As though this were not enough, when the success of Germany on the western front was at its height, Count Terauchi, Prime Minister and arch-plotter in China, came out with a statement published by Mr.

Gregory Mason of the "Outlook" to the effect that it was not unlikely that some understanding, if not alliance, might be effected between j.a.pan, Russia and Germany. And the rumors of such an understanding having been actually arrived at, have since been shown to have had just foundation.

Furthermore, since 1917, according to "Millard's Review" for April, 1920, j.a.pan has lent China about 281,543,762 yen or thereabouts, privately, for political and industrial purposes, for reorganization, railway construction, munitions, ca.n.a.l improvements, flood relief, wireless, forestry, war partic.i.p.ation, and other undertakings.

These things must be recalled in considering the new consortium, as they show what led up to its final consummation. These actions of j.a.pan indicate encroachment upon China to the extent of virtually closing the Open Door. In this regard, the alliance has had a dual effect: while it makes possible for j.a.pan to go as far as Britain would dare go, and even farther, on the other hand it tends to keep j.a.pan in check. Hence, the state of mind of the j.a.panese on the subject of the treaty has been contradictory. They have regarded its renewal and its abrogation with about equal anxiety. From a moral point of view, they dare not stand alone in the world, being the only great autocracy remaining. Conscious of their power and twitching under the restraint which the alliance imposes, yet needing its support, they are trying to make it appear that Great Britain needs it fully as much.

As far as Great Britain goes, the alliance was formed chiefly to guarantee the interests of the empire, but also the Open Door and China's integrity. That is, that j.a.panese Yen and British Sovereigns should have full freedom to go to China to earn a living. Let us see what the various treaties and understandings purport to accomplish.

The Anglo-j.a.panese Alliance a.s.sures "The preservation of the common interests of all Powers in China by insuring the independence and integrity of the Chinese Empire and the principle of equal opportunities for the commerce and industry of all nations in China."

The Root-Takahira Understanding declares: "The Policy of both Governments [j.a.panese and American], uninfluenced by any aggressive tendencies, is directed to the maintenance of the existing _status quo_ in the region above mentioned and to the defense of the principle of equal opportunity for commerce and industry in China." In other words, without an alliance, America has secured from j.a.pan an understanding guaranteeing the integrity of China and the Open Door for her pet, the Dollar. Hence, except for the fact that it made no promises to the effect, "My Ally, right or wrong, but still my ally," this agreement says that the American Dollar has as much right to earn a living in China as the Yen has.

But in the meantime the Yen has been having it all his own way, for the Sovereign and the Franc and the Dollar were very busy doing things in Europe. And in good Oriental fashion the Yen has been breeding, and breeding rapidly. He was going to China, as we have seen, by the million and keeping China's interests and integrity, which all had guaranteed, in a very feverish state, notwithstanding alliances and agreements born and in embryo.

This, at bottom, is what the whole Far Eastern problem is,--all of the governments seeking opportunities in China and mutually binding and barring one another from aggression and concessions. They have all guaranteed China's "integrity," but none, except America, has actually lived up to the agreement, and China's integrity is rapidly ceasing to be an integer.

Now, if that were all there was to it, debate would be childish, but integers, like the atom, are not easily divided without creating something new. The atom becomes an electron; and the integer, when a nation, becomes a source of international conflict. Hence, it is of the utmost importance that China remain an integer. The Anglo-j.a.panese Alliance has failed to maintain China's integrity. The Root-Takahira Agreement seemed to cover the ground well enough, but that it was not sufficient is proved by the later necessity on the part of Mr. Lansing to supplement it by his so-called "understanding" with Viscount Ishii.

However, that the Ishii-Lansing Agreement is loose and inadequate was obvious on the face of it and it was shown to be absurd when the Consortium Agreement was being negotiated. It seems that Secretary-of-State Lansing, realizing that his "agreement" with Ishii was being translated into a Monroe Doctrine of Asia, as it was never intended to be, fostered the new Consortium Agreement in order to throw a ring round the Ishii-Lansing Agreement and define its limitations.

With the very first approach the promoters of the consortium made to j.a.pan, j.a.pan, as we have seen, began eliminating from its scope everything that propinquity permitted, threatening not only the consortium but the various previous agreements. I state these facts not to condemn j.a.pan, but to delve into the psychology of the powers who, at the Peace Conference at Versailles, came to the conclusion that the only solution for the situation in the Far East was a cooperative scheme.

