Читать книгу Economics and the Public Welfare - Benjamin M. Anderson - Страница 23
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Germany a Hollow Shell at End of War. Germany at the end of the war was economically a hollow shell. Germany’s war economic policy had been extraordinarily efficient in sucking out of the people all their resources and all their vitality to put guns and food into the hands of the soldiers at the front. She had not been invaded, but invaders could hardly have done a more efficient job of denuding her of resources than her own war government. Her government, moreover, had been financially a gambler, counting on winning the war, counting on bolstering the weakness of her internal finances with requisitions on a conquered France, and had overloaded the Reichsbank with government paper. Germany had, at the end of the war, a system of public finance and currency vulnerable in the extreme.
Unrealistic Reparations Demands of Versailles Treaty. To call upon Germany suddenly for great reparations payments in a situation of this sort was natural enough, perhaps inevitable, in the temper of the times, but it was certainly economically unrealistic. Whatever she paid under those conditions could only be at the expense of further economic demoralization, and lessened the ability to make systematic payments in the future. The Treaty of Versailles itself imposed reparations payments of a magnitude which not even an economically powerful Germany could have made. But the payments demanded of Germany in her weakened condition were wholly fantastic.
Heavy Initial Payments in Gold, Railroad Equipment, and Flocks and Herds. Heavy initial payments were made. Part of the gold of the Reichsbank was taken, the German merchant marine was surrendered. Payments were taken in the form of rolling stock of the railroads and flocks and herds—a not unnatural procedure on the part of people who had seen Germany systematically stealing rolling stock of railroads and flocks and herds from France and Belgium while the war was on. And it was not an unnatural procedure to take the merchant marine when the world had seen Germany, in defiance of international law, sinking merchant vessels, even
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neutral merchant vessels, without warning and without giving aid to the helpless seamen to save their lives.
Later Payments Made by Selling Paper Marks. But these things did not do the Allies much good, and they greatly impaired Germany’s ability to make further reparations payments. Increasing demands were made for payments, and increasingly the only resource which Germany could find with which to make the payments was the sale of newly created marks in the speculative foreign exchange markets at whatever price they would bring.
The prewar gold mark had an exchange value of 23.8¢, but when postwar trade in the mark began in the summer of 1919, the mark was offered at 8¢. From then on, progressively, the mark went down.
German Income Tax System Helpless in Inflation—Contrast with France. The pressure of reparations payments did not constitute the only burden on the German mark. The German tax system, for one thing, admirable in a stable economy, was utterly helpless in a period of rapidly increasing currency depreciation. Germany relied primarily on the income tax, in which the taxes of a given year are based on the income of the preceding year. With rapid currency depreciation, prices rose rapidly and government expenditures rose rapidly while revenues based on last year’s income could never catch up. France, as we shall see, with a much less scientific tax system, one in which the primary reliance was indirect taxes and the revenues from fiscal monopolies, had nonetheless a tax system much better adapted to meeting currency depreciation. French indirect taxes and French revenues from fiscal monopolies were based on prices currently prevailing, and as the franc went down and prices rose, these revenues automatically rose concurrently. As we shall later see, this was a very important factor in saving the French franc from the complete collapse that the German mark went through.
Weak and Shifting Governments Feed the People with Paper Marks. Germany, like France, had a succession of weak governments based on uncertain and shifting majorities in the Reichstag. The changes of ministry were less frequent in Germany than in France, but the position of the ministry was usually precarious. Weak democratic governments are very likely to yield in times of stress to popular clamor for increasing expenditures for relief and public works. Germany yielded to this pressure, borrowing paper marks from the Reichsbank for the people, and these marks, sold abroad in the foreign exchange markets, brought in year after year a great import surplus to Germany. The German people were kept alive at the expense of speculators in marks in foreign countries.
The German Inflation. The story of the German inflation has been told many times and it is unnecessary to go into detail with it here.
The government and the people lived on the credit of the Reichsbank while it lasted. The Reichsbank printed banknotes to supply the government with funds with which to employ and feed the prople. The law with
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respect to the banknotes issued was scrupulously observed, and the government never took any notes from the Reichsbank without turning over government bonds or other government securities to the Reichsbank in equal amount. As the notes increased in number and in size—1,000-mark notes replacing 10-mark notes, 1,000,000-mark notes replacing 1,000-mark notes, until finally trillion-mark notes were in common circulation (the trillion-mark note being valued at the end at one gold mark)—the notes continued to bear the legend “Verfaelschung gesetzlich verboten” (“Counterfeiting Forbidden by Law”). From the summer of 1919 to the time of the Dawes Plan in 1924, the history of the quotation for marks in the foreign exchange market in New York City is, briefly, as follows. They started in the summer of 1919 at approximately eight cents each. They reached, at the lowest, sixteen trillion marks to the dollar. They were finally stabilized at four trillion marks to the dollar.
Purchasers of the notes of the Reichsbank finally used them in not a few cases for wallpaper.
Inflation Produces Economic Demoralization. The effect of this unprecedented and incredible depreciation of paper money upon the economic life of a great industrial nation was utterly demoralizing. Thrift of course disappeared. Thrift became folly. Lloyd George told a story, which he placed in Austria, where a similar inflation took place—although a much more moderate one, because the Austrian crown was finally stabilized at only 14,000 to 1. The story was that of two brothers who shared equally in an inheritance. One was a steady, thrifty lad who, remembering the teaching of his father, saved his money, and put it in the bank. The other was a reckless blade who spent all his inheritance for bottles of wine. He drank up the wine and then he sold the empty bottles for more money than his thrifty brother had in the bank.
