Where Are We Going?

by David Lloyd George

When the invasion of the Ruhr was decided upon, the shortage in the promised coal deliveries upon which default was declared was barely 10 per cent. A little better organisation of the wagon service on the French side would have made up that deficiency in a very short time. During the months of the occupation the French and Belgians have not succeeded in collecting one-sixth the tonnage delivered during the corresponding months last year. It will take weeks after passive resistance has collapsed to restore railways and collieries to working order. The new régime will have to liquidate arrears of at least 15,000,000 tons before it begins its regular monthly deliveries. What about cash payments? It is not too much to say that Germany is much less able to meet her obligations in this respect than she was before the invasion. Her credit has been blown out of sight into infinite space. It will take a long time to pull it back from its wanderings and set its feet once more firmly on European earth. There are only four ways in which the huge sum due from Germany can be liquidated:—

(1) By handing over to the Allies the gold reserves of Germany and of Germans either at home or on deposit abroad. The former is negligible; the amount of the latter is disputable. Much of it is essential to enable Germany to purchase abroad the raw material and food necessary to her existence. The worse German credit becomes the larger must this deposit be. As for the foreign securities and deposits which are not strictly necessary for trading, they cannot all be made available, for nothing will induce some of the depositors to part with the whole of these securities. The sum, therefore, derivable from this source would amount to but a small percentage of the total figure payable for reparations.

(2) Deliveries of coal, timber, potash, dyes and other raw material. With the exception of timber, these deliveries have been, on the whole, satisfactory—since the Spa Agreement. It did not require the pressure of armed invasion to improve these deliveries, including the timber demands of the Allies.

(3) A percentage levied on German exports. These are paid for in gold or its equivalent, and the levy would therefore be remitted in gold. A levy of 20 per cent. on German exports would have produced between £40,000,000 and £50,000,000 a year on the basis of last year's exports. When German trade returned to normal it would yield £100,000,000. This sum, added to the value of the material delivered, would cover interest and sinking fund on the £2,500,000,000 which is now the accepted maximum of German capacity.

(4) The restoration of German credit with a view to the immediate raising of a loan on reparation account. This would help the Allies over their urgent financial difficulties.

These four methods of payment are the only known and knowable means of obtaining reparations. They would have been more immediately fruitful if so much time, money and resource had not been wasted over this ill-judged invasion.

The apologists of French action in the Ruhr contend that France was driven to these extremes by the refusal of Britain to co-operate with her in bringing legitimate pressure to bear on Germany to carry out the Treaty. Those who put forward this contention argue in ignorance of the proposals submitted by the British Government to the Allied Conference in August 1922. These would have exploited all the methods above set forth to the limit of their productiveness. These proposals were substantially accepted by all the Allies except France. Repeated efforts have been made this year in Parliament to induce the Government to publish this scheme. Both the present and the late Prime Minister gave favourable if not definite answers to the request for publication. But so far the August proceedings have not made their public appearance. Why this reluctance to give the whole facts to the public? The discussions at the November and January Conferences have been published in full. These meetings were only adjournments from the August Conference. The story of the fateful Conference is, therefore, incomplete if August is suppressed. Ought not the world to know the proposals which France rejected in August 1922? In the absence of official publication I will take the responsibility now of giving a Summary.

It was proposed:—

(1) That Germany should be called upon to take such measures as the Reparations Commission should stipulate, in order to balance her Budget and restore her financial stability.

(2) That the Reichsbank should be made independent of Government control.

(3) That 26 per cent. of the total value of German exports should be collected in gold or foreign currencies and paid into a separate account in the Reichsbank in the name of the Sub-Committee of the Reparations Commission known as the Committee of Guarantees.

(4) That the produce of all German import and export duties other than the levy should be paid monthly to a special account at the Reichsbank, which should be under the scrutiny of the Committee of Guarantees. The German Government should have the disposal of the sums standing to the credit of this account so long as the Reparations Commission was satisfied that it fulfilled the obligations imposed upon it. If at any time the Commission was not satisfied that this was the case the Committee of Guarantees should have the right to take over the sums standing to the credit of this account and to secure the payment to it of the produce of these duties thereafter.

(5) There were stern provisions for supervision of German finance by the Committee of Guarantees and for preventing the export of German capital.

(6) There were provisions for supervision over State mines and forests in the event of their being a failure in delivery of coal or timber as the case might be.

A Moratorium up to December 1922 was to be given conditionally on the acceptance of the above terms by the German Government, and the Reparations Commission were then to proceed to fix the further annual payments.

Had these drastic proposals been adopted and enforced by the Allies, what would have been the result? Deliveries of coal and timber would have been ensured up to the full quota arranged. By means of the levy on exports, £50,000,000 would have been already collected in gold and paid into Allied account. The mark would have been stabilised, and could have been made the basis of a considerable loan. As German trade gradually recovered the export levy would bring in larger amounts. This year would certainly have produced a yield of between £60,000,000 and £70,000,000. This is what would have been effected for Reparations if the plan put forward by the British Government had been accepted and put into execution in August. By the settlement of this most troublous question, the great cost and the still greater irritation of the Ruhr episode would have been avoided, trade would have continued its convalescence, and the peace of Europe would have been established.

What would have happened if Germany had refused these terms? We should certainly have heard what objections or counter-proposals Germany had to offer. But we were resolved to have a settlement that would put an end to the fiscal chaos inside Germany, and having thus put her in a position to pay we were equally resolved that she should pay up to the limit of her capacity. We, therefore, undertook, if Germany rejected the terms finally agreed upon, to join France and the other Allies in any coercive measures deemed advisable to compel acceptance. M. Poincaré refused to agree. His refusal alone rendered that Conference fruitless. Over a year has elapsed since then. He has pursued a different policy. So far it has brought him nothing. I am bold enough to predict that in future it will bring France considerably less than the August 1922 plan would have yielded.