The Two Europes
( Originally Published 1932 )
BUT economic recovery in Europe might come along other lines than these. It is worth while here to examine briefly the thesis very strikingly developed by M. Francis Delaisi in his book Les Deux Europes, to which reference has already been made.
The two Europes M. Delaisi depicts are, as he epigrammatically puts it, " the draught, horse Europe " and " the horse power Europe;: more simply the agricultural and the industrial Europe. There can, of course, be no clear-cut line of division between the two. Every agricultural country supports a certain number of industries; every industrial country maintains a certain amount of agriculture. But the contrast between predominantly agricultural and predominantly industrial regions does broadly represent existing facts in Europe. M. Delaisi goes so far as to define his industrial and agricultural areas. The first covers most of the centre and west of the Continent, lying within a line drawn from Stockholm through Danzig, Cracow, Budapest, Florence, Barcelona, Bilbao, then up to Glasgow (including all France and all England, but not Ireland), and so back. to Stockholm again. This area Europe A, as M. Delaisi calls it has steadily developed itself in the last two or three centuries, while Europe B, mainly the southern and eastern parts of the Continent, stood still. Not only did A develop its industries, it developed such agriculture as was not crowded out by industrial expansion, till the yield per acre in Europe A far exceeded the yield per acre in Europe B. It then proceeded to develop the lands overseas, mainly the lands across the Atlantic.
Here an interesting process went on. At first Europe A sent out colonists—Englishmen, Dutchmen, Germans and others—and having sent them themselves, sent after them, or in some cases before them, two vital necessities—implements and capital. The emigrant settled in Canada or the Argentine or the United States. He arrived often almost penniless, with nothing but the plot of land which his new country gave him for nothing or a nominal rent. But thanks to the enterprise of Europe A a bank founded with European capital was there to lend him, on the security of his land, money to buy the ploughs and the reapers, the boots and the clothes, which the factories of Europe A had manufactured and the ships of Europe A had carried for him across the sea. Railroads and harbours were built with money supplied by European investors. After a while a change occurred in the flow of emigrants.
Fewer came from Europe A and far more from Europe B--Poles and Italians and Rumanians and Balkan Slays. Europe A was then providing money and machinery; Europe B was providing men.
This, of course, is the compression of decades of history into a paragraph, but it indicates sufficiently the trend of the argument. But that is not the end of the story.
In some countries, notably the United States, agricultural machinery, clothing, furniture, soon came to be produced on the spot, and Europe A found its profitable export business in those commodities drying up. Europe B continued to export men, but now that process too is largely curtailed, for the United States and Canada have so far restricted immigration, and limited what they do still permit of it to inhabitants of Europe A, that Europe B has to keep its population at home. It may be replied that there are other outlets in the world, both for surplus population and for surplus capital, than are provided by the northern half of the American continent. That is true enough. There are many, but M. Delaisi, after examining them individually, reaches the conclusion that the world's possibilities are pretty nearly exhausted, and that Europe A will find that the best field for its investments and the best market for its goods lies at its very doors, in the territories representing Europe B.
There is no need to accept his argument at every point. It may well be, for example, that he underrates the ultimate potentiality of the vast Chinese market. But the th general conclusion, that it would abundantly pay Europe A to devote itself to exploiting Europe B, compels consideration in any serious examination of the future of Europe.
To explore the possibilities of this conception fully would involve a more detailed study of conditions in eastern Europe than is possible here. Such a study is the more necessary in view of the changes in the character of agriculture in most eastern Euro countries since the war. In Czechoslovakia, in Rumania, in parts of Poland, in Jugoslavia, great estates have been broken up and the land given in small parcels to the peasant. One competent authority has estimated that as a consequence 100 million peasants have become owners of their land. The change may have valuable social results but it does not improve the yield of the soil. Quite the contrary, and for obvious reasons. In the case of cereals large-scale farming is far more escient than cultivation in small holdings, and quite apart from that the new peasant-proprietor too often found himself with simply patch of land to call his own, and possibly-some sort of hovel to live in, but no stock, no draught animals, no ploughs, no tractors, nothing to spend on repairs or development, no spare money for the ordinary daily necessities of life. Russia has aims of its own and methods of its own, but at any rate cultivation is taken seriously in that country, and what has been happening there is instructive. The estates were broken up, millions of peasant holdings were created, the total yield of the land dropped catastroph ically as a consequence, and now, through the creation of the collective farms and the State farms, the whole process has been reversed, with results that so far as yield goes are relatively satisfactory. The economic consequences of the change cannot be assessed M. Dunk Heineman in a preface to Les Dezx Europes.
without a good deal more information than is available at present as to costs and returns, and as things stand in Russia today neither the one nor the other is computed on a normal basis. As to the conditions of the workers there is some conflict of evidence, but they are pretty certainly better than those of peasant left to fend for themselves and make what they can of their new independence.
