Chapter 15
In order to guarantee the payments an inter-allied army--in reality a Franco-Belgian army--occupies the left bank of the Rhine, and is stationed at the bridgeheads. Germany is completely helpless, and has lost all the features of a sovereign State inasmuch as she is subject to "controls" in a way that Turkey never was. In modern history we can find no parallel for this state of things. These are conditions which alter the very bases of civilization and the relations between peoples. Such procedure has been unknown in Europe for centuries. The public has become accustomed in certain countries to consider responsible for the War not the government that wished it or the German people, but the future generations. Thus the indemnities are to be paid--were such conditions possible--in thirty years and for at least twenty years afterwards by people still unborn at the time of the War. This cursing of the guilty people has no parallel in modern history. We must go back to the early ages of humanity to find anything of the kind.
But even the most inhuman policies, such as Germany has never adopted in her victories, although she has been accused of every cruelty, can find at least some justification if they had a useful effect on the country which has wished and accepts responsibility for them. The conqueror has his rights. Julius Caesar killed millions of Germans and retarded perhaps for some centuries the invasion of Rome. But the practices established by the Treaty of Versailles are in effect equally harmful to victors and vanquished, though maybe in unequal measure, and in any case prepare the dissolution of Europe.
I had my share in arranging at San Remo the Spa Conference, in the hope and with the desire of discussing frankly with the Germans what sum they could pay by way of indemnity without upsetting their economy and damaging severely that of the Allies. But the ministerial crisis which took place in June, 1920, prevented me from participating at the Spa Conference; and the profitable action which Great Britain had agreed to initiate in the common interest, ours as well as France's, could not be proceeded with. The old mistakes continued to be repeated, though many attenuations have come about and the truth begins to appear even for those most responsible for past errors.
We shall have to examine with all fair-mindedness if Germany is in a position to pay in whole or in part the indemnity established or rather resulting from the treaty. France especially believes, or has said on several occasions she believes, that Germany can pay without difficulty 350 milliards.
After many stupidities and many exaggerations which have helped considerably to confuse the public, in face of the new difficulties which have arisen, new arrangements for the payment of the indemnity have been established. On May 11, in face of the situation which had arisen, the Allies proposed and Germany accepted a fresh scheme for the payment of the reparations. Germany is constrained to pay every year in cash and in kind the equivalent of 500 million dollars, plus 26 per cent. of the total of her exports.
The rest of the accord refers to the procedure for the issue of bonds guaranteed on the indicated payments, to the constitution of a guarantee committee, and to the date of payment. Probably Germany will have been able to get through the year 1921 without insurmountable difficulties.
At Spa, on April 27, 1921, the proportionate sums assessed for each of the conquering powers were established on a total indemnity notably reduced in comparison with the earlier absurd demands.
But leaving alone the idea of an indemnity of 250, 150, or even 100 milliards of gold marks, it will be well to see in a concrete form what Germany can be made to pay, and whether the useless and elaborate structure of the Reparations Commission which, with its powers of regulating the internal life of Germany for thirty years or more, ought not to be substituted by a simpler formula more in sympathy with civilized notions.
Shortly before the War, according to successive statistics, the private wealth of France did not amount to more than 250 milliards.
The wealth of France, according to successive valuations, was calculated at 208 milliards of francs in 1905 (de Foville), at 214 milliards in 1908 (Turquan), at about 250 milliards according to other authors. The wealth of Belgium, according to official statistics published by the Belgian Ministry of Finance in 1913, amounted to rather less than 30 milliards of francs. The estimate is perhaps a trifle low. But this official figure must not be considered as being a long way from the truth. At certain moments Belgium's demands have surpassed even the total of her national wealth, while the damages have not been more than some milliards.
The value of the land in France was calculated before the War at between 62 and 78 milliards; the value of the buildings, according to _l'Annuaire Statistique de la France_, at 59-1/2 milliards. The territory occupied by the Germans is not more than a tenth of the national territory. Even taking into consideration the loss of industrial buildings it is very difficult to arrive at the figure of 15 milliards. At the same time it is true that the Minister Loucheur declared on February 17, 1919, in the French Chamber that the reconstruction of the devastated regions in France required 75 milliards--that is, very much more than double the private wealth of all the inhabitants of all the occupied regions.
In all the demands for compensation of the various States we have seen not so much a real and precise estimate of the damages as a kind of fixing of credit in the largest measure possible in order that in the successive reductions each State should still have proportionally an advantageous position.
