Eugen Varga

The Economic and Financial Situation at Genoa

(19 April 1922)

From International Press Correspondence, Vol. 2 No. 28, 19 April 1922, pp. 207–208.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

The Genoa Conference is one in the long series of conferences in which the European bourgeoisie has made vain attempts to cure the economic and financial situation of Europe, put out of gear by the world war. But since the reconstruction of Europe is impossible without the aid of the United States, and since the latter will not take an active part in Genoa, this conference does not promise to be much of a success.

The essential facts that necessitate the reorganization of European economic and financial conditions are generally known. The economic crisis has been going on for two years, showing no signs of abatement. This economic crisis assumes two forms. Those sections of the world which preserved their material and human forces of production intact during the war, or have even improved them (the United States, Japan, the neutral European countries and England), are suffering from a crisis of overproduction. This crisis assumes the usual forms with which we are acquainted from the former “normal” crises of capitalism; here are: Unsaleable goods, stopped production, a steep fall of prices, bankruptcies and tremendous unemployment. The firmer organization of capitalism enables it to shift the burden of the crisis upon the working-class. Whereas, in former crisis, it was the capitalists themselves who through reduction of prices, loss of property and bankruptcies bore the cost of adaptation to the economic conditions of life, the present crisis of overproduction is being combated and the surplus stores of goods are eliminated mainly through a systematic and protracted limitation of production and through the unemployment of millions of workers. The figures are only too well known. In the United States there are about 5,000,000, in England about 2,000,000 unemployed. In England and in the neutral countries of Europe, about 20% of the workers are unemployed. Never before in the history of capitalism was there such extensive and protracted unemployment.

Such vast and protracted unemployment is a severe trial for the social equilibrium of capitalism. The capitalists of England were compelled to reduce the great social pressure caused by unemployment by means of an unemployment benefit on a large scale, which requires millions of pounds yearly. Economic as well as social reasons therefore moved England to attempt the reorganization of European economic relations.

Aside from bad business and the unemployment caused by it, the financial and exchange crises led to Genoa. England indeed succeeded by straining all its forces in balancing its budget. Italy and France, on the other hand, are still suffering from great deficits in their government finances. Besides, the Entente governments owe more than 10 billion dollars to America, while Italy and France are also in debt to Britain. The tax burden is in all countries, including the United States, very great and forces the establishment of an order in Europe that will make the maintenance of large armies and navies superfluous.

These financial difficulties are the direct effects of the world war. The current cost of the war by far exceeded the amounts that the yearly income of the various nations could afford. The national wealth itself was then consumed. But since under the capitalistic system, this could be done only in accordance with the right of private property, the actual capital used up was displaced by fictitious capital; government debts amounting to hundreds of billions in face value. The nations of Europe will have to drag these immense burdens for decades (if capitalism lasts that long).

However, the causes of the worldwide economic crisis are more complex. The main factor is the economic breakdown of Central and Eastern Europe during the war; up till now they have not recovered from it. These countries: Germany, Poland, Russia, the Balkan countries and the Succession States of the former Austro-Hungarian monarchy, have a population of about 300,000,000 people, in other words, about three-eighths of the world’s population involved in the capitalist economic system. Of these, Germany with a population of 60,000,000, was one of the leading capitalistic countries. Due to the shortage of goods, occasioned by the war, but chiefly the shortage of the means of production and transportation, these regions are suffering from a constant underproduction; in other words, production does not cover consumption, and the stores of goods that are still available are being used up. In full accord with the laws of capitalistic economy, this can be seen in the continuing depreciation of the exchange in these countries, in contrast to those countries having a relative surplus production. Aside from temporary fluctuations, we see that the currencies of Germany, Austria, the Balkans, and of Russia are undergoing a progressive depreciation from year to year. It is the reserve side of the fact that these countries consume more than they produce. This circumstance makes it impossible for these countries to be a market for English and American goods on the pre-war scale. And the overproduction in the “healthy” countries is caused directly by the absolute underproduction of these countries.

This situation is greatly complicated by the reparations problem According to the latest ruling, Germany, which is economically the strongest of the defeated countries, is to make yearly payments in goods amounting to two billion gold marks; these are to be delivered to the Allies with nothing in return. But since Germany hardly produces as much as the most necessary consumption of its own population requires, it becomes dear that the continued payment of these reparation burdens will inevitably bring Germany to complete ruin. But this in turn means that:

  1. Germany is eliminated as a buyer in the English and American markets.
  2. In order to be able to bear the reparations burden, Germany will be compelled to export goods, at all costs. (Whether the reparations burden is to be paid in gold or in goods, does not alter the fact that with its present human and material production apparatus, Germany cannot possibly stand such a gigantic burden, without sinking deeper and deeper into the economic abyss.)

As is well known, the discussion of the reparations question was stricken from the agenda of the Genoa conference, although it seems wholly impossible to reorganize the economic household of Europe without making essential changes in the reparations questions. The difficulty lies in the conflict of interests that manifests itself in this question between the two leading European countries, England and France. England, which is chiefly interested in exporting goods, in order that it may overcome its unemployment, is in favor of reducing the reparations burden, so that Germany’s buying capacity may be increased. France, however, which is not suffering so much from the economic crisis because of its fundamentally agrarian character, and which has no unemployment to cope with because of its general depopulation and loss of life in the war, has on the other hand the greatest financial difficulties to cope with, it is therefore greatly interested in receiving goods and gold payments from Germany. This conflict between the two great powers is a constant obstacle in the way of settling the reparations question.

The second important field is Russia with her 135,000,000 inhabitants and her immense potential wealth, that stands out in such sad contrast with her present frightful poverty. The almost complete elimination of this economic force from the world market and the drop of production caused by it and by the protracted war (rendered more acute by this year’s famine) is one of the main causes of the disturbed equilibrium in the world’s economic household.

The reconstruction of the underproducing regions of Central and Eastern Europe would first of all require the transportation of the means of production into these regions, in order that these may start their own production going. Under the capitalistic system this means loans to these countries. Of the world powers, America is beat able to furnish a big loan, for it has a surplus of goods and of the means of production which it can furnish to the impoverished regions. But the American capitalists think that they will be able to restore their economic equilibrium by developing their domestic market and by opening the South American markets. Up till now they have flatly refused even the requests for negative relief or for the withdrawal of their demands upon the Entente countries that have their origin in the war; they even made the demand that out of the payments made by Germany, they be paid the cost of the American army of occupation an the Rhine. This behavior on the part of the United States is directed chiefly against French militarism and against the elimination of the United States from the non-American petroleum fields, by England, etc. The proletarian regime in Russia is another great obstacle in the way of international regulation.

On the whole we may say that the economic and financial situation of the capitalistic world demands the reorganization of economic forces in Europe, Germany and Russia included. The essence of such a reorganization should consist in the reduction of the reparations burden, in the mutual cancellation of war debts by the Allied countries, and in big loans to be granted by those countries having a surplus production to the impoverished countries of Central and Eastern Europe. The country striving most for these possibilities of relief is England, which of all the great powers, is most closely connected with world economics, and which therefore suffers the most from the economic crisis of the world. But it is not able to reconstruct the impoverished regions all by itself, and the orderly cooperation of the great powers is thwarted by the special interests of each of these powers. Hence it seems to us that the Genoa Conference is tackling a problem that is of the greatest importance to the very existence of the capitalistic world, but that this conference will hardly be able to obtain a solution to these problems.

Last updated on 5 September 2019