From International Press Correspondence, Vol. 2 No. 25, 31 March 1922, pp. 186–187.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
| This is taken from a pamphlet, entitled: The World Economic Situation and the Course of Economic Policy in the Last Three Years, which is soon to be published in German by the Communist International. – The Editor |
The inherent tendency towards the restoration of the world’s economic equilibrium is as yet very much hampered by the reparations burden which Germany has to carry for Continental Europe. But no matter how important this problem may be for Germany, we must nevertheless emphatically point out that this is only a secondary problem of the great disturbance in the world economic equilibrium, and that its “solution” (if we can admit the possibility of a solution at all) would in no way be synonymous with the solution of the world economic crisis, as is believed in Germany.
What namely is the essence of the reparation problem when examined from our point of view of the world economic situation?
Germany is to make yearly payments of 3,500,000,000 gold marks out of its limited production which even without such payments is scarcely sufficient for the renewal of its means of production and for the miserable maintenance of its proletariat. This amounts to about one tenth of the national income of rich pre-war Germany whose territory was still intact. The literal execution of this decision would mean:
The simplest solution would be to cancel reparations altogether!
Such a solution could be carried out, however, if Germany only had to make payments exclusively to those countries which had a surplus production. We see that England has gotten used to the idea of not getting another penny from Germany. The English statesmen and political economists clearly see that the saving of the capitalistic system requires an order of world economy which renders possible the reduction of the gigantic and danger-brewing army of unemployed. But a Germany driven to a cut-throat export only means the perpetuation of English unemployment. [1]
But only a very small portion of the reparation payments falls to the share of “rich” England, which could and would solve its problem through simple confiscation. By far the greater portion falls to France, Belgium, Italy and Serbia, countries which laid great hopes upon these payments. Let us take France for example. During the war it proceeded in its financial mismanagement just as blindly as Germany with the cry: “Les Boches paiera!” In France too, less taxes were paid during the war than in peacetime. And when “victory” had been won, and it was necessary to elect a “national majority”, billions were again wasted among the electors. The actual material loss which France suffered and which Keynes estimates at about 20 billions (which is probably correct) was puffed up to three and four times its actual value, all in the hope of German payments, and those capitalists of the occupied territory who had “good connections” were likewise granted exaggerated compensation. Thus we see France with a yearly deficit of 20 billion francs! Even the full payment of France’s deserved reparations share would not bring about any noticeable equilibrium in the French budget. France can therefore not afford to agree to the simple cancellation of the reparation demands. From the point of view of government finances, we may say that France’s interests demand that Germany pay in full. But Germany is not able to do this. And as far as it is able to pay, it can do so only with a huge export which on the other hand brings Germany into cut-throat competition with those countries which have a surplus production and incidentally also with France itself which through its annexation of Alsace- Lorraine, has become an exporting country of heavy industrial products. The artifices employed by France in its hope of evading this problem, in that it demands the full payment of reparations at the same time seeking protection against the competition of German goods behind a high protection tariff, will not work its salvation. The pressure of German prices makes itself felt in other countries, to which Germany dictates the prices of the world market. Besides, Germany’s obligation to pay reparations in gold drives the stable exchanges higher, thus widening the gulf between the countries with an under-production and those with a surplus production. We thus see that with every attempt to collect reparations, the world economic crisis is only intensified. But to drop reparation payments altogether would simply mean bankruptcy for France. [2]
The Wiesbaden Agreement is an attempt to overcome these difficulties. The economic nature of this agreement consists of the systematic regulation of goods to be delivered to France by Germany instead of an anarchic dumping of goods on the world market. The goods delivered are assigned to the reconstruction of France’s devastated regions, which means that they are to be consumed outside of the regular course of French economy. This would mean getting goods from Germany without creating an unbearable competition for France in the world market, deliveries and payments for the reconstruction of dwellings, roads, etc., that is for private purposes, without directly increasing the process of production and the supply of goods.
The Wiesbaden Agreement would be favorable to France. But it still remains unratified, the private profit interests of influential French capitalist groups are in the way. Germany would not gain much by it. The delivery of goods on a large scale and of the same sort would cheapen production. The payment of its debts directly in goods would relieve Germany from the task of raising funds for the payment of reparation instalments. But the primary problem of how impoverished Germany can afford to strip its decreased production of a quantity of goods amounting to 3,500,000,000 gold marks annually remains untouched. Indeed, the difficulty would become still more increased by the fact that in the next few years Germany would have to deliver more goods to France than the latter’s share of reparation payments would warrants. Germany would thus make advance payments with which France would credit it. But with the present impoverished condition of Germany such an experiment is out of the question. We must therefore admit that the German political economists who stamped the Wiesbaden Agreement as detrimental to Germany were in the right.
The reparations problem could be solved only within the sphere of a general solution of the disturbed world economic equilibrium. Every attempt at a special solution only serves to intensify the general crisis.
We shall have occasion to treat of this question again.
1. We know very well that the absolute quantity of goods exported by German in the years 1920–21, is a comparatively small one, much smaller than before the war. But with the relative equilibrium in the world economic situation before the war, this export disturbed the economic situation in the other capitalistic countries very little, with the possible exception of England. But today, when the capacity of the world market to absorb goods is greatly reduced, every country seeks protection against German export behind tariff walls.
2. Even with the complete reparations payments, the French budget would show a deficit of billions of francs for an indeterminate number of years.
Last updated on 5 September 2019