THE REPARATION BILL
The Treaty of Versailles specified the classes of damage in respect
of which Germany was to pay Reparation. It made no attempt to assess
the amount of this damage. This duty was assigned to the Reparation
Commission, who were instructed to notify their assessment to the
German Government on or before May 1, 1921.
An attempt was made during the Peace Conference to agree to a figure
there and then for insertion in the Treaty. The American delegates in
particular favored this course. But an agreement could not be reached.
There was no reasonable figure which was not seriously inadequate
to popular expectations in France and the British Empire.[60] The
highest figure to which the Americans would agree, namely, 140 milliard
gold marks, was, as we shall see later, not much above the eventual
assessment of the Reparation Commission; the lowest figure to which
France and Great Britain would agree, namely, 180 milliard gold marks,
was, as it has turned out, much above the amount to which they were
entitled even under their own categories of claim.[61]
Between the date of the Treaty and the announcement of its decision
by the Reparation Commission, there was much controversy as to what
this amount should be. I propose to review some of the details of
this problem, because, if men are in any way actuated by veracity in
international affairs, a just opinion about it is still relevant to the
Reparation problem.
The main contentions of _The Economic Consequences of the Peace_
were these: (1) that the claims against Germany which the Allies
were contemplating were impossible of payment; (2) that the economic
solidarity of Europe was so close that the attempt to enforce these
claims might ruin every one; (3) that the money cost of the damage
done by the enemy in France and Belgium had been exaggerated; (4) that
the inclusion of pensions and allowances in our claims was a breach of
faith; and (5) that our legitimate claim against Germany was within her
capacity to pay.
I have made some supplementary observations about (1) and (2) in
Chapters III. and VI. I deal with (3) here and in Chapter V. with (4).
These latter are still important. For, whilst time is so dealing with
(1) and (2) that very few people now dispute them, the amount of our
legitimate claim against Germany has not been brought into so sharp a
focus by the pressure of events. Yet if my contention about this can
be substantiated, the world will find it easier to arrange a practical
settlement. The claims of justice in this connection are generally
thought to be opposed to those of possibility, so that even if the
pressure of events drives us reluctantly to admit that the latter must
prevail, the former will rest unsatisfied. If, on the other hand,
restricting ourselves to the devastations in France and Belgium, we
can demonstrate that it is within the capacity of Germany to make full
reparation, a harmony of sentiment and action can be established.
With this end in view it is necessary that I should take up again,
in the light of the fuller information now available, the statements
which I made in _The Economic Consequences of the Peace_ (p. 120) to
the effect that “the amount of the material damage done in the invaded
districts has been the subject of enormous, if natural, exaggeration.”
These statements have involved me in a charge, with which Frenchmen
as eminent as M. Clemenceau[62] and M. Poincaré have associated
themselves, that I was actuated not by the truth but by a supposed
hostility to France in speaking thus of the allegations of M. Klotz and
M. Loucheur and some other Frenchmen. But I still urge on France that
her cause may be served by accuracy and the avoidance of overstatement;
that the damage she has suffered is more likely to be made good if
the amount is possible than if it is impossible; and that, the more
moderate her claims are, the more likely she is to win the support of
the world in securing priority for them. M. Brenier, in particular, has
conducted a widespread propaganda with the object of creating prejudice
against my statistics. Yet to add a large number of noughts at the
end of an estimate is not really an indication of nobility of mind.
Nor, in the long run, are those persons good advocates of France’s
cause who bring her name into contempt and her sincerity into doubt by
using figures wildly. We shall never get to work with the restoration
of Europe unless we can bring not only experts, but the public, to
consider coolly what material damage France has suffered and what
material resources of reparation Germany commands. _The Times_, in a
leading article which accompanied some articles by M. Brenier (December
4, 1920), wrote with an air of noble contempt—“Mr. Keynes treats their
losses as matter for statistics.” But chaos and poverty will continue
as long as we insist on treating statistics as an emotional barometer
and as a convenient vehicle of sentiment. In the following examination
of figures let us agree that we are employing them to measure facts and
not as a literary expression of love or hate.
