War finance : as viewed from the roof of the world in Switzerland

Front matter

Books bp C. MW. Barron

MANAGER OF THE WALL STREET JOURNAL, BOSTON News BurgAv, AND PHILADELPHIA News BUREAU

WAR FINANCE, as Viewed from the Roof of the World in Switzerland.

Preface

Bor slight introduction is needed for these letters from Europe, with succeeding notes, on War Finance.

It. was to get the causes underlying the European War that I visited England and the Continent in the autumn of 1914 and published early in 1915 The Audacious War dealing with the problems at the inception of the great conflict.

It was to study the finance under the war, its probable duration and its financial and economic results, that I left home in July, 1918, and visited England, France, Switzerland, and the devastated region behind the battle front. I returned in October, bringing my letters and notes, because no such matter at that time could be expected to promptly pass the censorship.

After publishing in the Boston News Bureau and The Wall Street Journal my observations from Switzerland, I was about to ask Washington permission to deal freely with our American supply bases, when it was announced that the censorship concerning such matters was lifted. I was therefore immediately free to give data that no other journalist had been in position in France to gather.

I concluded The Audacious War with a presentation of the one great result that ought to flow from such a x PREFACE war —a league of nations to keep the peace of the world.

Again, in the spring of 1917, I studied, in Mexico, problems of international peace as I journeyed through the oil regions, west and south from Tampico. The data I there gathered I presented in The Mexican Problem. I found the same problems of interrelated war and finance in Mexico as in Europe. I now see the international unfolding of the larger problem, the brotherhood of man — brotherhood in war and in peace, brotherhood in trade and in finance.

Before this war nobody could dream of the democracies of the world fighting a defensive war at a cost of more than one hundred and fifty billion dollars, maintaining prices and exchanges on a gold base, making loans to one another of credits, supplies, and men, and all with such unity and harmony.

It will take years to unfold and prove up all the lessons for humanity from this war.

An issue rises before us that is greater than that of war or peace, or of international peace. It is the issue between the rights, wages, and duties of the living, and the rights, duties, and wages of accumulated capital.

It is the hope of the author that from beginning to end in this book, and especially in the final chapters, he has made some presentation that will assist to clear thought concerning the great economic issues now before the world. ) } C. W. Barron.

Contents

. On THE Rooror tHe Wortp . ., . INTERNATIONAL EXCHANGE een . THe DANGERS OF PEACE

. THe GreRMAN Spy System : . THe GERMAN GOVERNMENT AND PEOPLE . THe WEapons oF GERMANY ... . STARVATION AND PRISONERS

. GriIppE AND American BUSINESS

Letter I On The Roof Of The World

By Lake Geneva, Switzerland, in September “‘Wuy did you go back into journalism?” I once asked Charles H. Grasty after he had sold out his Baltimore and St. Paul papers and realized more than a million dollars.

**I wanted to be on the roof of the world,” he replied. ‘‘And as one of the five managers of the ‘New York Times’ and with a home in London as well as New York, I can get the broadest survey.”

I last left Grasty at the Hotel Ritz in Paris and passed into Switzerland to be on the roof of the world and get a broad view down the German side of the war front, to study international finance, peep into Italy, learn something of Russia, and to think.

A RELIGIOUS WAR

You can think in Switzerland. Calvin thought here. Voltaire thought and wrote here and lit the fires of the French Revolution. Byron and Shelley walked and talked and sang here. Gibbon viewed the rise and fall of the Roman Empire, looking down from these hills.

Fruits, flowers, and powers grow in Switzerland as nowhere else. And if the melting snows of these mountains were harnessed, the descending powers could light the capitals of Europe.

Is Switzerland a nation? — Only by self-determination, for seventy-one per cent of her people speak German, and less than twenty-five per cent speak French.

Is this a religious war? It is the greatest religious war the world has ever known, for on one side is the war for human freedom without which there can be no true religion, and on the other side it is a war for enslaving power — power to the nth degree as the ultimate end and good, Germany to be that power and good over all the world. All good things are German, and all German things are good; Good must rule; Germany is the super-nation and will create the super-man. Worship, praise, and fight for Germany!