The break-up of the great estates in Russia, in other words, resulted in an individualism carried much too far for efficiency, and corrected subsequently with more or less success by a forced return to farming on the original scale. And what is true of Russia is true of practically the whole of Europe B. The peasant, lacking enough capital to enable him even to struggle miserably on from harvest to harvest, has fallen by the hundred thousand into the moneylender's hands. His farm, such as it is, is mortgaged ; his harvest even before it is sown has such charges on it that the margin remaining represents barely sufficient pittance to keep lite together, and the rates of interest charged run (so, at least, M. Briand declared at a meeting of the European Commission at Geneva) to anything up to 25 per cent. and sometimes more.
Something, it seems obvious, can be done for Europe as a whole if something can be done for the peasant in the east. Even if Russia is left out of account (and there is no reason why it should be permanently) the peasants of Finland and the Baltic States, Poland and Rumania and Jugoslavia and Hungary and the Balkans number not less than seventy or eighty millions, That represents a vast potential market for the products of the industrial countries--if only the peasants can somehow be endowed with purchasing-power. It is clear enough how they would use it if they had it. They would first of all perhaps improve their stock, they would spend something on fencing their land, they would replace their often primitive tools by something modern and serviceable, they would form small co-operative groups for the purchase of tractors and threshers, and other pieces of mechanism too expensive for the individual to buy. Then their personal needs would begin to be satisfied.
They themselves and their families would get better clothes and better boots, they would improve their usually miserable cottages, they might even invest in little luxuries like wireless sets. All this would mean in bulk heavy orders for industrial Europe and a marked access of prosperity there.
But all of it is dependent on one preliminary condition. The eastern Europe peasant must somehow acquire power to buy. He can only do that in the first instance by acquiring the power to borrow, not at the ruinous rates charged by the moneylender but at reasonable interest, perhaps 7 per cent., which he can meet regularly, paying off the capital gradually at the same time. That is perfectly possible, so possible that plans on these lines will almost certainly be carried though for the moment they are hanging fire. Europe, indeed, in a panic of depres sion, is suffering from a shortsightedness that blinds it to its own obvious interests. In 1930 plans for an International Agricultural Mortgage Credit Company were framed at Geneva. Its purpose was to raise a fund out of which agricultural institutes in each country could lend to peasants on the security of first mortgages on their farms. Every one praised the scheme. The contributions needed from governments--only in the form of temporary guarantees—were relatively small (Great Britain would have been called on for £120,000, and the countries that would benefit spend £15,000,000 per annum on British goods 1), and the value of the loan system to agrarian Europe great. Some twenty nations immediately signed the convention bringing the mortgage company into being. It was hoped that the company would be actually at work by the autumn of 1931. Yet by December of that year only one State, Greece, had followed up its signature by ratification. But the idea embodied in the Geneva scheme is too sound to be dropped, and it can hardly be doubted that in one form or another it will soon be carried into effect.
Go back now for a moment to the conception of a predominantly agricultural Europe as contrasted with a predominantly industrial Europe, remembering, of course, all the time that there can be really no clear-cut line of division between the two. What may broadly be called the agricultural area of the Continent has double the area of the industrial, but its yield per acre is only half that of the agricultural parts of industrial Europe.
There are more reasons than one for that, but the main reason is the access of the western farmer to capital that enables him to equip himself with the latest and best Figures given by the Foreign Secretary in the House of Commons, June 17, 1931.
The machinery, the proximity of markets, and the encouragement an efficient system of transport gives. The farmer in eastern Europe enjoys none of these advantages to-day, but there is no reason why he should be permanently debarred from them.
Capital is completely international, and given political stability and a prospect of good returns it can as readily he obtained for building railways in Ruthenia or Transylvania as for opening up mines in Bolivia or Manitoba, and farm-loans can be arranged quickly enough once it becomes tolerably certain that interest at a fair rate and repayment within a reasonable period can be counted on.