They must be borne in mind in order to understand why j.a.pan withheld from concurring, and finally yielded.

2

America was viewing all this with no little apprehension. Matters in the Far East were extremely precarious at the time she entered the war. It was in order to rea.s.sure j.a.pan and merely as a restatement of issues that the Ishii-Lansing Agreement was made. j.a.pan's propinquity was recognized. But it was also recognized that the Open Door was being walled up. Hence, the American Government, which had withdrawn from the s.e.xtuple Consortium, suggested that a new consortium agreement be made in which the four leading powers take equal part. These powers had been drawn closer together during the war, and that concord was to be taken advantage of before it had a chance to dissipate.

At the time that I wrote the article on "Lending Money to China" for the "World's Work," August, 1920, the whole consortium scheme was shrouded in mystery. Since then the correspondence that took place between the powers has in part been published. The way it developed is worthy of being outlined.

The American bankers had been asked by the Government to enter the proposed consortium. They were not over-enthusiastic about it, for at the time they felt they had enough demand at home and in Europe for such funds as they could command. They realized that at that time (July, 1918) they would be expected to carry, with j.a.pan, both England and France, but they agreed that "such carrying should not diminish the vitality of the membership in the four-Power group." But they did stipulate that "One of the conditions of membership in such a four-Power group should be that there should be a relinquishment by the members of the group either to China or to the group of any options to make loans which they now hold, and all loans to China by any of them should be considered as a four-Power group business."

Lansing replied to the bankers, accepting their stipulations, obviously his main intention in working for the consortium being, as I have said, to encircle the problem with a view to defining its limitations so as to make it impossible for j.a.pan to interpret his agreement with Ishii too broadly.

These communications were transmitted to the British Foreign Office, prompting a reply from Mr. Balfour on August 14, 1918, wherein he inquired whether it was the intention of the American Government to enter the $100,000,000 loan to China for currency reform which was then under consideration and toward which j.a.pan had already made two separate advancements; and whether it was the intention of the United States to confine activities to administrative loans or to include industrial and railway enterprises as well. Lord Reading made inquiry of the State Department and determined that both types of loans had been considered.

It is obvious from these communications that both j.a.pan and Great Britain wished to retain their special interests in regard to the existing railway and industrial loans, and balked at their being pooled with those of the consortium. But England was ready enough from the beginning to forego these. The United States held "that industrial as well as administrative loans should be included in the new arrangement, for the reason that, in practice, the line of demarcation between those various cla.s.ses of loans often is not easy to draw."

Everything went along smoothly until j.a.pan was consulted, and then it was found that while she was willing enough to enter into a consortium for the whole of China, she was emphatically unwilling to have Manchuria and Mongolia included. From the very beginning, the American, British, and French banking-groups and governments most decidedly refused to accede to j.a.pan's demands in this matter, declaring that such a rendering would simply open up the sores of spheres-of-interests and concession-hunting, and completely nullify the purposes and intentions of the consortium. The j.a.panese argument is amusing. When j.a.pan first encroached upon Manchuria and Mongolia, it was because of danger to her safety from Czarist Russia. Now she was face to face with Bolshevist Russia, and she trembled for her safety in these terms:

Furthermore, the recent development of the Russian situation, exercising as it does an unwholesome influence upon the Far East, is a matter of grave concern to j.a.pan; in fact, the conditions in Siberia, which have been developing with such alarming precipitancy of late, are by no means far from giving rise to a most serious situation, which may at any time take a turn threatening the safety of j.a.pan and the peace of the Far East, and ultimately place the entire Eastern Asia at the mercy of the dangerous activities of extremist forces. Having regard to these signals of the imminent character of the situation, the j.a.panese Government all the more keenly feel the need of adopting measures calculated to avert any such danger in the interest of the Far East as well as of j.a.pan.

Now, South Manchuria and Mongolia are the gate by which this direful influence may effect its penetration into j.a.pan and the Far East to the instant menace of their security. The j.a.panese Government are convinced that, having regard to the vital interests which j.a.pan, as distinct from the other Powers, has in the regions of South Manchuria and Mongolia, the British Government will appreciate the circ.u.mstances which compelled the j.a.panese Government to make a special and legitimate reservation indispensable to the existence of the state and its people....

