Economics and the Public Welfare. Benjamin M. Anderson
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.
[print edition page 110]
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,
[print edition page 111]
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.
[print edition page 112]
French Prewar and Wartime Deficits. We turn now to the parallel story of the financial developments in France during the period when Germany was sinking so rapidly. France entered the war with bad government finances. She had a national debt of 30 billion gold francs as against an estimated national wealth of 300 billion gold francs at the beginning of the war. France had had chronic deficits for many years before the war. There was governmental extravagance, and there was a great reluctance on the part of the people to submit to direct taxes. They did tolerate very heavy indirect taxes. When Caillaux undertook early in 1914 to introduce an income tax of 2 percent in the effort to balance the French budget, the outcry in France was so extreme that one would have supposed that the end of the world had come. During the war France did relatively little with taxation, and the public debt ran up from 30 billion to 147 billion francs before the war was over.
French Postwar Deficits. Then France began to have some real deficits. Adherents of the school of Keynes and Hansen would do well to study the history of French finance from 1918 to 1926. The one difference between the policies followed in France in this period and the policies advocated by the New Deal spenders for the United States is to be found in the fact that the French were ashamed of it and tried to conceal it and to find excuses for it, whereas the New Deal spenders would glorify it and call it “investment.”
Exact facts regarding the French budget and the total of French expenditures were very difficult to obtain in the period following the war. Expenditures were concealed under a multitude of rubrics.1
[print edition page 113]
The point was that French financial accounting dealt not only with “the budget,” which could easily be balanced by making it equal the taxes, but also the “special budget recoverable” (from Germany), the “special budget” (not recoverable), the “annexed budgets,” and the “special accounts.” When all these were taken together the French figures ran approximately as follows:2
FRENCH GOVERNMENT POSTWAR DEFICITS
(In millions of francs)
| 1919 | 1920 | 1921 | 1922 | 1923 | 1924 | |
| Expenditures | 54,956 |
|