Speculators Grow Rich. It was a situation in which the business manager, the engineer, the producer had very little chance. Production was demoralized, speculation took its place. The most successful speculation was speculation on borrowed money. With the mark declining rapidly the wise thing to do was to go heavily into debt, purchase any kind of real values—real estate, commodities, foreign exchange—hold them for a time, then sell a small part of the purchases and pay off the debt. Huge concentrations of wealth were accomplished in precisely this way, the alert speculators borrowing money and buying up from their necessitous holders businesses, buildings, commodities, and every kind of real values.
But Are Often Ruined by Zigzag Course of Mark. The fly in the speculator’s ointment came in the fact that the downward movement of the mark was not in a smooth curve but rather a very jagged curve. From time to time there would be convulsive recovery movements in the mark, commodity prices would drop violently, and the thinly margined speculator who had just borrowed a great deal of money would find himself bankrupt. Even Hugo Stinnes, the most notorious and the largest scale
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operator of this kind, who amassed a vast economic empire while the mark was declining, overplayed his hand, borrowed too heavily in the late stages of the depreciation, and was finally obliged to hand over to his creditors the greater part of his accumulation.
Economic Middle Class Wiped Out. The German economic middle class was pretty well wiped out in this process. One of the causes of the political weakness of the German democracy in later years was precisely this wiping out of the economic middle class.
Speculative Building. There was a good deal of feverish construction of a speculative character as the mark declined. Men could speculate in brick and mortar and men could speculate in labor with which to put brick and mortar together. Men engaging in building operations, however, could not plan intelligently to put up buildings that would be serviceable to the German economy, for with the constant violent fluctuation of values and prices there was no foundation for sound calculation.
Working Capital Disappears. Working capital largely disappeared in Germany during the course of this inflation, and the fixed capital which was created in the form of buildings, factories, and the like proved itself very inadequately adapted to the needs of a postwar Germany after the mark was stabilized and the nightmare was over. The standard of life of the people sank steadily.
The Fallacy That Progressive Exchange Depreciation Helps Exports. There was an important body of opinion which held that the depreciation of the German mark would stimulate German exports by giving Germany an advantage in competition in the international markets, and that this would stimulate production for export and make for general prosperity. But the figures all tell a different story. The following table gives representative figures for the years 1919-21 inclusive.
GERMAN FOREIGN TRADE*
| 1,000,000 paper marks | 1,000,000 gold marks** | |||||
| Imports | Exports | Balances | Imports | Exports | Balances | |
| Monthly average, 1913 | . . . . | . . . . | . . . . | 927 | 871 | -56 |
| Monthly average, July 1919-May 1920 | 4,984 | 2,924 | -2,059 | 571 | 256 | -315 |
| Monthly average, May-December 1921 | 9,885 | 8,366 | -1,518 | 373 | 304 | -69 |
* Journal of the American Bankers Association, March 1922.
** Gold marks obtained by multiplying paper mark figures for each month by percentage of parity for that month of German mark in terms of American dollar.
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The theory that exchange depreciation helped exports ran definitely contrary to the facts in all the major countries of postwar continental Europe. And the moment stabilization came to the currencies which were depreciated there was a radical improvement in the relation of exports to imports.
During the postwar years when their exchange rates were falling, French and Italian exports were hampered, not helped. Between 1919 and 1926 they amounted to only 74 percent of imports in the case of France, and 56 percent in the case of Italy. With the benefits of stable currency at work these figures rose for the 1927-31 period to 89 percent and 73 percent respectively. Figures are available in terms of quantities for Belgium and Germany. It appears that Belgian exports increased more than 30 percent in the three years following stabilization of the currency, while German exports increased no less than 160 percent.1
Amount of Reparations Payments to January 1923. The influence of pressure, primarily French pressure, upon Germany for reparations payments during this catastrophic period was very great. It was virtually impossible for Germany to get a breathing spell while the pressure continued, and quite impossible for the German government to get any foreign credits with which to gain time so that she might introduce financial reforms. In early 1923 the German government attempted to float a $50 million “gold loan.” The Reparations Commission, after deliberating, vote that while Germany was free to issue such a loan, she would not be free to pay it back if, at the time of its maturity, she were in default on reparations account. Obviously no foreign lender could be interested in such a loan under such conditions. French insistence upon payment regardless of Germany’s capacity to pay made the German situation pretty hopeless.
This is not, however, to excuse the German financial authorities for their failure to make use of very much more heroic measures.
The extent of the burden of payments by Germany from the Armistice down to January 1923 was very much in dispute at the time. Some German claims were fantastic, among them Rathenau’s estimate that Germany had paid $11 billion. By January 1, 1923, Germany had surrendered in cash, in state properties in the ceded territories, in restitution of Allied property found in Germany, in Allied expenses in Germany, and in sequestrated German property in foreign lands, a sum estimated by the New York Times on April 15, 1923, at $3.85 billion.
German credits on reparations account as set forth by the Reparations Commission at the same time were very much smaller than these figures indicated. The significant point in connection with these figures, however,
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is not to be found in the benefit that the Allies got from them, which was comparatively small, but in the costs which they imposed on Germany.
France Moves into the Ruhr, January 11, 1923. With the German economic situation virtually hopeless, and with the German government clearly in default on reparations payments, the French government on January 11, 1923, exercised its undoubtedly legal rights under the treaty and moved into the German industrial Ruhr with an army of occupation to seize “productive guarantees” as a means of compelling German compliance with the impossible treaty requirements for reparations payments. France did this against the advice of her former Allies in the war, and the effect upon world opinion was very bad. Germany was further demoralized—France was in no way helped.