Dante imaged the hells; Swedenborg classified them; Germany has exemplified them. Dante saw men in tortures for sin; Swedenborg saw them in the pleasures and insanities of sin; the world sees Germany in the pleasures and insanities of a sinful war, and will yet see her writhe in the tortures of the damned beyond the dreams of Dante.

FRIGHTFULNESS

A HELL once established creates its own penalties. Frightfulness returns unto its authors. Only those

ON THE ROOF OF THE WORLD 3 who know fear could invent terrors or hope to win by terrorism.

In the invention of frightfulness as a weapon of war is the confession of the weakness of war. I never understood it as respects Germany until I listened of late to the story of a Belgian countess.

When the German massacres in her village were finished, the Germans having slain all the old men and young girls they desired, the countess said to a young German soldier: “‘Why, why did you kill these innocent people?” And the answer is the keynote to the German side of this war in its beginning and in its ending.

“Madam, we were afraid!”

Look at the statistics — more insanity, more nerve weaknesses, more suicide, more offenses against innocence, in Germany than in any other country in the world.

Ask French, English, or American nurses, and the testimony is unanimous that the German more easily gives way, and becomes a cry-baby and a blubberer in advance of any other soldier. The German has no sustaining faith. He was taught to envy and fear France, and then his fears were transferred to Russia.

His treachery, deceit, and spy systems, are based on fear. He has no individual faith or confidence. He must move in organization under orders from his captain and the rule of his Kaiser.

Now he faces defeat in dread and fear.

PEACE PROPOSALS

For several months he has been trying to put through Switzerland arguments to all the allies as to why peace should be negotiated with Germany, and again the German shows his fear and argues through frightfulness.

From Berlin comes up the argument through Switzerland to the banking and political powers of the world, “Don’t you want to stop the spread of Bolshevikism?”’

“Don’t you want Germany to stand as the defense of Europe against the menace of Russia? Are you willing to stand by and see war destroy accumulated wealth and capital, the fone of the human race, civilization itself?”

And when all arguments fail, down comes the argument of tears. I have it on very high authority that the German has been as well trained in preparation for peace in defense as he has been trained in preparation for attack in war. Before the war, the Germans did not hesitate to say: “We shall carry the next war with all frightfulness; our enemies are Christian people and will not punish us if we fail.”

TEARS AND FEARS

Now comes down the final argument. It is whispered into Switzerland straight from the circle about the “All Highest.” “Quickly, quickly, put it up to

ON THE ROOF OF THE WORLD 5 your governments that if they continue to refuse to discuss terms of peace with us, they may be respon- . sible for a débdcle in Germany greater than that in Russia. When the military gives way before the allied pressure, nothing can hold the civil population and they will murder and prey upon one another. Quickly save European civilization from such an end.”

And this argument has been made before citizens of the allied powers resident in Switzerland, and made with tears streaming down the faces of the official messengers. The answer has been, “We distrust your tears, and we distrust your terms and your treaties.”

And as to terms, ans two terms have been named by the Germans. They will surrender seized territory, _ they will indemnify, they will pay. All that Germany asks is, first, that the German Government shall not be put in the wrong before her people, and second, that the people shall have access to free raw materials, but even this second term can be discussed. All they really ask is the first, which 1 is in effect, ““Save our face.”

Letter II International Exchange

September, Somewhere in Switzerland War finance burns at your finger-tips when you come to pay your hotel bill here, and find that no less than 1000 French francs are required to pay 750 francs to the Swiss. Before the war French paper was at least the equal of the Swiss. Under the Latin Union Convention of 1879-85, French, Italian, Belgian, and Greek silver still circulate here on a parity with the Swiss.

