The Day After Russia Attacks
What War in Ukraine Would Look Like—and How America Should Respond
THE International Economic Conference which was held at Geneva last spring proved significant in various ways -- in the number of countries represented, the relative harmony of the proceedings, the variety of the problems which came under discussion, and the close approach to unanimity which marked the acceptance of the final resolutions. The deliberations proved that on some questions of economic policy there exists a fair consensus of world opinion; but the proceedings also demonstrated that there are other economic problems, some of great importance, which could not be placed on the agenda with any prospect of agreement among the various delegations. Hence the recommendations of the conference are silent on some matters of great and widespread public interest. They do not make a thrilling newspaper story, but their importance is considerable none the less.
It may be useful, therefore, to set forth briefly the chain of events which led to the calling of this meeting, the chief problems which it considered, the impressions gained by the American delegates there, the American attitude toward possible solutions, and, in general, what may result from the work of the conference if its recommendations are followed.
This conference, like so many others that have been held during the past nine years, grew out of the dislocations caused by the war. The great struggle threw out of gear much of the mechanism which facilitates international trade. And the decisions of the Peace Conference added to the difficulties, for the moment at least, by creating new states and new international boundaries. From the war and the peace, between them, there resulted a variety of obstacles -- instability of currencies, an interruption of the usual flow of international credits, diminished production, and greater difficulties of transportation across the various frontiers. This, in turn, brought loss of markets, unemployment, impaired purchasing power on the part of individuals and governments, all culminating in reduced standards of living among the people. The governments of the various countries made haste to meet this situation by various alleviating devices, but in most cases these merely served to place additional handicaps upon the natural flow of commerce and credit.
This condition was one of the first things to which the new-born League of Nations turned its attention, for statesmen recognized that the maintenance of world peace must depend in some measure upon the amelioration of prevailing economic ills. Hence the Brussels Conference was called in 1920. It dealt mainly with the problem of monetary stabilization, acting on the proper belief that fluctuations in currency were in considerable measure responsible for the sudden erection of high tariff walls and for the discriminating practices to which countries were resorting in order to safeguard their own producers against outside competition. This conference agreed upon fundamental formulæ for the stabilization of currencies, and during the past seven years these formulæ have been generally accepted throughout the civilized world. Today, all the important commercial countries, with two exceptions, may be said to have stabilized their currencies on a gold basis -- not by law in all cases, but at any rate in fact.
In 1923 came the next step. The complete devaluation of the old German currency resulted in the Dawes Plan for the rehabilitation of German economy, the payment of reparations in the form of annuities, and the transfer of these payments without serious disturbance to the mechanism of international credit. The Locarno Conference followed soon after, with agreements and understandings which tended greatly to clarify the whole European political situation and to eliminate, in some degree, the poison of hatred from the minds of various peoples.
The work of the Brussels Conference was general; that of the Dawes Committee on Reparations was special; while that of the Locarno Conference was once more general in its scope. But even after all three of them had done their work, many real and difficult economic problems remained untouched, and the dominant minds in the League of Nations felt that a plenary international conference for the consideration and possible elimination of these difficulties ought to be held at the first opportune moment.
The time chosen for the Geneva Economic Conference proved to be opportune and the method of constituting it, as well as the work of preparing material for its consideration, turned out to be both wise and effective. The League began by selecting a preparatory committee composed of members from the most important commercial countries. This committee not only shaped the agenda for the conference, but arranged for the compilation of data and documents on the various items. These publications were prepared by men of high reputation and ability in their respective fields. The members of the conference itself were officially named by the governments of the countries represented, but the individual delegates did not speak with official authority. They were free to put forth their own personal ideas, and this resulted in a sounder and saner approach. Members of the delegation from the United States were impressed with the character, ability, and experience of the men from other countries. They came from every quarter, represented every angle of economic thought, and did not hesitate to voice their opinions without reserve. The preparatory work gave the debate both direction and definiteness, while the arrangements made by the Secretariat of the League for facilitating the work were very effective.
The members of the American delegation, with the greater number of their advisers, were able to have a series of meetings before the conference opened and to reach an accord on the various questions on the agenda. This was done without having recourse to any compromises in the convictions or principles of any individual member. From the very outset of the conference, then, the American group was solid on every important question that came up.
