Part III: The Rationing System and the American Embargo (cont'd.)
Chapter 27: General Remarks upon the Rationing System During 1916
It will be evident, from this long survey, that, although the operation of rationing countries bordering on Germany involved the Foreign Office in long and delicate negotiations with every neutral government in Europe, those negotiations were not undertaken because neutrals obstructed the rationing system, but rather because they accepted it so easily. It was not Swiss resistance to the system, but the German dislike of Swiss compliance, which forced us to conduct such intricate negotiations at Berne and in London; and it was not Norwegian, but German, dislike of our fish and copper agreements, which compelled us to deal so severely with the Norwegian people. The long resistance of the Swedish government was occasioned by a hazard of domestic politics; and their final acceptance of the system is, in itself, proof that there was, in neutral Europe, a movement towards acquiescence, which was too strong to be resisted. This ready accepting of the system is the more striking when it is examined in detail. It may be said, in a general way, that the system was working at great strength during the first quarter of the year, and at full strength thereafter; for it was only after the blockade ministry was in full operation, that embargoes, detentions on statistical evidence, letters of assurance, and the rest were being operated in harmony. These severities were obviously no deterrent; for, during the first half of the year, six supplementary rationing agreements were signed; during the second half, and after the system had been in full operation for two months, the Swedish government abandoned their resistance and opened negotiations.
The peculiarity of the system is, therefore, that it was almost popular, and this indeed is a peculiarity; for although it is easily understood why neutral traders thought the rationing system attractive, when it was still a project - as such it seemed to promise the order and regularity for which they were then hoping - it is not so easy to understand why they continued to adhere to it, after it was in operation. If the records kept by the contraband committee were alone consulted, it could be concluded that the rationing system gave neutral merchants no alleviation; for, during the year 1916, detentions were ordered on the same pretexts as had been thought to justify them during the previous year. Indeed, in some respects, the uncertainties of the shipping directors were even greater: an increasing number of cargoes were detained on statistical evidence; and a great number of ships were held, because the guarantees given by the associations were deemed insufficient. Moreover, when an inspection is made of the detentions and embargoes by which the system was actually operated, it really seems surprising that so many corporations, associations, and governments should have subjected themselves voluntarily to what seems, outwardly, a harsh and arbitrary commercial tyranny. The explanation is that this tabular list of severities gives a wrong impression; for, if the matter is more closely inspected, it is seen that the rationing system fulfilled its promises far better than would be imagined, in that, even when it was being operated with the greatest rigour, all the major industries of the rationed country were receiving a regular supply of goods. Let the case of Denmark serve as an example. The attached table shows what classes of goods were regularly delivered, and what classes of goods were arbitrarily detained. The implications of this are not doubtful and are: that only the minor, and exceptional, trades were adversely affected by the arbitrary detentions; that the major industries may have had more or less than they required; but that, inasmuch as a supply of cereals, foodstuffs, textiles, metals and propellants was guaranteed by agreement, every large industry in the country  was free to accept and to fulfil contracts. There is, indeed, good proof that no substantial injustice was ever done to the populations of the rationed countries; the proof being that an abnormal state of affairs automatically creates its own literature, and that there is no literature of the rationing system in neutral Europe. No Scandinavian housewife has ever published a diary of her life, during those times, nor has any Scandinavian shipowner, or commercial director, written a word about his; from which it can safely be inferred that there was nothing to write about. Scholars endowed by the Carnegie trust have made the most minute researches into the economic movements of the times, but their researches do not constitute that spontaneous comment upon an abnormal state of affairs, which is its record in history.1
Again, it can be said, that, just as the justice or injustice of the system cannot be estimated by juxtaposing it to abstract conceptions of law and policy, so, the particular parts of the system can as little be judged by the same principles. Ostensibly, nothing could have been more contemptuous of all that had hitherto been called the rights of neutral commerce than the navicerting system; for what right could we possibly claim to issue commercial passports to neutral cargoes, starting from neutral ports, and going to neutral destinations; and by what right could we refuse those passports, without reason given? Actually, the navicerting system was a blessing to the neutral populations of Europe. When fully established, the system gave shipping directors a strong liking for cargoes of commodities that had been rationed by agreement, and so ensured preferential treatment for them. This was a great advantage to neutral countries, for the following reason. During the year 1916, commercial tonnage was beginning to fail: the following will show by how much, and on what routes. Supposing, therefore, that shippers had been competing to secure cargo space in this failing tonnage, and that no preference had been given to cereals, textiles, and the like, many cargoes of essential goods would  certainly have been held back, and delayed in delivery, for the competition would have been keen, and the movement of grains, oils, and textiles towards Europe would have been far more irregular and uncertain than it actually was. In other words, navicerting, as operated, protected neutral Europe against economic confusion.