Making his calculation with a generosity which I assert to be excessive (and I assert this as a result of an accurate study of the question, which perhaps I may have occasion to publish), Keynes maintains that the damages for which Germany should be made to pay come to 53 milliards for all losses on land and sea and for the effects of aerial bombardments--53 milliards of francs all told, including the damages of France, Great Britain, Italy, Belgium, Serbia, etc.! I do not believe that the damages reach 40 milliards of gold marks, unless, of course, we calculate in them the pensions and allowances.
But these figures have but small interest, since the demands have been almost entirely purely arbitrary.
What we must see is if Germany can pay, and if, with a regime of restrictions and violence, she can hand over, not the many milliards which have been announced and which have been a deplorable speculation on the ignorance of the public, but a considerable sum, such as is that which many folk still delude themselves it is possible to have.
Germany has already consigned all her transferable wealth; the gold in her banks, her colonies, her commercial fleet, a large and even the best part of her railway material, her submarine cables, her foreign credits, the property of her private citizens in the victorious countries, etc. Everything that could be handed over, even in opposition to the rights of nations as such are known in modern civilized States, Germany has given. She has also hypothecated all her national goods. What can she give now?
Germany can pay in three ways only:
1. Merchandise and food products on account of the indemnity: coal, machines, chemical products, etc.
2. Credits abroad coming from the sale of merchandise. If Germany exports, that is sells eight milliard marks' worth of goods abroad, she pays two milliards to the Reparations Commission.
3. Property of private citizens. Germany can enslave herself, ceding the property of her private citizens to foreign States or citizens to be disposed of as they wish.
Excluding this last form, which would constitute slavery pure and simple, as useless, as impossible, and calculated to parallel the methods in use among barbarous peoples, there only remain the first two methods of payment which we will examine briefly.
It must be remembered that Germany, even before the War, was in difficulties for insufficient avenues of development, given the restricted nature of her territory and the exuberance of her population. Her territory, smaller than that of France and much less fertile, must now nourish a population which stands to that of France as three to two.
If we have had gigantic war losses, Germany, who fought on all the fronts, has had losses certainly not inferior to ours. She too has had, in larger or smaller proportion, her dead and her mutilated. She has known the most atrocious sufferings from hunger. Thus her productive power is much diminished, not only on account of the grave difficulties in which her people find themselves (and the development of tuberculosis is a terrible index), but also for the lowered productive capacity of her working classes.
The statistics published by the Office of Public Health of the Empire (_Reichsgesundheitsamt_) and those given in England by Professor Starling and laid before the British Parliament, leave no doubt in the matter.
Germany has had more than 1,800,000 dead and many more than 4,000,000 of wounded. She has her mass of orphans, widows and invalids. Taken altogether the structure of her people has become much worse.
What constituted the great productive force of the German people was not only its capacity to work, but the industrial organization which she had created with fifty years of effort at home and abroad with many sacrifices. Now Germany has not only lost 8 per cent. of her population, but _25_ per cent. of her territory, from which cereals and potatoes were produced, and 10 to 12 per cent. of her live stock, etc. We have already seen the enormous losses sustained by Germany in coal, iron and potash.
The most intelligent and able working classes, created by the most patient efforts, have been reduced to the state of becoming revolutionary elements. By taking away from Germany at a stroke her mercantile marine, about 60,000 sailors have been thrown on the streets and their skill made useless.
Germany, therefore, impoverished in her agricultural territory, deprived of a good part of her raw materials, with a population weakened in its productive qualities, has lost a good part of her productive capacity because all her organization abroad has been broken, and everything which served as a means of exchange of products, such as her mercantile fleet, has been destroyed. Moreover, Germany encounters everywhere obstacles and diffidence. Impeded from developing herself on the seas, held up to ridicule by the absurd corridor of Danzig, whereby there is a Polish State in German territory, she cannot help seeking life and raw materials in Russia.
In these conditions she must not only nourish her vast population, not only produce sufficient to prevent her from falling into misery, but must also pay an indemnity which fertile fantasies have made a deceived Europe believe should amount even to 350 milliards of gold marks, and which even now is supposed by seemingly reasonable people to be able to surpass easily the sum of a hundred milliards.
Could France or Italy, by any kind of sacrifice, have paid any indemnities after ending the War? Germany has not only to live and make reparation, but to maintain an inter-allied army of occupation and the heavy machinery of the Reparations Commission, and must prepare to pay an indemnity for thirty years. France and Italy have preserved their colonies (Italy's do not amount to much), their mercantile fleets (which have much increased), their foreign organization. Germany, without any of these things, is to find herself able to pay an indemnity which a brazen-faced and ignorant Press deceived the public into believing could amount to twenty or twenty-five milliards a year.
