The great changes in money values have made it difficult, in all countries, to obtain estimates of the national income in terms of money under the new conditions. The Brussels Conference of 1920, on the basis of inquiries made in 1919 and at the beginning of 1920, estimated the German income per head at 3900 paper marks. This figure may have been too low at the time, and, on account of the further depreciation of the mark, is certainly too low now. A writer in the Deutsche Allgemeine Zeitung (Feb. 14, 1921), working on the statistics of statutory deductions from wages and on income–tax, arrived at a figure of 2333 marks per head. This figure also is likely to be too low, partly because the statistics must mainly refer to earlier dates when the mark was less depreciated, and partly because all such statistics necessarily suffer from evasions. At the other extreme lies the estimate of Dr. Albert Lansburgh, who, by implication (Die Bank, March 1921), estimated the income per head at 6570 marks.[50] Another recent estimate is that of Dr. Arthur Heichen in the Pester Lloyd (June 5, 1921), who put the figure at 4450 marks. In a newspaper article published in various quarters in August 1921 I ventured to adopt the figure of 5000 marks as the nearest estimate I could make. In fixing on this figure I was influenced by the above estimates, and also by statistics as to the general level of salaries and wages. Since then I have looked into the matter further and am still of the opinion that this figure was high enough for that date.

I am fortified in this conclusion by the result of inquiries which I addressed to Dr. Moritz Elsas of Frankfort–on–Main, on whose authority I quote the following figures. The best–known estimate of the German pre–war income is Helfferichʼs in his Deutschlands Volkswohlstand 1888–1913. In this volume he put the national income in 1913 at 40–41 milliard gold marks, plus 2½ milliards for net income from nationalized concerns (railways, post office, etc.), that it is say, an aggregate of 43 milliards or 642 marks per head. Starting from the figure of 41 milliards (since the national services no longer produce a profit) and deducting 15 per cent for loss of territory, we have a figure of 34.85 milliards. What multiplier ought we to apply to this in order to arrive at the present income in terms of paper marks? In 1920 commercial employees obtained on the average in terms of marks 4½ times their pre–war income, whilst at that time workmen had secured an increase in their nominal wages of 50 per cent more than this, that is to say, their wages were 6 to 8 times the pre–war figure. According to the Statistischen Reichsamt (Wirtschaft und Statistik, Heft 4, Jahrgang 1) commercial employees at the beginning of 1921 earned, males 6⅔ times and females 10 times as much as in 1913.[51] On the basis of the same proportion as in 1920 we arrive at an increase of 10 times in the nominal wages of workmen. The wages index number of the Frankfurter Zeitung for August 1921 estimates the wages per hour at 11 times the pre–war level, but, as the number of working hours has fallen from 10 to 8, these figures yield an increase of 8.8 times in the wage actually received. Since the wages of male commercial employees have increased less than this, since business profits in terms of paper marks only reach this figure of increase in exceptional cases, and since the income of the rentier, landlord, and professional classes has increased in a far lower proportion, an estimate of an 8–fold increase in the nominal income of the country as a whole at that date (August 1921) is likely to be an over–estimate rather than an under–estimate. This leads to an aggregate national income, on the basis of the Helfferich pre–war figures, of 278.80 milliard paper marks, and to an income of 4647 marks per head in August 1921.

No allowance is made here for the loss by war of men in the prime of life, for the loss of external income previously earned from foreign investment and the mercantile marine, or for the increase of officials. Against these omissions there may be set off the decrease of the army and the increased number of women employees.

The extreme instability of economic conditions makes it almost impossible to conduct a direct statistical inquiry into this problem at the present time. In such circumstances the general method of Dr. Elsas seems to me to be the best available. His results show that the figure taken above is of the right general dimensions and is not likely to be widely erroneous. It enables us, too, to put an upper limit of reasonable possibility on our figures. No one, I think, would maintain that in August 1921 nominal incomes in Germany averaged 10 times their pre–war level; and 10 times Helfferichʼs pre–war estimate comes to 6420 marks. No statistics of national incomes are very precise, but an assertion that in the middle of 1921 the German income per head per annum lay between 4500 marks and 6500 marks, and that it was probably much nearer the lower than the higher of these figures, say 5000 marks, is about as near the truth as we shall get.

In view of the instability of the mark, it is, of course, the case that such estimates do not hold good for any length of time and need constant revision. Nevertheless this fact does not upset the following calculation as much as might be supposed, because it operates to a certain extent on both sides of the account. If the mark depreciates further, the average income per head in paper marks will tend to rise; but in this event the equivalent in paper marks of the Reparation liability will, since it is expressed in terms of gold marks, rise also. A real alleviation can only result from a fall in the value of gold (i.e., a rise in world prices).

To the taxation in respect of the Reparation charge there must be added the burden of Germanyʼs own government, central and local. By the most extreme economies, short of repudiation of war loans and war pensions, this burden could hardly be brought below 1000 paper marks per head (at 20 paper marks=1 gold mark), i.e., 60 milliards altogether, a figure greatly below the present expenditure. In the aggregate, therefore, 2170 marks out of the average income of 5000 marks, or 43 per cent, would go in taxation. If exports rise to 10 milliards (gold) and the average income to 6000 paper marks, the corresponding figures are 2500 marks and 42 per cent.

There are circumstances in which a wealthy nation, impelled by overwhelming motives of self–interest, might support this burden. But the annual income of 5000 paper marks per head is equivalent in exchange value (at an exchange of 20 paper marks to 1 gold mark) to $62.50, and after deduction of taxation to about $35, that is to say to less than 10 cents a day, which in August 1921 was the equivalent in purchasing power in Germany of something between 20 cents and 25 cents in the United States.[52] If Germany was given a respite, her income and with it her capacity would increase; but under her present burdens, which render saving impossible, a degradation of standards is more likely. Would the whips and scorpions of any Government recorded in history have been efficient to extract nearly half their income from a people so situated?

For these reasons I conclude that whilst the Settlement of London granted a breathing space to the end of 1921, it can be no more permanent than its predecessors.

EXCURSUS III

THE WIESBADEN AGREEMENT