Finally, if a further search is made into the particular effects of the system, it will be apparent that it caused most confusion to ordinary traders and ordinary citizens in its initial period, and that, when this period was past, individual merchants and traders were less and less inconvenienced. The initial difficulties of complying with the system were truly formidable, more particularly to that ordinary trader in a small way of business, who is representative of a country's business community.2 It must be remembered, however, that nothing has ever been written about the ordinary trader's business, when the rationing system was in full operation; and that, if there had been anything to write about, space would certainly have been given to the subject. Indeed, it is apparent that when these initial difficulties were overcome, the course of ordinary business must have been very much eased, and that the occasional severities of forcible rationing cannot have caused any confusion comparable to the first disturbances. When acquired, business habits soon gain a strong momentum, and, after the ordinary trader had complied with the regulations, which, at first, he found so difficult to comply with, he, and many thousands of others, presumably complied with them as a matter of daily business, and benefited from belonging to a community that was receiving a regular supply of essential goods. Nobody in Europe was better able to appreciate the system than M. Foss; and he urged the Swedes to come into it, not to oblige Great Britain, but for their own advantage; and when M. Wallenberg asked him: Did not the system put the whole of his country's trade into a sort of vassalage, M. Foss answered by no means. This conversation took place after the agreement with the Danish guilds had been in operation for ten whole months.
Finally, as to the effectiveness of the system. It is futile to follow Admiral Consett's method of proving occasional leakages, and of making declamations about them. The inner workings of the system can be understood by examining its particular effects  (as has here been done); but the system, as a whole, can only be judged by trying to discover whether, with the means at our disposal at the end of 1916, any more could have been done to restrict German supplies than was actually being done. With regard to this, statistics that have never been put in question prove that the essential imports of all border neutrals were reduced to the abnormal quantities of the rationing formula: Normal exports minus exports to enemy countries. The quantity was abnormal, because the re-exports thus artificially subtracted were part of the country's ordinary trade, and a part of its economic system. This was the end proposed by the whole operation, and there is no doubt that it was reached; and that, when excesses over this figure were allowed, it was done deliberately, on a guarantee being given that the raw materials would be used to increase trade with Great Britain.3 But, as no particular operation of war can be deemed sufficient for so long as war continues, it was inevitable, that, even while this was being accomplished, enquiries were undertaken to discover whether it would serve any good purpose to impose even greater restraints upon neutral imports. What, then, was the outcome of these enquiries?
In the case of Denmark, the question of greater rigour was twice examined: once, when the regulation of Danish produce was being attempted, and secondly, when the Danish proposals for a new agreement were presented (December, 1916). Denmark was, perhaps, the most helpless of all neutrals, yet the outcome of the enquiry was, that, if severer restrictions were imposed, then, Danish exports to Great Britain would certainly decline at once; and that we could not sacrifice them without grave disadvantage to ourselves. The Danish supplies of butter were half our total supply; Danish exports of bacon were a quarter of our whole imports of bacon; these imports could only be replaced by putting a block of ships on to longer routes, and so making another draft upon our declining tonnage. The ministry of agriculture, who were most competent to decide, were convinced that we should suffer far more from this than Germany. The cases of Norway and Sweden were enquired into for reasons that have already been explained, and it has been shown that the case against exercising severer restraints was far stronger than the case in favour of it. Severe pressure upon Norway would have endangered the French munition factories; while, as for Sweden, we agreed to negotiate an agreement with the Swedish government, because the danger of continuing without one was patent. The case of Holland was also considered at the end of the year. The arrangements for redistributing agricultural produce were not working satisfactorily, and the Netherlands government declined to intervene. As a result, the Foreign Office, who were then contemplating something like a trade war with the Netherlands, asked the Board of Trade to enquire what the probable consequences would be, if every possible restraint were imposed upon Dutch trade: restraints so severe and rigorous, in fact, that Holland would virtually be blockaded, and that commerce between the two countries would cease. The Board of Trade reported, with an abundance of illustrative statistics, that we should lose more than we should gain. Their conclusions may be quoted verbatim:
The Netherlands are or could become practically independent of the British empire in respect of tin, rubber, wool, graphite, nickel, and hides and skins.
There was certainly nothing in all these enquiries to prove that no greater
rigours could have been imposed; indeed the Foreign Office were willing
that they should be imposed, if found profitable. In every case, however,
experts of the highest standing and integrity were satisfied, that, if greater
restraints were imposed upon neutral trade, then, we should receive more
damage than we should inflict upon the enemy. This is the same as a report
that the system was as complete as it could be made.
1For the Carnegie trust publications see Carnegie endowment year book, 1936, pp. 203 et seq. ...back...