Taking by chance Helferich's book, which valued the annual capitalization at ten milliards, the difference between an annual production of forty-three milliards and a consumption of thirty-three milliards, inexpert persons have said that Germany can pay without difficulty ten milliards, plus a premium on her exports, plus a sufficient quantity of goods and products.
One becomes humiliated when one sees newspapers of serious reputation and politicians deemed not to be unimportant reasoning in language so false.
The estimates of private wealth, about which the economists make experiments, and on which I myself have written much in the past, have a relative value. It may be argued that before the War the total of all private patrimony in Germany surpassed but by little three hundred milliards of marks; and this is a valuation made upon generous criteria.
But when it is said that the annual capitalization of Germany was ten milliards, that is not to say that ten milliards of capital is deposited in the banks ready to be transferred at will. Capitalization means the creation of instruments of production. The national capital increases in proportion as these are increased. Therefore the best way of examining the annual capitalization of a country is to see how many new industries have arisen, to what extent the old ones have been improved, what improvements have been introduced into agriculture, what new investments have been made, etc.
If the capitalization of Germany before the War was scarcely ten milliards of marks, it was too small for an Empire of some 67,000,000 persons. I believe that in reality it was larger. But even if it came to fifteen milliards, it represented a very small figure.
The population in the progressive countries augments every year. In Germany, before the War, in the period 1908-1913, the population increased on an average by 843,000 persons a year, the difference between the people born alive and the dead. In other words, the annual increase of the population per annum was at the rate of 13.0 per thousand.
As in certain districts of Italy the peasants plant a row of trees on the birth of every son, so among nations it is necessary to increase the national wealth at least in proportion to the newly arrived. Supposing that the private wealth of the German citizens was from 300 to 350 milliards of marks (an exaggeration, doubtless), it would mean that the wealth increased each year by a thirteenth part or rather more. The difference between the increase in population and the increase in wealth constituted the effective increase in wealth, but always in a form not capable of being immediately handled. To plant trees, build workshops, utilize water-power: all this stands for the output of so much force. One may undertake such works or not, but in any case the result cannot immediately be given to the enemy.
This is so obvious as to be banal.
To seek to propagate the idea that Germany can give that which constitutes her annual capitalization either wholly or in great part is an example of extreme ignorance of economic facts.
It is positively painful to listen to certain types of argument.
A French Minister has said that the success of the war loans for 151 milliards in Germany, and the increase of bank deposits for a sum of 28 milliards, coinciding with an increase of capital of 45 milliards in limited companies, demonstrate that Germany has saved at least 180 milliards in four years. Leaving aside the exactness of these figures, it is really sad to observe reasoning of this type. How can the public have an idea of the reality?
Let us apply the same reasoning to France. We must say that inasmuch as France before the War had a public debt of 32 milliards, and now has a debt of 265 milliards, without calculating what she owes to Great Britain and the United States, France, by reason of the War, has immensely enriched herself, since, leaving aside the debt contracted abroad and the previous debt, she has saved during the War 200 milliards, quite apart from the increase in bank deposits and the increase in capital of limited companies. The War has therefore immensely enriched her. In reality we are face to face with one of the phenomena of the intoxication brought about by paper money, by means of which it has been possible at certain times for the public to believe that the War had increased wealth. Other features of this phenomenon we have in the wretched example of the capitalist classes, after which it was not unnatural that the people should give way to a great increase in consumption, should demand high wages and offer little work in return at the very time when it was most necessary to work more and consume less. There is small cause for wonder that certain erroneous ideas are diffused among the public when they have their being in those very sophisms according to which the indemnity to be paid by the beaten enemy will pay all the debts and losses of the conquering nations.
We are told that Germany, being responsible for the War, must impose on herself a regime of restrictions and organize herself as an exporting nation for the payment of the reparation debts.
Here again the question can be considered in two ways, according as it is proposed to allow Germany a free commerce or to impose on her a series of forced cessions of goods in payment of the reparations. Both hypotheses can be entertained, but both, as we shall see, lead to economic disorder in the conquering States, if these relations are to be regulated by violence.
It is useless to dilate on the other aphorisms, or rather sophisms, which were seriously discussed at the Paris Conference, and which had even the honour of being sustained by the technical experts:
1. That it is not important to know what Germany can pay, but it is sufficient to know what she ought to pay.
2. That no one can foresee what immense resources Germany will develop within thirty or forty years, and what Germany will not be able to pay will be paid by the Allies.
3. That Germany, under the stimulus of a military occupation, will increase her production in an unheard-of manner.
4. The obligation arising from the treaty is an absolute one; the capacity to pay can only be taken into consideration to establish the number and amount of the annual payments; the total must in any case be paid within thirty years or more.