In a general way, the American representatives took the position that while they believed the people of the United States to be much interested in the work of the conference and in its outcome, they had no desire to impose upon Europe the economic ideals, ideas, or practices of America. Our participation in the discussions was not based upon any profound knowledge of European conditions or any exceptional experience in economic diplomacy, but was dictated solely by a desire to show good will and by a hope to assist, so far as possible, the consideration of the various problems in a broad and objective spirit. To this end we were glad to explain the economic organization and methods used in the United States whenever we were asked to do so, but not with any implication that these were of necessity applicable to European conditions. This attitude the American delegation maintained throughout.
The agenda of the conference omitted some very important problems. It did not include any mention of reparations, international debts, restrictions on immigration, or tariff levels (except as an incident to the general discussion of tariff barriers). Doubtless it was felt that the question of reparations payments under the Dawes Plan had not reached a point where the question could wisely be brought up as affecting the general economic situation. Nor did the question of international debts seem to be an appropriate one for this conference to discuss, particularly in view of the fact that the actual payments on international debt accounts, except possibly in the case of Great Britain, are not yet sufficient in amount to be a factor of much economic importance. As for questions affecting the international movement of populations, it was clear that a large conference, organized as this one was, could not discuss such problems in any profitable way.
The work of the conference fell into three main divisions -- industry, commerce, and agriculture. The gathering divided itself into three committees on this basis. The industrial committee limited its work to "rationalization" and "cartelization;" the principal work of the commercial committee related to tariff barriers; while the agricultural committee dealt with a variety of matters in its field.
The American delegates soon reached the conclusion that the agenda and the accompanying documents seemed to portray conditions of economic distress which, by the time the conference met, no longer obtained in all lines or in all European countries. In fact it was our impression that a continuous, though not a uniform, improvement had been going on throughout Europe, with the possible exception of Russia, ever since the Brussels Conference of 1920. And it was to these European conditions and problems that most of the discussions related. The economic interdependence of European countries was the central theme, although it was recognized that alterations in the European situation would have repercussions outside the continent and that the resolutions adopted by the conference would have, in the main, possibilities of world-wide application.
For the most part, the conference attacked each problem "as is," without much discussion of what had gone before. It recognized that the factors affecting international economic life are never absolute or static, but are ever-changing in character and importance. Nevertheless, the age-old discussion of free trade versus protection and of the socialization of national resources were injected into the proceedings. These discussions served their purpose, perhaps, in developing the fact that the rationalization of tariff schedules is a problem of more importance than the limiting of tariff levels, and that the socialization of resources is a problem of domestic rather than of international implications.
The members of the American delegation believe that the discussions at the conference may be of as great and lasting benefit as the resolutions, even though the latter incorporated definite formulas which, if followed, would undoubtedly ameliorate some of the economic troubles existing in Europe. The various European delegations seemed to feel that the prosperity of the United States, which they assumed to be both nation-wide and marvellous, is due to some economic alchemy that Americans have discovered and are utilizing but which has not yet been adopted by the rest of the world. We were asked to enlighten the conference as to the true reasons for this phenomenon. In so doing, however, the members of the American delegation took occasion to point out that not all lines of production are enjoying "extraordinary" prosperity in the United States -- that several important branches of agriculture and some lines of manufacturing and mining have not been on a very prosperous basis for a considerable time. Attention was also drawn to the fact that the purchasing power of the individual citizen is unusually large in the United States and that this has been an important factor in the situation. This buying power, as we pointed out, has also contributed to the economic improvement in Europe and in the world generally, through purchases for the American market which are unusual both in amount and in character.
In the work of the committee on industry, the American delegation and its advisers were able to render assistance by indicating the advance made by American industries in reducing the number of types and classes of manufactured products. They explained, furthermore, that trade practices and methods are no longer generally kept secret in the United States, but through the trade journals, the Department of Commerce, and the chambers of commerce, have for the most part become available to all. Emphasis was placed on the fact that the prevailing American practice is to seek lower costs of production, not by wage reductions but by improved management, by the substitution of machinery for manual labor, and by the elimination of waste. It was interesting to observe that the representatives of the workers at the conference seemed to feel that substitution of machinery and elimination of waste must inevitably increase unemployment. In the end, a formula was adopted, based generally on American industrial practice, and this was done without any urging on the part of the American group.