You promptly turn your few American bills into Swiss money at full value of five francs to the dollar, and casually ask if gold would bring more. The answer is, “‘We have no use for gold, but if you wish you can turn it into the bank at full value. There is no other demand for it, and trade in it is forbidden.” Y

Then you recollect that nowhere from the shores of America to the Swiss frontier has there been any more rigorous customs inquiry than as to the money you carry out of one country into another. Both sides of every international border will question you as to the gold or money you are taking in or out. And everywhere there will be legal or illegal limitations. © ;

INTERNATIONAL EXCHANGE 7

GOLD ONLY FOR GOVERNMENTS

You may leave France with only two hundred francs of paper money. In America you are allowed to leave the country with only $200.

You can take gold out of the United States only on special license, and you must have Treasury permission for a letter of credit of more than one thousand pounds.

To-day all over the globe gold is moved from one country to another only by governments or government permission.

Compared with food, the gold supplies are doubly precious, for gold is under your paper credit, and your paper credit under all food and all prices.

Fight it as you will, gold is still a weapon superior to either lead or steel, and individuals may not be trusted to handle it. In other words gold sustains all national defense, but sustains it invisibly, for nobody sees it, _ and, indeed, nobody appears individually to want it.

It somehow assists to support the public or patriotic confidence under this dirty paper, the contamination of which you try to dodge everywhere.

DIRTY PAPER

ENGLISH one-pound notes are printed on specially thick, heavy paper of parchment texture, and were evidently meant to go in the washtub, but nobody takes the trouble to wash them. They are greased and creased and sweated. The only satisfaction in handling them is that you can get rid of them quickly, indeed more quickly than ever before.

As you handle the crumpled, blackened, smallchange paper issued by local chambers of commerce in France running down into the centimes, and for Swiss National Bank notes change your crisp English five-pound notes, which may still be had clean, you wonder what the Swiss hundred-frane notes would look like if the green and blue paper colors were removed from beneath the dirt.

You regret your education in the chemistry of microbes and that you ever complained in former days of carrying while in Europe two leather purses, one for gold and one for silver.

The war has not yet been brought home to America. In Europe it distresses your digestion, dirties your hands and pockets, and refuses you a hot bath after travel.

In both France and Switzerland you are told, **Non, non, Monsieur, there is no hot water for baths except Sunday and sometimes Saturday” — and then you realize the possibility of coal being at a premium over gold.

GOLD AND COAL

Bur what about Germany and her gold and coal? Germany is able to balance her gold with the coal she has stolen from Belgium and France. Germany

INTERNATIONAL EXCHANGE 9 has summoned all the gold of the Empire to come into the Reichsbank under her paper and credits, and has put her gold reserve up only from $300,000- 000 to $600,000,000 while the United States has expanded her gold reserve from $1,000,000,000 to $2,000,000,000.

The Swiss can get coal only from Germany, and for it they must pay with both dairy products and chocolate. They must give the same commodities to Austria for beet sugar.

ALLIED NATIONS REGULATE SWISS TRADE

Tue singular feature of this arrangement is that Switzerland has to get the consent of the Allies as to the amount of cheese, beef, etc., she is permitted to send into Germany and Austria.

Thus are the Allied nations regulating trade through Switzerland, but nobody can prevent poor Switzerland paying fifty-five dollars a ton for coal.

Notwithstanding this high price, it is insufficient to sustain the German credit above fifty to fifty-five cents on the dollar, for her paper marks, when they get out of the country. That is their value in Switzerland and in other neutral countries.

Daily and hourly the rates of exchange in international credits are noted at all the Swiss commercial centers. There is speculation in credits and exchanges on the Bourses and put and call markets, but no speculation is permitted in gold. Speculators buy up credits in anticipation of a demand and sell them at an advance. But all the nations keep close watch on neutral countries like Spain, Holland, Scandinavia, and Switzerland, to note, and, if need be, counteract any adverse influences from Germany on their credit.

GERMANY NOT FIGHTING FINANCIALLY

OFFICIALLY and unofficially in banking circles I have received denials that there were sinister German influences at work in the international credit markets.

