[ 22 ] The Great Transformation
vious source of the obstacles to international organization that had so
unexpectedly emerged. For suddenly neither the economic nor the
political system of the world would function, and the terrible injuries
inflicted on the substance of the race by World War I appeared to offer
an explanation. In reality, the postwar obstacles to peace and stability
derived from the same sources from which the Great War itself had
sprung. The dissolution of the system of world economy which had
been in progress since 1900 was responsible for the political tension
that exploded in 1914; the outcome of the War and the Treaties had
eased that tension superficially by eliminating German competition
while aggravating the causes of tension and thereby vastly increasing
the political and economic impediments to peace.
Politically, the Treaties harbored a fatal contradiction. Unilateral
permanent disarmament of the defeated nations forestalled any recon-
struction of the balance-of-power system, since power is an indispens-
able requisite of such a system. In vain did Geneva look toward the res-
toration of such a system in an enlarged and improved Concert of
Europe called the League of Nations; in vain were facilities for consul-
tation and joint action provided in the Covenant of the League, for the
essential precondition of independent power units was now lacking.
The League could never be really established; neither Article 16 on the
enforcement of Treaties, nor Article 19 on their peaceful revision was
ever implemented. The only viable solution of the burning problem of
peace—the restoration of the balance-of-power system—was thus
completely out of reach; so much so that the true aim of the most con-
structive statesmen of the twenties was not even understood by the
public, which continued to exist in an almost indescribable state of
confusion. Faced by the appalling fact of the disarmament of one
group of nations, while the other group remained armed—a situation
which precluded any constructive step toward the organization of
peace—the emotional attitude prevailed that the League was in some
mysterious way the guarantor of an era of peace which needed only
frequent verbal encouragement to become permanent. In America
there was a widespread idea that if only America had joined the
League, matters would have turned out quite differently. No better
proof than this could be adduced for the lack of understanding of the
organic weaknesses of the so-called postwar system—so-called, be-
cause, if words have a meaning, Europe was now without any political
system whatever. A bare status quo such as this can last only as long as
Conservative Twenties, Revolutionary Thirties [ 23 ]
the physical exhaustion of the parties lasts; no wonder that a return to
the nineteenth-century system appeared as the only way out. In the
meantime the League Council might have at least functioned as a kind
of European directorium, very much as the Concert of Europe did at
its zenith, but for the fatal unanimity rule which set up the obstreper-
ous small state as the arbiter of world peace. The absurd device of the
permanent disarmament of the defeated countries ruled out any con-
structive solution. The only alternative to this disastrous condition of
affairs was the establishment of an international order endowed with
an organized power which would transcend national sovereignty.
Such a course, however, was entirely beyond the horizon of the time.
No country in Europe, not to mention the United States, would have
submitted to such a system.
Economically, the policy of Geneva was much more consistent in
pressing for the restoration of world economy as a second line of
defence for peace. For even a successfully reestablished balance-of-
power system would have worked for peace only if the international
monetary system was restored. In the absence of stable exchanges and
freedom of trade the governments of the various nations, as in the
past, would regard peace as a minor interest, for which they would
strive only as long as it did not interfere with any of their major inter-
ests. First among the statesmen of the time, Woodrow Wilson appears
to have realized the interdependence of peace and trade, not only as a
guarantee of trade, but also of peace. No wonder that the League persis-
tently strove to reconstruct the international currency and credit or-
ganization as the only possible safeguard of peace among sovereign
states, and that the world relied as never before on haute finance, now
represented by J. P. Morgan instead of N. M. Rothschild.
According to the standards of the nineteenth century the first
postwar decade appeared as a revolutionary era; in the light of our
own recent experience it was precisely the opposite. The intent of that
decade was deeply conservative and expressed the almost universal
conviction that only the reestablishment of the pre-1914 system, "this
time on solid foundations," could restore peace and prosperity. In-
deed, it was out of the failure of this effort to return to the past that the
transformation of the thirties sprang. Spectacular though the revolu-
tions and counterrevolutions of the postwar decade were, they repre-
sented either mere mechanical reactions to military defeat or, at most,
a reenacting of the familiar liberal and constitutionalist drama of
[ 24 ] The Great Transformation
Western civilization on the Central and Eastern European scene; it was
only in the thirties that entirely new elements entered the pattern of
Western history.
With the exception of Russia, the Central and Eastern European
upheavals of 1917-20 in spite of their scenario were merely roundabout
ways of recasting the regimes that had succumbed on the battlefields.
When the counterrevolutionary smoke dissolved, the political sys-
tems in Budapest, Vienna, and Berlin were found to be not very dif-
ferent from what they had been before the war. This was true, roughly,
of Finland, the Baltic States, Poland, Austria, Hungary, Bulgaria, and
even Italy and Germany, up to the middle of the twenties. In some
countries a great advance was made in national freedom and land re-
form—achievements which had been common to Western Europe
since 1789. Russia, in this respect, formed no exception. The tendency
of the times was simply to establish (or reestablish) the system com-
monly associated with the ideals of the English, the American, and the
French revolutions. Not only Hindenburg and Wilson, but also Lenin
and Trotsky were, in this broad sense, in the line of Western tradition.
In the early thirties, change set in with abruptness. Its landmarks
were the abandonment of the gold standard by Great Britain; the Five-
Year Plans in Russia; the launching of the New Deal; the National So-
cialist Revolution in Germany; the collapse of the League in favor of
autarchist empires. While at the end of the Great War nineteenth-
century ideals were paramount, and their influence dominated the
following decade, by 1940 every vestige of the international system had
disappeared and, apart from a few enclaves, the nations were living in
an entirely new international setting.
The root cause of the crisis, we submit, was the threatening col-
lapse of the international economic system. It had only haltingly func-
tioned since the turn of the century, and the Great War and the Treat-
ies had wrecked it finally. This became apparent in the twenties when
there was hardly an internal crisis in Europe that did not reach its cli-
max on an issue of foreign economy. Students of politics now grouped
the various countries, not according to continents, but according to
the degree of their adherence to a sound currency. Russia had aston-
ished the world by the destruction of the rouble, the value of which
was reduced to nothing by the simple means of inflation. Germany re-
peated this desperate feat in order to give the lie to the Treaty; the ex-
propriation of the rentier class, which followed in its wake, laid the
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