The German debt before the war was an annual charge of 230 million marks, the peace expenditure excluding the army 200 millions. The war debt in December, 1918, was 146 milliards, increased in January by 3.5 milliards, in February by 2.7 milliards, in March by 2 milliards and estimated to increase further by 1-½ milliards per month on an average for the coming financial year. To this must be added ½ milliard for cost of expropriations, 4-½ milliards for reconstruction of ravaged territories in Prussia, 1-½ milliards for compensation of German shipowners, separation allowance subsidies to the German States, etc., in all 185 milliards about, with an annual charge of 10 milliards. Reduction of this item by total or partial repudiation of this debt, though advocated by the Opposition, is impossible without causing economic ruin and political revolution. The new army is estimated to require 2 milliards; about the same as before the war, because of the enormously exaggerated expense of this small volunteer force compared with the old conscript army. If, to the great political advantage of Germany, a Swiss militia were substituted for the Frei-Corps, this item could be halved easily. The estimate of 4-½ milliards for pensions is the same as that of France and will probably be exceeded, though as yet less than half that is being paid. This makes up a total annual estimated expenditure of 17,429 million marks, the mark at pre-war exchange being equal to a shilling.
As Herr Erzberger's speech on the Budget showed, he is faced by a financial position unparalleled in the history of national bankruptcies. The interest which he has to find on the Imperial debt amounts by itself to Mk. 10 milliard; and his total annual requirements, exclusive of the Allies' demands under the Peace Treaty, are estimated at Mk. 25 milliard. Before the war the revenue from Imperial taxation was under Mk. 2 milliard. Additional taxation imposed during the war yields about Mk. 4 milliard. To-day therefore Germany is faced with an annual expenditure of Mk. 25 milliard and an annual revenue of Mk. 6 milliard—i.e., an annual deficit of Mk. 19 milliard, nearly ten times greater than the whole revenue of 1913. The new taxes actually proposed are estimated to bring in about Mk. 2 milliard. But the main sources upon which the Finance Minister is going to rely are two: a levy on capital and a tax on sales. The levy establishes a graded tax on all property, starting at 10 per cent. and reaching a maximum of 63.9 per cent. Payment may be made by instalments spread over 30 years, and it is estimated that the tax will bring in about Mk. 4 milliard annually. The tax on sales is still more drastic. It really consists of three different taxes: (1) a general tax of 1 per cent. on all sales, (2) a tax of 5 per cent. on retail trade, (3) a tax on the producer of luxuries of 10 per cent., and on retail trade in luxuries of 15 per cent. This tax is estimated to bring in about Mk. 3 milliard. But even after this raid on the owners of property and upon capital, the unfortunate Minister of Finance is faced with a deficit of Mk. 10 milliard. He proposes to get Mk. 2-½ milliard out of beer, petroleum, stamps, flour and meat, and the remainder, Mk. 7-½ milliard out of a uniform income tax for the whole country and an excess profits tax.
The magnitude of these sums can be estimated when it is remembered that the total incomes of all Prussians earning more than a pound a week only amounts to 19 milliards, and that Helfferich's estimate of the pre-war income of all Germany was 315 milliards. But that was a very different Germany from the present. Germany has lost a greater part of its mineral wealth, the coal of the Saar, the potash of Alsace, the ores of Luxembourg. She has lost her colonies with their great potential wealth. She has also lost her fleet and a great part of her railway material. Over a million and a-half, or 16 per cent. of the male working population are dead. Industry has neither the capital nor the energy to reconvert itself to peace productivity. Much of the capital left is either concealed or has been carried abroad. German holdings of foreign securities were estimated at twenty milliards before the war and not more than one milliard now. Over a milliard of the gold reserve at the Deutsche Bank has been paid for foreign provisions, leaving only a milliard and a-half to cover a note issue of thirty milliards.
