Th. Rothstein 1917

The Case Against Indemnities

Source: The Call, 28 June 1917, p. 2 (Originally written under his pseudonym John Bryan)
Transcribed: Ted Crawford
HTML Markup: Brian Reid
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In a recent article the case for indemnities was examined, and was found to be untenable. In the present article an attempt will be made to prove the case against indemnities in a more positive manner.

Indemnities are formally levied upon Governments. It is the Governments which pay them over to the successful enemy, and are held by it responsible for the punctual discharge of the liability. To make sure of the business, various securities are frequently taken by the enemy, of which the most common form is the occupation of the country or parts of it by troops until the indemnity has been fully paid. Of course, the troops of occupation are also maintained at the expense of the country so occupied. In addition, some well-marked sources of revenue are placed under control in those cases when the country is poor or when the victorious enemy has ulterior motives with regard to it. Of such sources of revenue the customs and the railways are the most favourite.

It goes without saying that the party which pays the indemnity is the people itself. In order to raise the huge sums which are usually exacted as an indemnity, a loan or a series of loans are floated, the interest on which is paid and the capital of which is repaid by the taxpayer. Who the taxpayer in such cases is immaterial. For even if the entire burden of the repayment of the loan be thrown upon the capitalist classes in the shape of direct taxes on income or property, it means the withdrawal of large sums from productive activity, and, therefore, an impairment of the economic development of the country and its impoverishment. Considering that the war will have everywhere exhausted the economic sources of the belligerent nations and that on the conclusion of peace every country will be confronted with a complete absence of stocks in raw material as well as manufactured articles, with a large gap in its working-class population and with machinery, railways, roads, etc., in a state of utmost dilapidation, we can well foresee that the countries which will have to pay indemnities—especially of the size contemplated by the present belligerents deeming themselves victorious—will be economically crushed, not only for the moment, but also for a long, very long time to come, if not for ever. To this day it is a moot question whether the feeble development of French industry since 1871 has not been due, to a large extent, to the withdrawal from the economic process of those 200,000,000 which France paid over to Germany after her unsuccessful war.

Now, the Germans are fond of quoting an utterance made in 1887 by a then highly reputable English weekly to the effect that “there is not a single Englishman who would not become richer through the destruction of German trade.” That this idea is fallacious has long been recognised, by economic science. But science is one thing, and individual experience is another thing, and there are plenty of persons in our midst who still share that grotesque notion. They know that if in then particular branch of trade German competition were eliminated, they would pro tanto be richer. In this they are not mistaken, but they are mistaken if they think that their experience can be generalised. A ruined and crippled Germany would not be able to take from Britain sixty million pounds’ worth of goods yearly, as she did just before the War, and though British traders may find some compensation for this loss in other markets which used to import from Germany, those markets, too, will become poorer through the loss of a customer who used to import goods from abroad to the amount of five to six hundred million pounds per annum. Single individuals may become richer through the elimination of German trade, but the community as a whole will become poorer. Those who are inclined to attach to this proposition a mere theoretical value should remember that it is one of the settled convictions of all “practical” men of business that any extension of the market creates additional employment. If that argument, so frequently used to justify Imperialist aggrandisement in the eyes of the working class, be true, the converse is certainly also true.

We have considered the effect of an indemnity imposed upon any country from a purely economic point of view, on the supposition that its burden would be thrown upon the shoulders of the capitalist classes. How its effect should be judged from the standpoint of international working-class solidarity, if its burden were shifted upon the proletariat of the affected country, needs no elucidation.

But the exaction of indemnities is quite specially a case in which he who receives is not less damned than he who gives. Consider in the concrete what becomes of the sums which the vanquished pays over to the victor. A portion of them may go towards a fund to assist the widows and orphans of the fallen soldiers. Another portion may be set aside for future war emergencies. The bulk will go towards reparation and compensation of various material losses sustained by individuals through the war. That was just the method of allocation which Bismarck employed in respect of the French indemnity. The practical results were miserable. The widows’ and orphans’ pensions fund was administered in a way which provoked strong criticisms as late as 1906. The war-money put into the “Julius Tuzmrm” proved utterly inadequate when the present war broke out. And the monies paid over to individuals by way of “compensations” gave rise to a period of commercial and financial speculation of the wildest character, and ultimately led to one of the gravest crises in German economic history. Those who know the amount of peculation and corruption with which the administration of such “windfalls” by a bourgeois State is usually accompanied will not regard the German precedent of 1871-75 as an exception, but rather as a typical example and a warning. But apart from this, one must consider what an amount of power will be placed in the hands of a Government by the sudden acquisition of such an immense sum as a modern indemnity is bound to be. At one stroke such a Government would become free from all financial worries and control. It can, if it chooses, exempt certain classes from taxation; it can bribe individuals and parties; it can establish a fund to feed its reptiles in the Press—above all, it can free itself from Parliamentary control, of which the essence, as is well known, is the annual voting of taxes. But, even supposing Parliament succeeds in establishing immediate and full control over the expenditure out of the indemnities’ fund, it will only mean the substitution of the capitalist State for the particular Government in the possession of the money, and who can doubt how it will then be spent? It will be spent in the interests of the capitalist class, Capitalism will become enormously strengthened, and the working class will, to a corresponding extent, be weakened.