But the market remains a difficulty. The agrarian countries of eastern Europe need an outlet for their products and the natural purchasers are the consuming countries of western Europe. But those countries have developed the habit of supplying their needs mainly overseas. Most of them are not large importers of cereals--Great Britain being a conspicuous exception—and they get what they want more cheaply from Canada and the United States and the Argentine than they can get it from Hungary or Rumania.
Have they any inducement to depart from the rule of buying in the cheapest market ?
Eastern Europe thinks they have. " Give us a small preference," says eastern Europe to the industrial countries, " on our cereals, so that a steady market is assured us, and you will have put us at last on a firm economic basis. Then we shall become your customers.
We shall buy from you ploughs and binders and reapers, waggons and tractors, machinery for our mills, rolling-stock and rails for new railways, motor-buses, artificial manures, decent boots and clothing that we are too poor to afford today. What we want to sell you represents only 15 per cent. of your normal imports, so that overseas countries would still be sending in 85 per cent. of what they are sending now." It looked recently as if that appeal had made an impression. The agrarian conferences of 1930, at Sinala, at Bucharest and at Warsaw, brought the needs of agricultural Europe before industrial Europe almost for the first time in any definite form, and the projects formulated at Warsaw were laid ore a larger audience at the League Assembly the same year. There they met in some quarters with a sympathetic and in others with a critical reception. France, Germany and Italy were all, as importing countries, ready to do what they reasonably could, but the overseas members of the League, mainly British Dominions like Canada and Australia and South Africa, pointed out not unjustly that while Europe was quite entitled to make what arrangements it chose regarding itself, they could hardly be expected to go so far as to give their blessing to a scheme which would put their own wheat at a disadvantage in competition with eastern European wheat.
That was recognised, but there was no reason why individual consuming countries should not make special arrangements with individual producing countries. Or rather, there was only one reason. That was the existence of commercial treaties containing the most-favoured--nation clause. If Germany, for example, wanted to make special terms, i.e. a reduction of her normal tariff, for wheat from some eastern European country, she would be faced with the difhculty that any country with whom she had a most favoured-nation clause treaty could claim that the reduced duty should apply to her wheat too. Such a claim might mean that the European countries would lose their advantage before it ever came into force.
That, in fact, is exactly what has happened. Germany made agreements giving a preference to Hungary and Rumania, and invited countries which had most-favoured-nation clause treaties with her to waive their rights under those treaties in this particular instance. Most of them did, but two or three, notably the Argentine, declined.
The project consequently failed to mature. Under the agreement with Hungary, Hungarian wheat, up to a limited quantity, was to be admitted into Germany at 75 per cent. of the normal duty, Germany exacting no quid pro quo, but reserving the right to extend the same privilege to other agricultural countries in eastern Europe.
That particular door therefore is temrarily closed, but it need not remain closed or ever. Western Europe has too much interest in finding markets for its wares to allow a potential market a few hundred miles off to go undeveloped. The story of how that same western Europe developed Canada and the United States (a story told admirably by M. Delaisi in Les Deux Europes), lending money for building railroads, but in fact keeping most of the money at home to pay for the rails and the locomotives and the rolling-stock ; lending money to found banks to finance the farmer, who borrowed to pay for tools and machinery made in European factories with European labour ; lending money for ships, built in European shipyards, to carry the products of the new farm-lands back to Europe that story does suggest that western Europe, actuated by no higher motive than self interest, but in fact serving equally, or more than equally, the interests of the eastern half of the continent, might at any rate explore the possibility of developing the soil of Europe as it so successfully and so beneficially developed the soil of America a couple of generations ago.
That raises various problems. There is a good deal of ground to cover between the investor in Paris or London or Amsterdam and the peasant in his wooden hovel on the Polish steppes. Large-scale organisation is needed. The financial side may be simple enough. Approved land-banks or mortgage-institutes can raise capital directly or indirectly from the western financial centres and lend it on reasonable terms and with proper safe-guards to the peasant, who if he has found in the past, as he usually has somehow, the exorbitant interest demanded by the local moneylender, will not default on the more moderate payments due to the land--bank.
But if wheat or other grain-crops are to be grown, as they can and should be, the unit cannot be the individual peasant's holding.