5. _Elle ou nous_. Germany must pay; if she doesn't the Allies must pay. It is not necessary that Germany free herself by a certain date; it is only necessary that she pay all.
6. Germany has not to discuss, only to pay. Let time illustrate what is at present unforeseeable, etc. etc.
If we exclude the third means of payment Germany has two ways open to her. First of all she can give goods. What goods? When we speak of goods we really mean coal. Now, as we have seen, according to the treaty Germany must furnish for ten years to Belgium, Italy, and France especially quantities of coal, which in the first five years run from 39-1/2 to 42 millions of tons, and in the following five years come to a maximum of about 32 millions. And all this when she has lost the Saar coalfields and is faced with the threatening situation in Upper Silesia.
Germany's exports reached their maximum in 1913, when the figures touched 10,097 millions of marks, excluding precious metals. Grouping exports and imports in categories, the millions of marks were distributed as follows:
Imports. Exports.
Foodstuffs 2,759 1,035 Live animals 289 7.4 Raw materials 5,003 1,518 Semi-manufactured goods 5,003 1,139 Manufactured goods 1,478 6,395
About one-fifth of the entire exports was in iron and machine products (1,337 [mil.] articles in iron, 680 machines); 722 millions from coal (as against imports of other qualities of 289), 658 millions of chemical products and drugs, 446 from cotton, 298 paint, 290 techno-electrical productions, etc.
What goods can Germany give in payment of the indemnity? We have seen how she has lost a very large part of her iron and a considerable quantity of her coal.
All the economic force of Germany was based upon:
(a) The proper use of her reserves of coal and iron, which allowed her to develop enormously those industries which are based on these two elements.
(b) On her transport and tariff system, which enabled her to fight any competition.
(c) On her potent overseas commercial organization.
Now, by effect of the treaty, these three great forces have been entirely or in part destroyed.
What goods can Germany give in payment of the indemnity, and what goods can she offer without ruining the internal production of the Entente countries? Let us suppose that Germany gives machines, colours, wagons, locomotives, etc. Then for this very fact the countries of the Entente, already suffering by unemployment, would soon see their factories obliged to shut down. Germany must therefore, above all, give raw materials; but since she is herself a country that imports raw materials, and has an enormous and dense population, she is herself obliged to import raw materials for the fundamental needs of her existence.
If we examine Germany's commerce in the five years prior to the War--that is, in the five years of her greatest boom--we shall find that the imports always exceeded the exports. In the two years before the War, 1912 and 1913, the imports were respectively 10,691 and 10,770 millions, and the exports 8,956 and 10,097 millions. In some years the difference even exceeded two milliards, and was compensated by credits abroad, with the payment of freights and with the remittances (always considerable) of the German emigrants. All this is lost.
Exported goods can yield to the exporter a profit of, let us suppose, ten, twelve, or twenty per cent. For the Allies to take an income from the Custom returns means in practice reducing the exports. In fact, in Germany production must be carried on at such low prices as to compensate for the difference, or the exports must be reduced.
In the first case (which is not likely, since Germany succeeds only with difficulty, owing to her exchange, in obtaining raw materials, and must encounter worse difficulties in this respect than other countries), Germany would be preparing the ruin of the other countries in organizing forms of production which are superior to those of all her rivals. Germany would therefore damage all her creditors, especially in the foreign markets.
In the second case--the reduction of exports, one would have the exactly opposite effect to that imagined in the programme proposed--that is, the indemnities would become unpayable.
In terms of francs or lire at par with the dollar, Germany's exportations in 1920 have amounted to 7,250 millions. In 1921 an increase may be foreseen.
If Germany has to pay in cash and kind 2,500 millions of marks at par, plus 26 per cent. of the total of her exports, then supposing an export trade of eight milliards, she will have to give 1,840 millions, or in all 4,540 millions of marks. Thus we arrive by stages at less hyperbolical figures, coming down from the twenty-five milliards a year to something less than a fifth. But to come to grips with reality, Germany in all ways, it must be admitted, cannot give more than two milliards a year, if, indeed, it is desired that an indemnity be paid.
Notwithstanding her great resources, France would not be in a condition to pay abroad two milliards a year without ruining her exchange, which would drop at once to the level of Germany's. Italy with difficulty could pay one milliard.
France and Italy are honest countries, yet they cannot pay their war creditors, and have not been able, and are not able, to pay any share of their debt either to the United States of America or to Great Britain. As a matter of fact, up till now they have paid nothing, and the interest continues to accumulate with the capital.