As there must be more or less speculation in international credits, sentiment has its play and sentiment is affected by the tide of battles. The German drive, begun March 21, had serious effects upon the international exchange of the Allies; the American successes restored it.

But the great influence on these exchanges in raising the credit of all neutral nations and decreasing the credit of all warring nations is to be found in the imperial commercial demands of the warring powers. France and England are buying heavily in Switzerland, and paying high prices for Alpine lumber, useful in trench work. Chocolate is not permitted to cross the frontier. While one of the features in Paris is the populace waiting in long lines at the grocery stores from morning to afternoon or until the chocolate for the day is all gone, you can find the chocolate piled high in the shop windows and at the country fairs in Switzerland.

INTERNATIONAL EXCHANGE 11

The Swiss watch-makers are most deft in making fuses, and all the nations are through Switzerland paying patent royalties on Krupp fuses, according to information I received here which ought to be correct.

SWISS PROSPERITY

SWITZERLAND is a land largely owned and ruled by hotel-keepers. Except at intervals her frontiers are closed by every one of the four nations surrounding her, and for the most part her hotels are closed. But when the Swiss officials figured on her financial position last spring and footed up the cost of her mobilization and balanced it against her international trade, they found that while the war had cost them a billion, trade with the four warring nations surrounding her had returned her two billion. The balance was on the right side of the ledger by one hundred per cent, and the Swiss banks are as never before full of money. Switzerland formerly invested largely in German securities, and outside of Geneva, closely associated with the French, te language of Switzerland is German.

If the United States wishes to rectify its exchange with Switzerland, it should send some of its idle and enterprising young bankers into Switzerland to invite investment in sound American railroad securities.

The New York Central that the English sold us at 112, and cannot now buy back, can be had by the Swiss on the present exchange market at under 60, and it is not often that the Swiss have had the opportunity to get a five per cent American railroad stock netting over eight per cent.

Letter III The Dangers Of Peace

Berne, Switzerland, September GERMANY is beaten, and knows she is beaten, but she still hopes to triumph in the peace terms and to win economically.

If Germany is left with Russia or with Austria and her Mittel-Europa plans, cutting off western Europe, ~she will have won the war and can afford to pay an indemnity of $30,000,000,000 to secure immediate peace and to enter the international race for trade supremacy in the future on both land and sea.

She has been maneuvering for peace every month this year, and had her plans laid skilfully to that end far back of this year. She has her peace envoys in Italy, England, and the United States. They are publishing letters, articles, and books most adroitly phrased to emphasize German values to the world. She knows every German sympathizer in every country and has pigeon-holed and docketed the measure of his power and influence.

AFTER PEACE THE REAL WAR BEGINS

THOUGHTFUL people here recognize that between now and next summer is the most dangerous epoch in the world’s history. The danger is that the war may end too soon. Indeed, it is said here that with the ending of the war, the war begins.

To the German mind there have been a few tactical, diplomatic, and economic mistakes in Germany’s plans, but from the experience of this war these can all be avoided in the next war.

Germany prepared and filled her storehouses for a war of four years. She boasted this at the Hague Peace Conference and knew that the rest of Europe had no preparations to enter a four years’ war. But the great mistake of Germany is now recognized to be the miscalculation concerning the U-boat. The Germans believed they had submarines enough to bring England to starvation and terms of peace before the United States could enter the war.

German statesmen privately declared, “‘If our submarines are as effective as we think they will be, in a war of unlimited frightfulness against British shipping, so far as we are concerned, Columbus need never have discovered America.”

BETWEEN TWO FIRES

SWITZERLAND is in a delicate position. She cannot afford to be outwardly pro-Ally, for her economic life is dependent upon Germany and Austria when her southern and western frontiers are absolutely closed to free commerce and the world.

When a Swiss bank issues a pro-Ally circular, the Germans demand a change in that bank and get it.