Leaving on one side for the present the items of pensions and
allowances and loans to Belgium, let us examine the data relating
to the material damage in Northern France. The claims made by the
French Government did not vary very much from the spring of 1919, when
the Peace Conference was sitting, down to the spring of 1921, when
the Reparation Commission was deciding its assessment, though the
fluctuations in the value of the franc over that period cause some
confusion. Early in 1919 M. Dubois, speaking on behalf of the Budget
Commission of the Chamber, gave the figure of 65 milliard francs “as a
minimum,” and on February 17, 1919, M. Loucheur, speaking before the
Senate as Minister of Industrial Reconstruction, estimated the cost at
75 milliards at the prices then prevailing. On September 5, 1919, M.
Klotz, addressing the Chamber as Minister of Finance, put the total
French claims for damage to property (presumably inclusive of losses
at sea, etc.) at 134 milliards. In July 1920 M. Dubois, by that time
President of the Reparation Commission, in a Report for the Brussels
and Spa Conferences, put the figure at 62 milliards on the basis of
pre–war prices.[63] In January 1921 M. Doumer, speaking as Finance
Minister, put the figure at 110 milliards. The actual claim which the
French Government submitted to the Reparation Commission in April 1921
was for 127 milliard paper francs at current prices.[64] By that time
the exchange value of the franc, and also its purchasing power, had
considerably depreciated, and, allowing for this, there is not so great
a discrepancy as appears at first sight between the above estimates.
For the assessment of the Reparation Commission it was necessary to
convert this claim from paper francs into gold marks. The rate to be
adopted for this purpose was the subject of acute controversy. On the
basis of the actual rate of exchange prevailing at that date (April
1921) the gold mark was worth about 3.25 paper francs. The French
representatives claimed that this depreciation was temporary and
that a permanent settlement ought not to be based on it. They asked,
therefore, for a rate of about frs. 1.50 or frs. 1.75 to the gold
mark.[65] The question was eventually submitted to the arbitration of
Mr. Boyden, the American member of the Reparation Commission, who,
like most arbitrators, took a middle course and decided that 2.20
paper francs should be deemed equivalent to 1 gold mark.[66] He would
probably have found it difficult to give a reason for this decision.
As regards that part of the claim which was in respect of pensions, a
forecast of the gold value of the franc, however impracticable, was
relevant. But as regards that part which was in respect of material
damage, no such adjustment was necessary[67]; for the French claim had
been drawn up on the basis of the current costs of reconstruction, the
gold equivalent of which need not be expected to rise with an increase
in the gold value of the franc, an improvement in the exchange being
balanced sooner or later by a fall in franc prices. It might have been
proper to make allowance for any premium existing, at the date of the
assessment, on the internal purchasing power of the franc over that of
its external exchange–equivalent in gold. But in April 1921 the franc
was not far from its proper “purchasing power parity,” and I calculate
that on this basis it would have been approximately accurate to have
equated the gold mark with 3 paper francs. The rate of 2.20 had the
effect, therefore, of inflating the French claim against Germany very
materially.
At this rate the claim of 127 milliard paper francs for material damage
was equivalent to 57.7 milliard gold marks, of which the chief items
were as follows:
──────────────────────┬───────────────┬─────────────
│Francs (paper),│Marks (Gold),
│ millions. │ millions.
──────────────────────┼───────────────┼─────────────
Industrial damages │ 38,882 │ 17,673
Damage to houses │ 36,892 │ 16,768
Furniture and fittings│ 25,119 │ 11,417
Unbuilt-on land │ 21,671 │ 9,850
State property │ 1,958 │ 890
Public works │ 2,583 │ 1,174
├───────────────┼─────────────
Total │ 127,105 │ 57,772
──────────────────────┴───────────────┴─────────────
This total is one which I believe to be a vast, indeed a fantastic,
exaggeration beyond anything which it would be possible to justify
under cross–examination. At the date when I wrote _The Economic
Consequences of the Peace_, exact statistics as to the damage done were
not available, and it was only possible to fix a maximum limit to a
reasonable claim, having regard to the pre–war wealth of the invaded
districts. Now, however, much more detail is available with which to
check the claim.
The following particulars are quoted from a statement made by M. Briand
in the French Senate on April 6, 1921, supplemented by an official
memorandum published a few days later, and represent the position at
about that date:[68]
(1) The population inhabiting the devastated districts in April 1921
was 4,100,000, as compared with 4,700,000 in 1914.
(2) Of the cultivable land 95 per cent of the surface had been
releveled and 90 per cent had been plowed and was producing crops.
(3) 293,733 houses were totally destroyed, in replacement of which
132,000 provisional dwellings of different kinds had been erected.
(4) 296,502 houses were partially destroyed, of which 281,300 had been
repaired.
