.
(Sen. Exec. Doc. No. I, 7zd Cong., ist sess.)
ACCESS to, or Anchorage in, the Port of Danzig, of Polish War Vessels. 164 double p. 24 cm.
(Series A./B. - Fascicule No. 43.)
ACTS and Documents Concerning the Organization of the Court. Second Addendum to No. 2
Modification of the Rules, 1931. 321 p. 32Y2 cm. (Series D.)
DEBTS AND REPARATION
MORATORIUM on Foreign Debts Hearings before the Committee on Ways and Means
House of Representatives. Seventy-Second Congress, first session on H. J. Res. 123, a Joint Reso-
lution to Authorize the Postponement of Amounts Payable to the United States from Foreign
Governments During the Fiscal Year 1932, and Their Repayment over a Ten-Year Period Be-
ginning July 1, 1933. Part I. December 1s and 16, 1931. (Including supplementary statement of
Undersecretary Mills, December 17). Part II. December 16 and 17, 1931. Washington, 1931.
128 p. 23Y4 cm.
POSTPONEMENT of Intergovernmental Debts. Hearing before the Committee on Finance
United States Senate, Seventy-Second Congress, first session on H. J. Res. 147, a Joint Resolution
to Authorize the Postponement of Amounts Payable to the United States from Foreign Govern-
ments During the Fiscal Year 1932, and Their Repayment over a Ten-Year Period Beginning
July I, 1933. December 16, 1931. Washington, 1931. 29 p. 23Y4 cm.
REPORT of the Special Advisory Committee convened under the Agreement with Germany
concluded at The Hague on January 20, 1930 (See Cmd. 3763) Basle, December 23, 193i. London,
1932. 40 p. 24Y2 cm. (Germany No. I (1932) Cmd. 3995.) 9d.
AGREEMENT for the Complete and Final Settlement of the Financial Liabilities of Germany
Relating to the Great War. Signed at The Hague, January 20, 1930. Canadian Ratification
deposited July 12, 193o. Ottawa, F. A. Acland, 1931. 155 p. 24Y cm. (Dominion of Canada Treaty
Series, 193o, No. 7.) 25 cents.
EUROPEAN UNION
COMMISSION of Enquiry for European Union. Minutes of the Fourth Session of the Com-
mission. Held at Geneva from September 3rd to 5th, 1931. Geneva, 1931. 70 p. 33 cm. (League of
Nations, C. 68S. M. 287. 1931. VII. 1s.)
• REPORT by the Special Committee to Examine the Draft Pact of Economic Non-
Aggression. Geneva, 1931. 3 P. 33 cm. (League of Nations, C. 807. M. 398. 1931. VII. 17.)
-. SPECIAL Committee to Consider a Pact of Economic Non-Aggression. Minutes of
Session. Held at Geneva from November 2nd to 5th, 1931. Geneva, 1931. 27 p. 33 cm. (League of
Nations, C. 910. M. 478. 1931. VII. 18.)

GOLD STANDARD
THE FUNCTIONING of the Gold Standard. A Memorandum Submitted to the Gold Delega-
tion of the Financial Committee by Dr. Feliks Mlynarski. Geneva, 1931. 115 p. 25 cm. (League of
Nations, C. 647. M. 261. I931. II. A. 25.) 8o cents.
GUATEMALA-HONDURAS
GUATEMALA-HONDURAS Boundary Arbitration. Brief on Behalf of Guatemala on the
Question Concerning the Competency of the International Central American Tribunal to Take
Cognizance of the Boundary Question between Guatemala and Honduras. Submitted to
the Arbitral Tribunal Composed of: The Hon. Charles Evans Hughes, Chief Justice of the
United States of America; Hon. Luis Castro Urefia, from Costa Rica; Hon. Emilio Bello Codesido,
528 FOREIGN AFFAIRS
from Chile. Under Treaty of July i5, I93O. Washington, Legation of Guatemala, 1931. 133
p. 23 cm.
ARBITRAJE de Limites Entre Ho:nduras y Guatemala. Alegato de Honduras sobre le Cuestion
Previa del Tratado de Arbitraje de 16 de Julio de 1930 (Espafiol E Ingles). Washington, Legation
of Honduras, 1931. 41 p. 23 cm.
IN THE GUATEMALA-HONDURAS Boundary Arbitration. Opinion and Judgment of the
Special Tribunal on the Preliminary Question. Washington, Legation of Guatemala, 1932. 10
double p. 2334 cm.