The utter fallacy of this is obvious. The consortium was not a miracle-worker. Its efforts would necessarily extend over a series of years; its princ.i.p.als were as opposed to Bolshevism as j.a.pan was. But there was j.a.pan,--bureaucratic, imperialistic j.a.pan,--shedding tears over the prospect of what might happen to her people from Bolshevism if the consortium were permitted to take a share in the development of Manchuria and Mongolia,--to which she has no right other than that of her might.

No pressure such as could be said to be in the nature of an ultimatum to join the consortium was exerted, of course, but it was obvious that unless j.a.pan withdrew her objections the consortium would not materialize. j.a.pan made an effort to get the other powers to make some written statement or accept her formula securing to her these special rights; but the others were adamant. j.a.pan specified just what she feared,--the construction of other railroads.

The United States replied:

The American Government cannot but acknowledge, however, its grave disappointment that the formula proffered by the j.a.panese Government is in terms so exceedingly ambiguous and in character so irrevocable that it might be held to indicate a continued desire on the part of the j.a.panese Government to exclude the American, British, and French banking groups from partic.i.p.ation in the development, for the benefit of China, of important parts of that republic, a construction which could not be reconciled with the principle of the independence and territorial integrity of China.

It is interesting to note that in all these communications, the j.a.panese Government is constantly referring to its own special interests and dangers, whereas the others repeat and repeat their concern for the integrity of China. It may be, after all, that the j.a.panese Government is the more honest, though America's stand is unchallengeable.

I have dwelt sufficiently, I believe, with the emanations from behind departmental doors. The human elements are much more interesting.

Suffice it to say that j.a.pan held out for a long, long time, and things seemed hopeless. At last, after an understanding with all those concerned outside j.a.pan, Mr. Thomas W. Lamont went to the Far East as spokesman for the other powers, to carry on negotiations with j.a.pan.

Unfortunately--whether by design or not I have no way of telling--an American business mission also went to j.a.pan at that time, upon the invitation of Baron Shibusawa, popularly known as the "Schwab of j.a.pan."

Everybody got these two parties mixed, but I have since been very earnestly a.s.sured that Mr. Frank A. Vanderlip, who headed the business mission, had nothing whatever to do with Mr. Lamont's mission. Be that as it may, it was certain even from the twin-reports that while the business mission was being lavishly entertained, Mr. Lamont was seeing all that he wanted to see, and saying all that he wanted to say. The mission was discussing with Junnosuke Inouye, Governor of the Bank of j.a.pan, and Baron Shibusawa, and others such questions as j.a.panese immigration, the Shantung situation, the invasion of Siberia, and the submarine cables. All that the world at large got as to the decisions arrived at was the fact that views were exchanged in a friendly manner, and some delightfully amusing articles from the pen of Julian Street who was the scribe of the occasion.

In the meantime, Lamont, who seems to be a man for whom a dinner has little attraction, left the impression on the j.a.panese Government that j.a.pan and j.a.pan alone would lose by holding back. When he left j.a.pan, to go to China, the j.a.panese Government was still determined on securing from the powers exemption for Manchuria and Mongolia.

But a series of subsequent events helped j.a.pan to make up her mind.

First and foremost among these was the financial slump in j.a.pan, which was seriously embarra.s.sing. This was followed by financial stringency in Manchuria and the eagerness of the directors of the South Manchurian Railway,--who are at present involved in a far-reaching scandal for a loan which could not be floated in j.a.pan and which was sought in America. Third, as either cause or effect, was the situation in China.

China, on account of j.a.pan's courtship of the Peking militarists and the rape of Shantung, had inst.i.tuted a boycott of j.a.panese goods the bitterness and force of which j.a.pan had learned to respect. These circ.u.mstances alone might have been enough to drive a nation to desperation; but a sensitive nation like j.a.pan would suffer these things a thousand times over in silence. One thing j.a.pan cannot stand, and that is the distrust of the world.

And the Lamont party found from the moment it left Nagasaki for China until the moment it set foot again in Shimonoseki on its return that there was not a white man nor a yellow man who had a good word to say for j.a.pan. j.a.pan was an isolated country socially,--isolated a thousand times more definitely than she is geographically. And the good sense of the j.a.panese has brought them to a realization that that does not pay.

j.a.pan wants the good-will of the world, and she wants it sorely.

When Mr. Lamont arrived in China he did not find the same atmosphere he had found in j.a.pan. The fact that he had been in j.a.pan first added to the suspicions of the Chinese. They had many things to ponder over and be suspicious about. China remembered the processes of westernization which she had had to answer with the Boxer Uprising in 1900. But China has never forgotten the return of the Boxer indemnity by the United States.

