Successive Cabinets since the war have been criticized for swelling the budget with enormous sums for railways and public works, for not taxing the people to the limit, for allowing the capitalists to send money out of the country. This policy, or lack of policy, has been interpreted as proof of dishonesty. But when a business Government, headed by Herr Cuno, the able shipping man, came into office in 1922, there was no longer doubt in the minds of impartial observers that Germany was ready to consent to any practicable reparations program and to put her house in order so that it could be carried out. The new Cuno Government, backed by Germany’s leading industrialists, received the support of the people and was ready to talk business with the Entente Powers.
But all the negotiations proved that the reparations problem was a political and not an economic one. France wanted reparations if she could get them; but she wanted security more than reparations. Public opinion in France had come to believe that the economic recovery of Germany spelled the ruin of France. Therefore, there could be peace in Europe only when the Germans became again “the modest Germans of 1848,” that is, a disunited people, content to be in a position of inferiority, military and economic, to their neighbors.
France may not have cherished these ideas at all. But the German people believed that she had them. So long as the French refrained from entering the Ruhr, the uncertainty of the situation demoralized the Germans completely. They seemed during the latter part of 1922 to be disintegrating socially, through the ruin of the bourgeois class. Then came the events of January, 1923, confronting Germany squarely with the issue, “To be or not to be.”
The blow of the Ruhr invasion fell upon Germany despite every effort made at home and abroad to stave it off. Herr Cuno had raised postal tariffs twice, and had made a third increase of 100 per cent on January 1, 1923. On the same date a second substantial increase was made in passenger-fares and freight-rates. By removing the control of rents, which had ruined landlords and prevented payment of taxes on land, Herr Cuno revived an involuntary body of tax defaulters. Rents now stood at twenty-seven times the 1914 rate. Taxes on small incomes rose from 1.6 to 9.3 per cent during 1922, and were promptly collected because employers used stamps. But it was estimated at the beginning of 1923 that these increases, which brought all prices to pre-war level, while wages were only half the pre-war level, would necessarily result in so radical an increase in wage scales that Germany could no longer put cheap goods on world markets. This would bring about a collapse of the fictitious prosperity.
Writing before the Ruhr invasion, the Dutch economist, Dr. Stuart, of the University of Utrecht, put the root of Germany’s problem in one short paragraph:
The cause of the desperate condition in which Germany finds herself is the impossibility of balancing her budget. The key to the inflation of the currency does not lie in the first place in the indemnity liabilities but in the further contents of the Treaty of Versailles. The reparations demands intensify the process of impoverishment and hasten the crisis to which it leads, but they are not the real cause of the impoverishment and of the crisis. The real cause is that an amputated Germany has been deprived of the possibility of feeding and maintaining its population of 63,000,000 souls, and the importance of the crisis which is upon us is that it will prove the awful truth of the words attributed to Clemenceau: “There are twenty million Germans too many.”
Professor Stuart believes that Germany cannot exist in her present condition, even if she pays no reparations at all! He points out, with a masterly array of figures, what has been said over and over again by the foremost British economists, that the territorial losses of Germany and the export of reparations coal have made it necessary for Germany to buy more food-stuffs than she did before the war in outside markets, and, instead of exporting coal, she has had to buy coal. On the other hand, she has lost most of her shipping. The means she formerly had of overcoming an adverse balance of trade are gone, and the adverse balance of trade is greater than ever.
Inflation warded off the collapse. But Germany’s depreciated mark has not helped her abroad, as some people think, because she has had to buy foreign currencies to meet the adverse trade balance and the reparations payments, and to pay for food-stuffs and raw materials.
Less than five years have proved that the Treaty of Versailles has deprived the German people of the possibility of a normal economic existence. With the Rhineland and the Ruhr cut off, it is clear that the Germans can not in the long run do otherwise than submit to the demands of the French. But the whole problem remains. Unless there is a radical revision of the Treaty of Versailles, the Germans may have to emigrate in large numbers or die or fight again.