THE DANGERS OF PEACE 15

Publicly, the Swiss bankers must proclaim the greatness of Germany. Privately, they will tell you that Germany cannot win; that the preparations of the United States are simply “énorme,” and that the war must end in less than a year with the military decision against the Hun.

STONES FROM THE SWISS

I ASKED a Swiss banker, a personal friend, for the absolute truth as to the sentiment here, and he said frankly, “I can’t give you that letter of introduction, but I will write or telephone and when you see Director you will get all the information you wish. You must remember the position in which Switzerland is now placed. Although the people speak German and cannot speak freely, I will tell you that when the defeat of Germany is well certain, there will not be stones enough in Switzerland for the Swiss to throw at the Germans.”

A MILITARY DICTATORSHIP

But peace must be well secured. I hear reports from Berlin coming up to the best-informed circles in Switzerland that the Kaiser is likely to be set aside. But this will not indicate any change in the Hun plans. Indeed, it is the military party and not any democracy that proposes his abdication and the vesting of all authority in a military dictatorship.

It is the Teuton mind which must be dealt with.

All Germany has become Prussianized through a military system that has taken the universities and all education under its tutelage, and made a new system of human thought and of morals and religion.

A learned professor told me he had nearly gone crazy trying to understand the new German mind that Prussian militarism had produced. He finally solved the problem when from personal contact with their statesmen, philosophers, and teachers, he reversed all sound morality and philosophy. He said to me: “For years I thought Germany was misled by philosophy. I know now that this philosophy has become a religion and it is a religion of the devil. It says, ‘Evil, be thou my good! Power, be thou my God!’ As you study this bedeviled Prussianized mind, you begin to believe in a personal devil, rivaling divine omnipotence. No human mind could conceive or execute the plan in its multifarious detail, which comes forth from Germany to strangle the world and humanity.

EVIL FROM THE LOVE OF EVIL

“You could not conceive, unless you had studied the Germans as I have, that men could love evil for evil’s sake, murder for murder’s sake, steal for the love of stealing, lie for the love of lying, in fact, do all evil things from the lust for evil.

**T know men high in Germany whose delight is the execution of their part in these evil designs upon the

THE DANGERS OF PEACE 17 world. They deliberately love evil and pursue it as an end.”

The problem of how to deal with such a people and produce a lasting peace is greater than the problem of the war itself. Julius Cesar, fifty years before the birth of Christ, spoke of the Germans as “‘that treacherous race which is bred up from the cradle to war and rapine’’ who “practice the base deception which first asks for peace and then openly begins war.”

I have received two answers to the problem of how to deal with this question of peace. One is from the statesmanship of England, and the other from an American statesman in Paris. The first declared to me, “I doubt if there is ever any peace treaty signed at the conclusion of this war. The Germans use a treaty of peace only for purposes of deception. I think President Wilson’s answer will be, ‘You have shown that you cannot be trusted. These are our terms of peace and they demand performances, not promises. You say you are ready to do this, that, and the other. Go ahead, and do them. Your performance is the only peace compact we will have with you.’”

TUTELAGE FOR GERMANY

Tue American statesman in Paris said: “‘ The safety of the world is in an American missionary movement in Germany. We are spending billions in this war. Why not supplement the war expenditure with a few hundred millions for missionary work to reéducate, and, if possible, put the principles of the Christian religion into Germany? The mind of her people is submerged under militarism, paganism, and the worship of power as the supreme good. Germany is a menace to the © world until the world can get a measure of Christianity into her organization and impulses. This is a task that can best be undertaken from the United States.”

The ablest student of the situation in Switzerland says: ‘““‘Why Germany went to war is still a mystery. She would have owned the earth in fifteen years if she had continued her business and social interpenetration of all the other nations. There is only one safety for the world and that is to crush the power of Germany by force, and then put her under restraint and tutelage. To-day every means to the end of power is justified to a German. But if they can’t win with terrorism, they are now ready and trained to win with tears. The only defense is a strong Anglo-Saxon-Latin union, holding Germany in disarmament that the peace of the world may be kept.”

