Not the whole of these sums need be paid in cash, and the value of deliveries in kind is to be credited to Germany against them. This item has been estimated as high as 1.2 to 1.4 milliard gold marks per annum. The result will chiefly depend (1) on the amount and price of the coal deliveries, and (2) on the degree of success which attends the negotiations between France and Germany for the supply by the latter of materials required for the repair of the devastated area. The value of the coal deliveries depends on factors already discussed on p. 49, above, the price of the coal being chiefly governed by the internal German price. At a price of 20 gold marks per ton and deliveries of 2,000,000 tons a month (neither of which figures are likely to be exceeded, or even reached, in the near future), coal will yield credits of .48 milliard gold marks. In the Loucheur–Rathenau Agreement[43] the value of deliveries in kind to France, including coal, over the next five years has been estimated at a possible total of 1.4 milliard gold marks per annum. If France receives .4 milliard gold marks in coal, not more than 35 per cent of the balance will be credited in the Reparation account. If this were realized, the aggregate deliveries in kind might approach 1 milliard. But, for various reasons, political and economic, this figure is unlikely to be reached, and if as much as .75 milliards per annum is realized from coal and reconstruction deliveries, this ought to be considered a highly satisfactory result.
| 1921–22 (Export 4 Milliards). | 1922–23 and subsequently (Export 6 Milliards). | 1922–23 and subsequently (Export 10 Milliards). | |||||||||
| May 25 | 1.00 | .39 | .65 | ||||||||
| July 15 | .50 | .50 | |||||||||
| Aug. 15 | .39 | .65 | |||||||||
| Oct. 15 | .50 | .50 | |||||||||
| Nov. 15 | .26 | .39 | .65 | ||||||||
| Jan. 15 | .50 | .50 | .50 | ||||||||
| Feb. 15 | .26 | .39 | .65 | ||||||||
| April 15 | .50 | .50 | .50 | ||||||||
| —— | —— | —— | |||||||||
| Total | 2.52 | 3.56 | 4.60 | ||||||||
| Equivalent in dollars at $1 = 4 gold marks | $630,000,000 | $890,000,000 | $1,150,000,000 | ||||||||
Now the payments were so arranged as to present no insuperable difficulties during 1921. The instalment of August 31, 1921 (which did not exceed the sum which the Germans had themselves offered for immediate payment in their counterproposal of April 1921) was duly paid, partly out of foreign balances accumulated before May 1 last, partly by selling out paper marks over the foreign exchanges, and partly by temporary advances from an international group of bankers. The instalment of November 15,1921, was covered by the value of deliveries of coal and other material subsequent to May 1, 1921. Even the instalments of January 15 and February 15, 1922, might be covered out of further deliveries, temporary advances, and the foreign assets of German industrialists, if the German Government could get hold of them. But the payment of April 15, 1922, must present more difficulty; whilst further instalments follow quickly on May 15, July 15, and August 15. Some time between February and August 1922 Germany will succumb to an inevitable default. This is the maximum extent of our breathing space.[44]
That is to say, in so far as she depends for payment (as in the long run she must do) on current income. If capital, non–recurrent resources become available, the above conclusion will require modification accordingly. Germany still has an important capital asset untouched—the property of her nationals now sequestered in the hands of the Enemy–Property Custodian in the United States, of which the value is rather more than 1 milliard gold marks. If this were to become available for Reparation, directly or indirectly, default could be delayed correspondingly.[45] Similarly the grant to Germany of foreign credits on a substantial scale, even three–monthsʼ credits from bankers on the security of the Reichsbankʼs gold, would postpone the date a little, however useless in the long run.
In reaching this conclusion, one can approach the problem from three points of view: (1) the problem of paying outside Germany, that is to say, the problem of exports and the balance of trade; (2) the problem of providing for payment by taxation, that is to say, the problem of the Budget; (3) the proportion of the sums demanded to the German national income. I will take them in turn, confining myself to what Germany can be expected to perform in the near future, to the exclusion of what she might do in hypothetical circumstances many years hence.
(1) In order that Germany may be able to make payments abroad, it is necessary, not only that she should have exports, but that she should have a surplus of exports over imports. In 1920, the last complete year for which figures are available, so far from a surplus there was a deficit, the exports being valued at about 5 milliard gold marks and the imports at 5.4 milliards. The figures for 1921 so far available indicate not an improvement but a deterioration. The myth that Germany is carrying on a vast and increasing export trade is so widespread, that the actual figures for the six months from May to October 1921, converted into gold marks, may be given with advantage:
| Million Paper Marks. | Million Gold Marks.[46] | |||||
| Imports. | Exports. | Imports. | Exports. | Excess of imports. | ||
| 1921, | May | 5,487 | 4,512 | 374.4 | 307.9 | 66.5 |
| ” | June | 6,409 | 5,433 | 388.8 | 329.7 | 59.1 |
| ” | July | 7,580 | 6,208 | 413.7 | 338.7 | 75.0 |
| ” | August | 9,418 | 6,684 | 477.2 | 334.8 | 142.2 |
| ” | September | 10,668 | 7,519 | 436.6 | 307.7 | 128.9 |
| ” | October[47] | 13,900 | 9,700 | 352.6 | 246.0 | 106.6 |
| Total for six months | 53,462 | 40,056 | 2443.3 | 1864.8 | 578.5 | |
In respect of these six months Germany must make a fixed payment of 1000 million gold marks plus 26 per cent of the exports as above, namely 484.8 million gold marks, that is 1484.8 million gold marks altogether, which is equal to about 80 per cent of her exports; whereas apart from any Reparation payments, she had a deficit on her foreign trade at the rate of more than 1 milliard gold marks per annum. The bulk of Germanyʼs imports are necessary either to her industries or to the food supply of the country. It is therefore certain that with exports of (say) 6 milliards she could not cut her imports so low as to have the surplus of 3½ milliards, which would be necessary to meet her Reparation liabilities. If, however, her exports were to rise to 10 milliards, her Reparation liabilities would become 4.6 milliards. Germany, to meet her liabilities, must therefore raise the gold–value of her exports to double what they were in 1920 and 1921 without increasing her imports at all.
I do not say that this is impossible, given time and an overwhelming motive, and with active assistance by the Allies to Germanyʼs export industries; but does any one think it practicable or likely in the actual circumstances of the case? And if Germany succeeded, would not this vast expansion of exports, unbalanced by imports, be considered by our manufacturers to be her crowning crime? That this should be the case even under the London Settlement of 1921 is a measure of the ludicrous folly of the figures given out in the British General Election of 1918, which were six times as high again.