British and French Premiers. At the adjournment of the conference Mr. Bonar Law read a declaration which stated his view of the failure of the conference as follows:

His Majesty's Government, after giving the most earnest consideration to the French proposals, are definitely of opinion that these proposals, if carried into effect, will not only fail in attaining the desired results, but are likely to have a grave and even disastrous effect upon the economic situation in Europe, and, in these circumstances, they cannot take part in, or accept responsibility for, them."

M. Poincaré read a statement giving his view as follows: The Government of the Republic for their part have examined very attentively and carefully the British proposals, and the longer they have studied them, the more have they felt obliged to recognize that the proposals would involve, together with a considerable reduction of the debt owing to France, the overthrow of the Treaty of Versailles, and that it is impossible for them to accept such a solution."

A week later French and Belgian troops proceeded to the military occupation of the Ruhr Valley, after Germany had been declared by the Reparation Commission to be in voluntary default on timber and coal deliveries. On January 13, 1923, the German Government notified the Reparation Commission that reparation deliveries would be discontinued to the Powers taking part in the Ruhr occupation, which she declared to be in violation of the treaty of peace. Thereupon, the Reparation Commission declared, on January 26, that the German notification of the 13th cancelled the German request of November 14, 1922, for a moratorium, that the schedule of payments of May 5, 1921, came into operation as from January 1, 1923, and that consequently Germany was in general default in the performance of her obligations toward France

7 New York Times, Jan. 15, 1923. p. I.

8 For the subsequent discussions between the Allied Governments concerning the legality of the occupation of the Ruhr, see the editorial by the writer in The American Journal of International Law for October, 1923, Vol. 17. pp. 724-733

and Belgium. Deliveries to the non-occupying Powers were later discontinued pursuant to the German notification of August 11, 1923.10

The occupation of the Ruhr Valley by the armed forces of France and Belgium was followed by measures taken by the German Government to impede this policy and to delay the payment of reparations. The enforcement of these measures became known as "passive resistance." Their execution was financed from Berlin by means of the printing press, and the consequent inflation of the currency brought Germany's economic fabric to the point of utter collapse.11

During the spring of 1923, the German Government submitted several proposals for the settlement of the reparation question. The main points of the last one, contained in the German note of June 7, 1923, were:

1. A proposal to submit to an impartial international tribunal the question of Germany's capacity to pay, coupled with an undertaking to furnish such a body with all possible information and assistance in conducting the investigation and to accept its decision as regards both the amount and the mode of payment.

2. The assignment of the following specific guarantees as securities for payment:

(a) A first mortgage of 10 milliard gold marks, carrying 5% interest, upon the German railway system, which Germany offered to detach from the other state property and transform into a separate fund.

(b) A first mortgage of 10 milliard gold marks, carrying 5% interest, upon the entire business, industry, banking, trade, traffic and agriculture of the country.

(c) As security for the annual payments, the German

Text of the decision of the Reparation Commission in New York Times, Jan. 27, 1923, p. I.

10 Text of note to Reparation Commission, London Times, Aug. 14, 1923, p. 8.

"By the middle of September, 1923, Berlin was supplying the Ruhr population with paper marks amounting to a weekly total of 3.500.000,000,000,000. (See proclamation of President Ebert of Sept. 26, 1923, printed in the New York Times of Sept. 27, 1923, p. 2.)

Government agreed to pledge the customs duties on luxuries, the excise duties on tobacco, beer, wine and sugar, and the receipts of the spirits monopoly.

3. The summoning of a conference between German and Allied representatives in order to work out a detailed scheme." The British Government was of the opinion that these proposals marked a sufficient advance in the German offers of settlement to justify careful consideration, and accordingly suggested that the Allies accept the proposal for an impartial international tribunal so far as it could be carried out within the frame-work of the Treaty of Versailles and with results not inconsistent with the treaty stipulations; that a careful examination of the stabilization of the mark and the balancing of the German budget be an inseparable feature of the inquiry into the guarantees offered by Germany, and that such guarantees must include provision for some form of international control of German financial administration.13

But France and Belgium consistently declined all offers of new proposals from Germany until the passive resistance in the Ruhr had ceased.

