II.
If we suppose for the sake of argument that the dodge of the “Drawn Game” were to succeed so far as to allow the Germans, by binding Austria-Hungary to the German Empire, to carry through their plan “from Hamburg to the Persian Gulf,” their success would involve certain general financial consequences. These we must unfold, if we would clearly understand the full extent of the craft hidden under the cloak of that manœuvre called the “Drawn Game,” which is still to be played.
The Germans having failed to crush the Allies, begin to think that the expenses of war may possibly fall on themselves. The Berlin Post has already calculated: “If we do not receive a war indemnity we must reckon on a yearly increase of taxes of at least four milliard marks,” being five milliard francs for 68 million inhabitants (Le Temps, 1st February, 1916).
The disappointment is certainly keen for the Germans who counted on exacting from France alone an indemnity of 35 milliard francs; but we must nevertheless fully understand that the dodge of the “Drawn Game” (which, for the sake of argument, we suppose to have succeeded) would place Germany in a financial position vastly more advantageous than that of the Allies.
As a matter of fact, the cost of war has been much less for Germany than for her adversaries. This is a point which must be fully considered, all the more because it helps to explain why the economic resistance of Germany is more prolonged than was generally expected.
From the beginning of hostilities, Austro-German troops have lived at the vast expense of enemy or Allied territories, such as Turkey and Bulgaria, whose accumulated resources they slowly drain. Besides, in enemy countries, particularly in Belgium and in France, which are the richest regions on earth, the Germans have collected a large amount of plunder. On Belgium alone they have levied a war contribution in specie of 480 million francs a year. Out of Belgium and France the Germans draw large quantities of coal and iron scot free. In both these countries they have purloined raw goods, machines, furniture, valuables, representing the value certainly of several milliard francs. In the French towns of the Nord alone the Germans have stolen about 550 million francs worth of wool. Everywhere they have seized innumerable securities which they have already tried to convert into money, though with small success, in the United States. But if a complete victory did not compel the Germans to restore those bonds to the Allies who own them, some at least of them would suffer a heavy loss of capital, by the mere fact of their warrants being detained; the effect of this would unavoidably react on the general wealth of the Allied countries. To these losses would probably be added those of the numerous milliards of francs, lent by the French or English to Austria, to the Balkan States, and to Turkey, and represented by bonds which at present are, it is true, in Allied lands, but whose value would become exceedingly uncertain and hazardous the day that Germany ruled from Hamburg to the Persian Gulf. Teutonic good faith would then serve as the only guarantee that dividends would be paid. The war, therefore, has put within Germany’s power not only vast territories which have enabled her to carry on the struggle with far less expense than the Allies, but also the Germans have been able to lay their hands on enormous wealth, representing tens of milliards of francs, which, being partly convertible into specie, have reduced by that amount the direct financial war outlay of Germany.
Clearly, the Allies are not in an equal position.
Always supposing, for the sake of argument, that peace were concluded with Berlin on the basis of the “Drawn Game,” each one of the Allies would have to bear, without any reduction, the immense expenses incurred to maintain a war made by Germany. It is easy to perceive that these war costs have been and are considerably higher for each of the Allies and more miscellaneous than has been the case for Germany. The Allies found it necessary to improvise an enormous war plant under most costly conditions, while Germany had been able during peace, that is, under relatively economical conditions, to produce all the material of her fighting equipment.
The Allies are bound to take care of and to maintain millions of refugees from invaded regions, whereas the Germans have only temporarily borne such a burden and merely for a small part of Eastern Prussia. After the war, Belgium, Russia and especially France will have to provide for some tens of milliards of francs worth of extra charges for repairs of the colossal damages done by the Germans in invaded territories, to private persons, State properties, railways, roads, etc. The Germans would not have a similar outlay, at least not anything like in the same proportion. In their conception of the “Drawn Game” the Germans certainly reckon that these financial differences would almost ensure, after peace, the ulterior impotence of the Allied countries as against Great Germany.
What, for instance, would be the position of France if a war indemnity were not paid to her? A few familiar figures, which everyone can check, will enable us to form an opinion on that score. If the struggle lasts, let us say, for two years, we can estimate at 50 milliards of francs the direct outlay for France, and about 20 milliards would be required for her indirect expenditure, that is, what must be paid after peace for repairing the prodigious damage caused to individuals and to the State—remaking of roads, rebuilding of railways, etc., the total of the expenses mounting up to some 70 milliards of francs. As the national debt of France, before the war, was 30 milliards of francs, it would therefore have increased after peace to about 100 milliard francs.
On the other hand the budget of France in 1914 was in round figures five milliard francs. The single item of the rise in price of daily commodities will in itself inevitably be increased after war at least by 10%, therefore the budget after peace will require, let us say, an initial increase of 500 million francs. On the other hand, this same budget would have to bear interest at 5% on the 70 milliard francs of newly incurred war debts; this would make a yearly outlay of 3,500 million francs. Finally, it is clear that pensions to be given to the wounded, to widows of combatants, will burden the budget by a yearly outlay of at least a milliard francs. Probably even that figure will be insufficient. Altogether the French budget of five milliard francs, as it was in 1914, would have to be increased by about five milliard francs; in other words, it will have to be doubled. Already we well know that this figure is much below what would be needed. And yet that enormous increase makes no allowance for sums required to effect important social reforms, nor for the great improvements necessary to bring up the economic national plant of France to a proper standard for resuming business actively.
We remember how hard it was in France before the war to find, by means of taxes, even the 500 million of francs needed for new expenditures. How could we find annually an additional sum of five milliard francs of taxes in a country cruelly devastated by the struggle and where the re-organization of economic life would have to be complete? It is obvious that the most crushing taxes levied on every person would not suffice for such a sum to be regularly raised.
Such a situation must inevitably tend to raise for the State and for every Frenchman individually considerable financial difficulties. The same would apply to economic undertakings. Thousands of these, at present in the hands of shareholders or bond-holders, would be in a most precarious condition, or the securities would be immensely depreciated. Landed property, overburdened by taxes and specially affected by the shortage of labour, would lose a great part of its value. This situation would lead to a general rise in prices for the commodities of daily life, and that again would lay a fresh burden on the back of every Frenchman. The financial position would be analogous for the Russians and for the English, who of all the belligerents have spent most on the war.
The Germans, in trying their “Drawn Game” trick, reckon oil these financial consequences to reduce the Allies to ultimate impotence. The only way to avoid this danger is to win that complete victory which all the Allies desire, since it would enable them to impose on Germany the payment of the war indemnity which she unquestionably owes, as she is responsible for the hostilities. Annuities paid to each of the Allies will be used as the basis of loans, which will help to tide over the serious financial difficulties that infallibly await all the belligerents after the war.