As respects cartelization, the American delegation assumed a negative attitude, particularly as respects international cartelization, citing our own experience with the pooling agreements and arguments of a generation ago. We pointed out that adverse legislation had ensued, with a change in the attitude of both operators and the public, and expressed a fear that if international pooling agreements were based upon the actual control of physical property, there would be serious danger of monopoly with resulting exploitation of both the worker and the public. In European countries there would be additional difficulties and dangers, owing to the practice of governmental participation in certain lines of production. Obviously an international cartelization covering these branches of production would accentuate international political difficulties and misunderstandings, for there would be pressure through diplomatic channels to secure the advantage of cartels in which each government had a pecuniary interest. The American delegates took the ground that while continued operation on an international scale might have merits in certain lines of production, such operations were always fraught with danger, and we declined to vote on the cartel resolution, although this resolution embodied various safeguards which grew out of American suggestions as to the possibilities of harm.
In the committee on commerce, the discussion of trade barriers brought out the fact that far more important than the general level of customs duties was the frequent and abrupt changing of rates, the lack of continuity in tariff policies, the widely different standards of classification and nomenclature, and the practice of discrimination. For this reason the committee made no specific recommendation as to tariff levels, contenting itself with the general declaration that "the time has come to put an end to the raising of levels in tariffs and to move in the opposite direction." But the conference, by resolution, approved the principle of "equality of treatment" and condemned the practice of artificially limiting the export of raw materials. It also suggested the simplification of customs formalities, the use of standard nomenclature, and various other technical improvements in tariff procedure.
In the agricultural committee the deliberations were concerned with the use of better farming and marketing methods, the improvement of credit institutions, and the amplification of credits to agriculturists on reasonable terms. The conference adopted resolutions in support of coöperative marketing and in favor of enlarged agricultural credits in countries where these are still inadequate. It also urged the collection of comparable statistics, on a world-wide basis, with reference to the production, movement, and consumption of agricultural products.
These, in summary, are the outstanding problems with which the conference, through its three main committees, undertook to deal. An interesting sidelight was thrown upon them by the participation of the Soviet Russian delegates, who endeavored to instruct the conference, and through it, the world, in the merits of their own communist economic system. In the end the Soviet delegates supported some important provisions in the resolutions of the conference and on the whole they were not a disturbing factor in its work.
It is not easy, of course, to estimate the extent to which the frequent explanations of American methods or the setting forth of their own ideas by the American delegates influenced the work of the conference, but a study of the resolutions will show that they recommend the adoption of various economic practices which have become generally accepted in the United States, and also of policies which are now being urged by our own Department of State in the making of commercial treaties. This was because the conference came to the conclusion that such practices and policies were sound and applicable; it was not in any sense the prompting of the American delegates.
There was a general feeling that through some agency the recommendations of the conference ought to be followed up after they had gone to the various countries concerned. Proposals were made for expanding the Economic Committee of the League of Nations so that it might serve this purpose, or for creating a new League committee. Other agencies were also suggested. In the end it was agreed that the League's existing economic organization could do the work without much expense and that another conference might well be called in due course. This conference, it was felt, should be somewhat similar in composition to the one held last May. Its function should be to receive reports of progress and to modify, amplify, or refine the recommendations already made.
Naturally the American delegates did not feel justified in urging that the follow-up work should be done by one of the League's regular channels, or that another conference be held at the League's initiative. They did feel, however, that the recommendations should be followed up, and so expressed themselves. Meanwhile, it may be mentioned that the Belgian Parliament and the German Reichstag have taken the recommendations under consideration and have acted upon certain phases of them.
Having thus summarized the work of the conference, there are some questions which can readily be answered. To what extent were American solutions of European economic problems accepted? The answer is that no American solutions were offered. American economic practices were explained whenever asked for, and the recommendations of the conference show that these explanations made some impression. What problems were left unsolved? Many of them. The agenda of the conference was significant not merely for what it contained but for what it omitted -- as has been indicated in the opening pages of this article. At the present juncture such omissions are inevitable. Another conference, when and if it is called, may find this situation different, but in any event it would find plenty of work on the old agenda, all the problems on which will undoubtedly have entered into new phases by that time.