INTELLECTUAL COOPERATION
INTER-AMERICAN Congress of Rectors, Deans, and Educators in General, Havana, Cuba,
February 20-23, 193o. Report of the Chairman of the Delegation of the United States of America.
Washington, 1931. 136 p. 234 cm. (Publications of the Department of State, Conference Series,
No. 8.) 25 cents. INTERNATIONAL
FINANCE
FINANCIAL Developments in Latin America During 1930. Washington, 1931. 54 p. 23 cm.
(Trade Information Bulletin No. 775.) iO cents.
Sale of Foreign Bonds or Securitieii in the United States. Hearings before the Committee on
Finance United States Senate, Seventy-Second Congress, First Session pursuant to S. Res. 19, a
Resolution authorizing the Finance Committee of the Senate to Investigate the Sale, Flotation,
and Allocation by Banks, Banking Institutions, Corporations, or Individuals of Foreign Bonds
or Securities in the United States. Part i. December 18, 19 and zi, 193 1. Washington, 193 1. 298 p.
tables. 23Y4 cm. MANDATES
PERMANENT Mandates Commhsion. Minutes of the Twenty-First Session. Held at Geneva
from October 26th to November 13th, 193 1, including the Report of the Commission to the Council
on the Ordinary Work of the Session, the Comments by the Accredited Representatives of the
Mandatory Powers, and the Special Report of the Commission to the Council on the Proposal of
the British Government with regard to the Emancipation of Iraq. Geneva, 1931. 233 p. 33 cm.
(League of Nations, C. 830. M. 411. 1931. VI. A. 3.)
GENERAL INDEX to the Records of the Permanent Mandates Commission No. 3 (Sessions
XI-XX) 1927-1931. Geneva, 1931. 67 p. 33 cm. (League of Nations, C. 918. M. 483. 1931. VI. A. 4.)
EXCHANGE OF NOTES between His Majesty's Government in the United Kingdom and the
French Government respecting the Boundary between British and French Cameroons, London,
January 9, 193i.London, 1931. 27 p. map. 242 rcm. (Treaty Series No. 34 (1931) Cmd. 3936.) 2S.
TABLES of General International Conventions Applied to the Mandated Territories. Geneva,
1931. x8 double p. 33 cm. (League of Nations, C. 735. M. 340. 1931. VI. A. 2.)
TREATY of Alliance between His Majesty in respect of the United'Kingdom and His Majesty
the King of Iraq, with an Exchange: of Notes, Baghdad, 3oth June, 1930, together with Notes
Exchanged embodying a separate Financial Agreement, London, 19th August, 193o. London,
193I. 16 p. 24 cm. (Treaty Series No. 15 (1931) Cmd. 3797.) 3d.
OPIUM CONTROL
INTERNATIONAL Convention '.or Limiting the Manufacture and Regulating the Distribu-
tion of Narcotic Drugs with Protocol of Signature, Geneva, July 53, 1931. London, 1931. 19 p.
2434 cm. (Miscellaneous No. 20 (193 1) Cmd. 3979.) 4d.
RECORDS of the Conference for the Limitation of the Manufacture of Narcotic Drugs,
Geneva, May 27th to July 13, 1931. Volume I. Plenary Meetings. Text of the Debates. Geneva,
193. 421 P. 33 cm. (League of Nations, C. 5o9. M. 214. 1931. XI. 1O/I.) $4.00.
TREATIES
TREATIES and Other International Acts of the United States of America. Edited by Hunter
Miller. Vol. 1 (short print). Plan of the edition, lists, and tables. Washington, 1931. x+2oi p.
(Publication No. 237.) 50 cents.
TREATIES and Other International Acts of the United States of America. Edited by Hunter
Miller. Vol. 2. Documents 1-4o: 1776-1818. Washington, 1931. xxix+662 p. (Publication No.
175.) $4.00.
These first volumes of the definitive edition of United States treaties set a new standard in
such publication. The first volume contains pertinent historical materials, lists, a table of proclama-
tions affecting foreign relations and other relevant material. It will be revised and added to in sub-
sequent "short prints." Volume 2, the first of treaty texts, gives all official languages, corrects or
straightens out many hitherto uncertain questions of date, and in notes to each text gives im-
portant material respecting the history of the text, the character of the documents, circumstances
of ratification, etc.
TRATADOS y convenciones vigentes entre los Estados Unidos Mexicanos y otros paises.
III. Tratados. Mexico, D. F., Secretaria de relaciones exteriores, 193. 369 p.