In Peking some students threatened to stone the hotel at which Mr.

Lamont stopped. A few came as special representatives of the student body, according to one report, and quizzed Mr. Lamont for two hours.

They left apparently satisfied. Their strong plea was that no loans be made to the Government until peace between North and South was established.

The press of China and the people of China were divided. Some of the j.a.panese, who owned papers in China, sought to alienate the sympathy of the Chinese for America; some tried other tactics. The Chinese militarists in Peking who had tasted of the flesh-pots of Nippon were not over-anxious to put themselves on a diet. Chinese patriots saw in the new consortium a rope of a different fiber. The consortium party found itself double-crossed by obvious agencies.

In a measure this was justified all the way round, for the undertaking was shrouded in secrecy on many points which could not but discredit it in the eyes of many. Perhaps this was unavoidable, but it was none the less natural that China should be wary. In her own sort of way, China was taking inventory. The last loan of $125,000,000 only arrived in China as $104,851,840 after deductions for underwriting had been paid.

And before the sum can be paid off, it will have cost China $235,768,105 by way of interest and commissions. And China knows that only a small part of this tremendous sum had gone into actual constructive work.

Yet China needs a.s.sistance. Railroads are the world's salvation and China's crying need. But for lack of railroads, China would to-day be the most powerful nation on earth, financially and politically. And the fact that her railroads are short while those of other countries are long makes of her a prey to those tentacles of trade against which she is helpless. China has to-day only about 6,500 miles of railroad: she needs 100,000. She who built the rambling wall has still only foot-paths. She needs 100,000 miles of highway. Her ca.n.a.ls, which a thousand years ago kept the country open to trade and partially free from famine, have fallen into disrepair. She needs telegraphs, telephones, wireless. If only the money she borrowed went into such enterprises China would repay the world a thousandfold.

It was therefore natural that China should be suspicious, and likewise natural that she should be willing to be convinced. What young China wanted most was definite and outspoken a.s.surance that her integrity as a nation would not be jeopardized.

The leading Chinese newspapers expressed their grat.i.tude at repeated, a.s.surances of due respect being given to Chinese public opinion and promises to refrain from interfering in her internal affairs. But others, like the China "Times," said:

The British plan to control our railroads jointly, and the American plan is to monopolize our industries jointly, while the j.a.panese plan to monopolize all our railroads, mines, forestry, and industries. Any one of these plans will put our destiny in their hands.

It also declared: "Although it has been reported that j.a.pan will make certain compromises, it is hard to say to what extent these will go."

To this Mr. Lamont said: "It now remains for the j.a.panese Government formally to confirm this desire [of the bankers to join]. If they fail to do so and if j.a.pan remains outside the consortium, I should think that j.a.pan might prove to be the chief loser." He next made it clear to China that she would first have to establish peace if she is to be helped. Aside from the reorganization of the currency, the consortium is going to see to it that a sufficiently safe audit system is established, so that it will be sure that all loan expenditures go as far as they should into the properties themselves. Further, the Chinese Government, in order to save some cash, refused to pay on certain bearer bonds which had come back rather curiously. These were formerly German property bonds on the Hukuan Railway loan which Germany had evidently sold off before the war. They had now come back by way of England and America.

The Chinese Government wanted proof of transference on bearer bonds. Mr.

Lamont pointed out to them that this action would totally discredit them and that the ability to secure further investments would be very slim unless these were redeemed. Mr. Lamont then returned to j.a.pan.

Then it became known that the j.a.panese Government had finally given its consent. In j.a.pan, opinion ranged from imperialistic chauvinism to liberal recognition of the consortium as a way out of the mess. On May 11 things came to a head. Mr. Lamont stated on his return to America that:

The fact that j.a.pan has come into the Consortium for China without reservations should be made clear. The agreement that the j.a.panese banking group with the approval of its government, signed at Tokio, leaves nothing to be desired on this point; but in j.a.pan, while there was perfect readiness by all authorities to announce that an understanding had been reached, there seems to be some reluctance to make public any statement that the j.a.panese Government had withdrawn its reservations as to Manchuria and Mongolia. It is only fair, therefore, that every member of the American banking group and American investors generally should clearly understand the facts.

Still Viscount Uchida, the Foreign Minister, insisted:

While other powers can afford to regard the new Consortium solely as a business matter j.a.pan is otherwise situated, since her vital national interests, such as national defense and economic existence, are apt to be involved in enterprises near her border.