The Iron Ration: Three Years in Warring Central Europe

by George Abel Schreiner

Why should the farmer sell food when the money he gets for it will purchase little by virtue of having no longer its former purchasing power? He can be induced to sell such food if he is given enough dollars and cents to buy again for the proceeds of his soil and labor what he obtained through them before. That means that he must be given more money for his wares. But that he is given more money does not leave him better off. What difference does it make to him if for the bushel of wheat he gets one dollar or two dollars when the price of an article he must buy also jumps from one to two dollars? The result is a naught in both cases. To be sure, he could save more, apparently, from two than he could from one dollar. That, however, is fiction, for the reason that the twenty cents he may save of two dollars will in the new economic era buy no more than the ten cents he saved from the one dollar.

It is clear now that the farmer has not profited by the increase in food prices. All others are in the same position. Money has ceased to buy as much as before. The worker who is getting twice the wages he received before the outbreak of a war is obliged to pay twice as much for food. Like the farmer, he is no better off than he was. He, too, sees nothing but zero when expenditures are subtracted from income.

The body politic is a living organism for the reason that it is composed of living organisms—men and women. As a living organism this body has the inherent quality to repair or heal the wounds it has received. The men lost in war are replaced by the birth of others. In our time, at least, the women are no longer killed off, and since the remaining males are able to fertilize them a decade or two generally suffices to make good this loss which the body politic has sustained. It is a well-known fact that the average man is able to produce many times the number of children to which monogamy limits him. At the conclusion of the Thirty Years' War, when polygamy had to be legalized in southern Germany, Nuremberg boasted of a citizen who had thirty-seven children by six women.

But even the economic wounds of the body politic heal rapidly. They begin to heal in war almost with the first day on which they are inflicted. Over them spreads the protecting scab of cheap money and high prices.

The German mark buys to-day about one-third of what it bought in July, 1914; this means that it is worth no more in comparison with its former value as a lien against the wealth of the German nation. The several German governments, however, will continue to pay on their public debts the old rate of interest, and when the loans are called in the depreciated mark will take the place of a mark that had full value. The gain for the state is that it has reduced automatically its old public debt by 66 per cent. in interest and capital.

The same applies to the first war loans. The German war loans up to the middle of 1915 were made with a mark that still bought 90 per cent. of what it had bought before. Interest on them will be paid and the loan redeemed with a mark which to-day has a purchasing power of only 33 pfennige. If nothing is done to interfere with this relation of currency values, the German governments will actually pay interest and return the loan with money cheaper by 62.97 per cent. than what it was when the loans were made. The fifth war loan was made at a time when the purchasing power of the mark was down to about 50 points, so that on this the "economic" saving, as established with the present purchasing power of the mark, would be only 33.34 per cent. On the seventh war loan, made with the mark down to roughly one-third of its former purchasing power, nothing could be saved by the government if redemption of the loan should be undertaken with a mark buying no more than what it buys to-day.

We are dealing here with the mark as a thing that will procure in the market to-day the thing needed to live. In its time the mark that made up the public debt and the war loans served the same purpose, in a better manner, as it were. But that mark is no more. The several governments of Germany will pay interest and redeem loans in the mark of to-day, without paying the slightest heed to the value of the mark turned over to them when the loans were made.

The result of this is that the older investments, be they in government securities or commercial paper, have lost in value. We must take a look at an investor in order to understand that fully. Let us say a man owns in government bonds and industrial stocks the sum of 200,000 marks. At 4 per cent. that would give him an annual income of 8,000 marks, a sum which in 1914 would have kept him in Germany very comfortably, if his demands were modest. To-day that income would go about a third as far. His 8,000 marks would buy no more than what four years ago 2,666 marks would have bought. His lien against the wealth of the community, in other words, is 2,666 marks to-day instead of 8,000 marks. Those who had to produce what the man consumed in 1914 have to produce to-day only a third of that. They would have to produce as before if the government returned to the old value of the mark, and since such a production is impossible to-day, with over two million able-bodied men dead and permanently incapacitated, with the same number of women and their offspring to be cared for, and with the losses from deterioration to be made good, the German government cannot take measures that would restore the pre-war value of the mark, especially since it would have to pay interest on war loans with a mark having more purchasing power than had the mark turned over to the government in these loans.

In adopting the policy of cheaper money Central Europe is doing exactly what the Roman government did more than two thousand years ago and what every other government has since then done when wars had made the expenditure of much of the state's wealth necessary. Capital is the loser, of course. That cannot be avoided, however, for the reason that capital is nothing but the surplus of labor—that part of production which is not consumed. During the European War there was no such actual surplus. The increase in capital, as this increase appeared on the books of the state treasury and the investors, was nothing but an inflation—an inflation which now must be assimilated in figures, since its influence upon actual production is nil.

I have already mentioned that the bankers of Central Europe are well disposed toward a partial cancelation of the public debts. They agree not because of patriotic motives, but for the reason that such a cancelation would better the purchasing value of the currency. A partial repudiation of the war loans would immediately force down prices of food and necessities, in which event the mark or crown would again buy more or less than it bought in 1915, let us assume. For the exigencies incident to foreign trade the step has merits of its own. It should not be necessary to point out that a Germany living on an American-dollar basis, as it is now doing with its depreciated mark, would find it hard to undersell the American competitor. German industrial and commercial interests must bear this in mind, and on that account will do their best to preserve the margin which has favored them in the past. Cheap money and high prices do not make for cheap labor, naturally. Even to-day labor in Central Europe has risen in price to within 70 per cent. of its cost in the United States, while food is about 15 per cent. dearer than in the American cities.