HOW GERMANY LOST IN RUSSIA

Tue blindness of the German Government and people concerning national and international sentiment is something stupendous. They see only the object directly in front of them, and estimate the force necessary to attain it, and then they are surprised when, having attained their object, they find they have really blundered from lack of any far-sightedness.

THE DANGERS OF PEACE 19

Diplomacy is but courtesy, and the people who know nothing of national kindliness ‘go blundering on and criticizing their own leaders for lack of diplomacy.

Had the Germans shown any kindly spirit at Brest- Litovsk, or any ambition to do anything for the Russians, they would have mightily stimulated their peace programme in other countries. But all they gained in their so-called Russian treaties was lost tenfold in the effect upon other nations. The will to war became stronger with the Allies. The peoples and small nations with which the Teutons were associated and whom they hoped to bind closer were simply alarmed that Germany showed herself as brutal in peace as in war.

THE UKRAINE SETTLEMENT

In the settlement with the Ukraine, it was agreed that the surplus wheat of the Ukraine should go to Germany. Finding no surplus wheat, the Germans ‘proceeded to shoot down the farmers, thereby making surplus of all they had. In Roumania, all foreign oil companies were confiscated by the Germans, and it was likewise provided that all surplus wheat should go to Germany. Later it was discovered that a commission in Leipzig was to determine what was surplus and also the price. When the Roumanians complained, the Germans said, “‘ You will not complain when you see the terms we will impose on France and England.”

BULGARIAN METHODS

Nor only are the Hun methods despised among all the nations of the earth, including Austria and Turkey, but clashes within the Teuton-Turk alliance are not infrequent.

Germany several times protested to Bulgaria concerning the shooting of German officers by Bulgarians for invasion of their homes. But the response that came back from the Bulgarians was that the cause of these shootings was entirely with the German officers themselves. And if the attempted invasion of Bulgarian homes by German officers continued, the shootings would continue; for according to Bulgarian law, every home invader forfeited his life, and no exception would be made in the case of German officers.

Although Germany paid King Ferdinand 500,000,- 000 marks to enter the war and supported the Bulgarians to the extent of 50,000,000 marks per month (the subsidy to Turkey was much larger) the Bulgarians have long been dissatisfied and anxious to be free from Teuton dominion.

For many months they have been putting up proposals through Switzerland in the endeavor to get terms from the Allies. |

It is useless to go into these detailed proposals because the United States would not listen to them. The Bulgarians are a Tartar people and in cruelty and treachery they equal the Hun.

THE DANGERS OF PEACE 21

NO DEMOCRACY IN GERMANY

THERE are no indications that the Germans are desirous of any form of self-government. From time immemorial the Hun tribes have demanded leadership and war. Democracy is farthest from their thoughts. The education of the German does not lead him towards democracy. He has been taught to worship organization and war autocracy, and he must serve under that organization or be lost. In Mexico the peon will not work unless he has a boss and the right to be indebted to him.

It is the plastic unassertive mind of the Teuton that makes Prussian military autocracy so dangerous to the world. Here are the increasing masses to be moulded for assault upon their neighbors, and these masses have no desire for moral or spiritual leadership, only for the leadership of force.

THE RUSSIAN MENACE

Ir the peasantry of Russia can be annexed to the peasantry of Germany under Prussian despotism, no man can measure the combined destructive power upon the liberties of the world.

European friends of mine, thoroughly familiar with Russia, declare that millions of people can be enlisted in that country to fight for Germany for provisions, pay, and promises. The Czar, the Kaiser, or whoever is in power, are all alike to them.

STRENGTHENING THE LINE FOR A PEACE BASE

More than a year ago the German General Staff warned the Kaiser that he must shorten the line by retirement to the heights of the Meuse or he would soon have no military reserves. He then declared that reserves were not so important as a contented civil population. Now it is absolutely necessary for the Germans to give up a large section of France, and possibly Belgium, to save man power, and entrench for the winter.