There must be co-operation in planning crops as well as in ploughing and reaping and threshing, and brains as well as the will to co-operate are needed for that. It can be done, but it will not do itself, and since external assistance is likely to work badly the governments of the countries concerned will need to treat agricultural development as a major problem.
But the agricultural development of eastern Europe with the object of creating a market there for western European goods means almost certainly some form of preference for European cereals over American or Australian cereals. That, in fact, is under discussion now, and some of the western countries, such as France and Germany, have approved the principle and attempted to conclude agreements on that basis, only to find themselves, as already mentioned, held up by the most-favoured-nation clauses in their commercial treaties. That difficult can be surmounted if it seems to be worth while to surmount it. But what definite aim is Europe to set before it ? With distances shrinking and transport getting speedier every day it might seem that the only possible economic unit for reasonable beings was the world as a whole, and that attempts to concentrate on the internal trade relations of a single continent were almost as retrograde a step as concentration on the internal trade relations of a single country. But the tariff policies of countries like the United States are a major factor in the problem. If that great country is bent equally on selling her wheat to Europe and on keeping European products out by an almost prohibitive tariff may it not pay Europe better to develop profitable exchanges within her own frontiers, even if her wheat-consuming countries have to give her wheat-producers a small preference and pay a little more for the product than they would for the grain of Minnesota or Manitoba ? It is not a mere question of reciprocity, but of creating a new market.
At present America sells to Europe and has the power but not the will to reciprocate. Eastern Europe wants to sell and has the will to reciprocate but not the power. It may be well worth western Europe's while to give her the power, even at some small sacrifice (in the form of a rise in the cost of bread) to itself.
There the subject must be left, for to follow all its logical conclusions would mean too great a digression. The home grower, excessively protected today in a country like Germany, would object as strongly to imports of European as to imports of overseas grain, and the question of how far to yield to his exigencies would involve important political decisions in each country. Wheat, moreover, is only one among many agricultural products of almost equal importance. There are the other grains, particularly rye and barley, there is meat, particularly pork and bacon, there are potatoes and eggs (Poland claims today to be the greatest egg exporter in the world). If, as result of M. Briand's proposals or from other causes, Europe takes the deliberate decision to foster trade within the continent at some sacrifice of trade outside it, considerable changes, likely on the whole to be changes for the better, will result. Great Britain's attitude towards any such tendency will be difficult to define, for it runs definitely counter to the projects of Imperial Preference, which seem nearer to some form of realisation today than ever before. On the other hand, if new demands are to be created in eastern Europe, Britain can ill afford to lose the opportunity of supplying them, as it may do if a system of European reciprocity is built up and Great Britain decides to stand outside it.
One further aspect of the question may be noted. If Europe is consciously to cater for its needs as a whole the mainly agricultural countries may be allowed to remain mainly agricultural, and in some parts of Europe the ceaseless flow from the country to the towns may be checked. So long as the national particularism rampant in Europe today prevails, each country will endeavour to be as far as possible self-contained, the industrial countries protecting their agriculture and the agricultural artificially fostering uneconomic industries behind tariffs. The continent is abundantly industrialised to-day, and for the further development of industry at the expense of agriculture there is little to be said. But will men in any case stay on the land ? Is the glamour of the town still to exert its compulsion everywhere ? The question is an old one, but the answer may be different today from what it was, for the radio, the wireless, the telephone, the motor-bus, have given life in the village, and even to some extent in the isolated farm, a new content. Their effect on the psychology of the rural population deserves expert investigation.
One final word. Over the whole of this question of the agricultural development of eastern Europe, as over almost every question that can be asked regarding Europe at all, there impends the incalculable factor of Russia—Russia the greatest grain-grower in the continent, Russia bent on industrialising herself till she becomes self-sufficient. Will her program be carried out ? Will Russia so far isolate herself that Europe will end at her western frontier ? Will she cooperate with the rest of the continent in its attempts to hold a balance between industry and agriculture, production and consumption ?
Will she simply stand aloof ? Or will she by cut-throat competition, in the grain-markets particularly, perpetually impede the adjustments the rest of Europe is trying to make ? Those questions can only be asked, as reminders of the uncertainty Russia imports into the situation, If in the end she should choose to co-operate she holds strong bargaining counters in her hands, the strongest being not her wheat but her oil.
But speculations as to Russia's external policy are idle today. The doctrinaire and the empiric are in conflict and the issue is beyond prediction.