Germany must by March, 1921, deliver up all payment in kind, i.e., goods, ships, coal, etc., which might possibly exceed the total of £800,000,000 provided by the Treaty. On the other hand, Germany must pay the pensions due to disabled soldiers and the relatives of the fallen, which in the case of France alone amounted to £8,000,000,000. In all, Germany is liable for a sum of £15,400,000,000, which should be paid off in a period of thirty-six years. For the two first years after the war she will pay nothing, but subsequently she must pay £554,000,000, with interest at 5 per cent. The total amount paid by Germany will therefore amount to £18,520,000,000 at the end of thirty-six years.
And most serious loss of all—she has lost for a time, anyway, all will to work. Improvement in food and general conditions of life will do something for this, socialisation of industry and introduction of the Council system would do more, but it will take time. Even if Germany obtained at once a return of energy, a reopening of markets, a re-entry of raw material and a free recourse to foreign capital, and she will have to wait long for all of these, even so it seems very doubtful whether she could make a living under such a load of debt. This will mean the emigration of from ten to twenty million Germans in the course of the next few years, to the West if it is open to them, but otherwise to the East. Germany will, in fact, be brought down to the political and economic conditions of Portugal.
We pursued this policy of ruining Germany for a century because we were still under the impression of animosities and anxieties that belonged to war conditions. Our attitude was that the Allies should get what they could out of Germany while they could; and if the attempt ruined Germany, Germany had deserved it.
This was the attitude that prevailed during the armistice period. But the Peace of Versailles has inaugurated a more systematic and far-reaching exploitation. This is no place to review its economic and financial provisions; but no one could read them without realising that our policy is apparently to make Germany work for us as its bankers, brokers, shippers and creditors with unlimited claims. To take a rake-off as merchants and middlemen from all German manufactures and to set up a receivership over Germany that we call a Reparation Commission, with the right to claim any remaining profit. The powers of this receivership are such as to prevent the development of any German competition with us in the conduct or control of German production. Combined with the claims for damages these powers would, indeed, make all government impossible. For example, under them Germany is liable to pay the pension claims of the dependents of Sikhs, Senegalese or South Carolina negroes to the exclusion of its own wounded and widows. But the policy, in so far as a compilation of the unchecked schedules and uncriticised schemes of war profiteers can be said to have a policy, is that of making the German workmen produce for British Big Business. The functions ascribed to the so-called "Reparation Commission" represent an attempt to make the German proletariat work under foreign exploitation. Experiments in foreign financial control we have had in Eastern Europe, with semi-civilised peoples; but this is an attempt to set up foreign economic control over a people which in industry had won for itself the first place in Europe. At first sight one is inclined to reject this policy as a practical impossibility; but so extreme is the debility of Germany, and so exceptional the docility of the people, that I am inclined to think it might have had some temporary and partial success but for one thing—the Council movement and the demands of the workmen for the socialisation of industry.
Without some measure of socialisation of industry, without some measure of political representation through Councils, the unemployed will not return to work and the employed will only work in fitful intervals between strikes.
Between the November revolution and the end of February the coalminers alone forfeited 23 million marks of wages in more or less meaningless strikes; and this was before the great strikes of the spring, which had an obvious political purpose. This is three times the loss incurred in the last pre-war strike of 1912. The decrease in production rose from a quarter-million tons in December to a million in February, and this was little compared with the loss that followed, estimated at no less than ten million tons.
During the first six months of 1919 there were always at least a million and a half workmen drawing an unemployment pay of about two-thirds of their average wage.[4] Add to this outlay that of the force raised to prevent the workmen from realising their revolution—the seven hundred thousand Frei-Corps, engaged at such a high pay that this Prussian volunteer force of to-day is budgeted for at the same total as the vast German armies that dominated Europe before the war. It is curious that Germany should now be paying the same amount to terrorise a few working quarters that it paid five years ago to terrorise the world. And the second attempt is as hopeless as the first, for the revolution will not be denied. Even the bureaucratic Social-Democrats of the present Government recognise this and try to placate it with words.