A Revision of the Treaty / Being a Sequel to The Economic Consequence of the Peace

by John Maynard Keynes

(5) Fifty per cent of the factories were again working.

(6) Out of 2404 kilometers of railway destroyed, practically the whole had been reconstructed.

It seems, therefore, that, apart from refurnishing and from the rebuilding of houses and factories, the greater part of which had still to be accomplished, the bulk of the devastation was already made good out of the daily labor of France within two years of the Peace Conference, before Germany had paid anything.

This is a great achievement,—one more demonstration of the riches accruing to France from the patient industry of peasants, which makes her one of the rich countries of the world, in spite of the corrupt Parisian finance which for a generation past has wasted the savings of her investors. When we look at Northern France we see what honest Frenchmen can accomplish.[69] But when we turn to the money claims which are based on this, we are back in the atmosphere of Parisian finance,—so grasping, faithless, and extravagantly unveracious as to defeat in the end its own objects.

For let us compare some of these items of devastation with the claims lodged.

(1) 293,733 houses were totally destroyed and 296,502 were partially destroyed. Since nearly all the latter have been repaired, we shall not be underestimating the damage in assuming, for the purposes of a rough comparison, that, on the average, the damaged houses were half destroyed, which gives us altogether the equivalent of 442,000 houses totally destroyed. Turning back, we find that the French Governmentʼs claim for damage to houses was 16,768 million gold marks, that is to say $4,192,000,000. Dividing this sum by the number of houses, we find an average claim of $9,480, per house![70] This is a claim for what were chiefly peasantsʼ and minersʼ cottages and the tenements of small country towns. M. Tardieu has quoted M. Loucheur as saying that the houses in the Lens–Courrières district were worth 5000 francs ($1000) a–piece before the war, but would cost 15,000 francs to rebuild after the war, which sounds not at all unreasonable. In April 1921 the cost of building construction in Paris (which had been a good deal higher some months before) was estimated to be, in terms of paper francs, three and a half times the pre–war figure.[71] But even if we take the cost in francs at five times the pre–war figure, namely 25,000 paper francs per house, the claim lodged by the French Government is still three and a half times the truth. I fancy that the discrepancy, here and also under other heads, may be partly explained by the inclusion in the official French claim of indirect damages, namely, for loss of rent—perte de loyer. It does not appear what attitude the Reparation Commission took up towards indirect pecuniary and business losses arising in the devastated districts out of the war. But I do not think that such claims are admissible under the Treaty. Such losses, real though they were, were not essentially different from analogous losses occurring in other areas, and indeed throughout the territory of the Allies. The maximum claim, however, on this head would not go far towards justifying the above figure, and we can allow a considerable margin of error for such additional items without impairing the conclusion that the claim is exaggerated. In The Economic Consequences of the Peace (p. 127) I estimated that $1,250,000,000 might be a fair estimate for damage to house property; and I still think that this was about right.

(2) This claim for damage to houses is exclusive of furniture and fittings, which are the subject of a separate claim, namely, for 11,417 million gold marks, or about $2,850,000,000. To check this figure let us assume that the whole of the furniture and fittings were destroyed, not only where the houses were destroyed, but also in every case where a house was damaged. This is an overstatement, but we may set it off against the fact that in a good many cases the furniture may have been looted and not recovered by restitution (a large amount has, in fact, been recovered in this way), although the structure of the house was not damaged at all. The total number of houses damaged or destroyed was 590,000. Dividing this into $2,850,000,000, we have an average of nearly $5,000 per house—an average valuation of the furniture and fittings in each peasantʼs or collierʼs house of nearly $5,000! I hesitate to guess how great an overstatement shows itself here.

(3) The largest claim of all, however, is for “industrial damages,” namely, 17,673 million gold marks, or about $4,400,000,000. In 1919 M. Loucheur estimated the cost of reconstruction of the coal mines at 2000 million francs, that is $400,000,000 at the par of exchange.[72] As the pre–war value of all the coal mines in Great Britain was estimated at only $650,000,000, and as the pre–war output of the British mines was fifteen times that of the invaded districts of France, this figure seems high.[73] But even if we accept it, there is still four thousand million dollars to account for. The great textile industries of Lille and Roubaix were robbed of their raw material, but their plant was not seriously injured, as is shown by the fact that in 1920 the woolen industry of these districts was already employing 93.8 per cent and the cotton industry 78.8 per cent of their pre–war personnel. At Tourcoing 55 factories out of 57 were in operation, and at Roubaix 46 out of 48.[74]

Altogether 11,500 industrial establishments are said to have been interfered with, but this includes every village workshop, and about three–quarters of them employed less than 20 persons. Half of them were at work again by the spring of 1921. What is the average claim made on their behalf? Deducting the coal mines as above and dividing the total claim by 11,500, we reach an average figure of nearly $35,000. The exaggeration seems prima facie on as high a scale as in the case of houses and furniture.