After eight months of resistance to the efforts of the occupying forces to collect or induce the payment of reparations, the German Government was brought to the point of economic exhaustion where it found it necessary to relinquish the struggle, and on September 26, 1923, President Ebert called upon the population to give up "passive resistance," and the government subsequently annulled the ordinances and instructions which had been issued to encourage the resistance.14

In due course of events, and after an interchange of diplomatic notes between Great Britain and the United States, on the one hand, and Great Britain and France,

12 For the text of the German proposal of June 7, 1923, see British white paper, Correspondence with the Allied Governments respecting Reparation Payments by Germany, Misc. No. 5 (1923), pp. 2-4.

ia For the identic reply to the German Government proposed by the British Government, see Misc. No. 5, 1923, pp. 22-25.

14 Text of proclamation in New York Times, Sept. 27, 1923, p. 2.

on the other, in which the United States renewed the offer contained in Secretary Hughes' address of December 29, 1922, "to take part in an economic conference in which all the European Allies chiefly concerned in German reparations participate, for the purpose of considering the questions of the capacity of Germany to make reparation payments and an appropriate. financial plan for securing such payments," the German Government informed the Reparation Commission on October 24, 1923, that it was prepared to resume the deliveries provided by the Treaty of Versailles, but that the economic situation in Germany deprived the Government of the possibility of raising the funds requisite to enable it to pay for the deliveries stipulated in the treaty. The Reparation Commission was therefore requested by the German Government to "enter upon an examination of the resources and capacity of Germany in pursuance of Article 234 of the Treaty of Versailles, as well as to let representatives of the German Government have an opportunity of stating with full particulars the actual status of the resources and capacity of Germany."10 The Reparation Commission on November 30, 1923, voted the following decision:

With a view to examining, in conformity with the provisions of Article 234 of the Treaty of Versailles, the resources and also the capacity of payment of Germany, and after having given to the representatives of that country an equitable opportunity of being heard, the Reparation Commission decides to constitute two committees of experts belonging to the Allied and Associated countries. The one is to be charged with the inquiry into the means of balancing the budget and the measures to be taken to stabilize the currency, the other is to consider the means of estimating the value of capital which has escaped from Germany and of bringing about its return.17

16

15 For the British and American exchange of notes of October 13-15, 1923, see World Peace Foundation pamphlet, Vol. VI, No. 5, entitled "ReparationPart V-The Dawes Report," pp. 338-342. See, also, the communiqué of the French Foreign Office, Oct. 28, 1923, in reply to the proposal of the British Government for the creation of a committee of experts, ibid., pp. 342-344. 16 Text of note to Reparation Commission, New York Times, Oct. 25, 1923, p. 2. 17 London Times, Dec. 1, 1923, p. 10.

As members of the first committee, the Reparation Commission appointed Charles G. Dawes, Chairman; and Owen D. Young, of the United States; Robert M. Kindersley and J. C. Stamp, of Great Britain; J. Parmentier and Edgard Allix, of France; Alberto Pirelli and Federico Flora, of Italy; and E. Francqui and Maurice Houtart, of Belgium. The committee was organized on January 14, 1924, and divided into two sub-committees, one on the stabilization of the currency and the other on the balancing of the budget. The former held 81 meetings and the latter 63, while the full committee met 54 times. The English version of the report covers 57 printed pages of a Blue Book, 18 and is accompanied by nine annexes of documents containing details which occupy 60 additional pages.

As members of the second committee the Reparation Commission appointed Reginald McKenna, of Great Britain, Chairman; Henry M. Robinson, of the United States; André Laurent-Atthalin, of France; Mario Alberti, of Italy; and Albert-Edouard Janssen, of Belgium. This committee convened at Paris on January 21, 1924, and held 38 meetings in Paris and Berlin. The report of the committee states: "We have examined numerous witnesses and have availed ourselves of the services of trained economists, technical advisers and expert accountants. We have also studied the published works on the subject by well-known economists, and each member of the committee has furnished reports on particular problems."19

On the first part of its inquiry, the committee "after a close examination of all the factors which make up the total sum, are of opinion that German capital abroad of every kind, including capital of varying degrees of liquidity and capital invested in participations in foreign companies and firms, and after taking into account all credit and debit items was at the end of the year 1923 not less than 5.7 milliard gold marks and not more than 7.8 milliard gold

18 Reports of the Expert Committees appointed by the Reparation Commission. Cmd. 2105. 19 British blue book, Cmd. 2105, p. 126.