(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 Government’s
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 peasants’ and miners’ 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 peasant’s or collier’s 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.
(4) The remaining item of importance is for unbuilt–on land. The
claim under this head is for 9850 million gold marks, or about
$2,460,000,000. M. Tardieu (_op. cit._, p. 347) quotes Mr. Lloyd
George as follows, in the course of a discussion during the Peace
Conference in which he was pointing out the excessive character of
the French claims: “If you had to spend the money which you ask for
the reconstruction of the devastated regions of the North of France,
I assert that you could not manage to spend it. Besides, the land is
still there. Although it has been badly upheaved in parts, it has not
disappeared. Even if you put the Chemin des Dames up to auction, you
would find buyers.” Mr. Lloyd George’s view has been justified by
events. In April 1921 the French Prime Minister was able to tell his
Senate that 95 per cent of the cultivable land had been releveled and
that 90 per cent had been plowed and was producing crops. Some go so
far as to maintain that the fertility of the soil has been actually
improved by the disturbance of its surface and by its lying fallow
for several years. But apart from its having proved easier than was
anticipated to make good this category of damage, the total cultivated
area (excluding woodland) of the whole of the eleven Departments
affected was about 6,650,000 acres, of which 270,000 acres were in the
“zone of destruction,” 2,000,000 acres in the “zone of trenches and
bombardment,” and 4,200,000 acres in the “zone of simple occupation.”
The claim, therefore, averaged _over the whole area_, works out at
about $370 per acre and, averaged over the first two categories above,
at more than $1000 per acre. This claim, though it is described as
being in respect of unbuilt–on land, probably includes farm buildings
(other than houses), implements, live stock, and the growing crops of
August 1914. As experience has proved that the permanent qualities of
the land have only been seriously impaired over a small area, these
latter items should probably constitute the major part of the claim.
We have also to allow for destruction of woodlands. But even with high
estimates for each of these items, I do not see how we could reach a
total above a third of the amount actually claimed.
These arguments are not exact, but they are sufficiently so to
demonstrate that the claim sent in to the Reparation Commission is
untenable. I believe that it is at least four times the truth. But
it is possible that I have overlooked some items of claim, and it is
better in discussions of this kind to leave a wide margin for possible
error. I assert, therefore, that on the average the claim is not less
than two or three times the truth.
I have spent much time over the French claim, because it is the
largest, and because more particulars are available about it than
about the claims of the other Allies. On the face of it, the Belgian
claim is open to the same criticism as the French. But in this claim a
larger part is played by levies on the civilian population and personal
injuries to civilians. The material damage, however, was on a very
much smaller scale than in France. Belgian industry is already working
at its pre–war efficiency, and the amount of reconstruction still to
be made good is not on a great scale. The Belgian Minister for Home
Affairs stated in Parliament in February 1920 that at the date of the
Armistice 80,000 houses and 1100 public buildings had been destroyed.
This suggests that the Belgian claim on this head ought to be about a
quarter of the French claim; but in view of the greater wealth of the
invaded districts of France, the Belgian loss is probably decidedly
less than a quarter of the French loss. The claim, actually submitted
by Belgium, for property, shipping, civilians and prisoners (that is to
say, the aggregate claim apart from pensions and allowances) amounted
to 34,254 million Belgian francs. Inasmuch as the Belgian Ministry of
Finance, in an official survey published in 1913, estimate the entire
wealth of the country at 29,525 million Belgian francs, it is evident
that, even allowing for the diminished value of the Belgian franc,
which is our measuring rod, this claim is very grossly excessive. I
should guess that the degree of exaggeration is quite as great as in
the case of France.
The British Empire claim is, apart from pensions and allowances, almost
entirely in respect of shipping losses. The tonnage lost and damaged
is definitely known. The value of the cargoes carried is a matter of
difficult guesswork. On the basis of an average of $150 for the hull
and $200 for the cargo per gross ton lost, I estimated the claim in
_The Economic Consequences of the Peace_ (p. 132) at $2,700,000,000.
The actual claim lodged was for $3,835,000,000. Much depends on the
date at which the cost of replacement is calculated. Most of the
tonnage was in fact replaced out of vessels the building of which
commenced before the end of the war or shortly afterwards, and thus
cost a much higher price than prevailed in, _e.g._, 1921. But even so
the claim lodged is very high. It seems to be based on an estimate of
$500 per gross ton lost for hull and cargo together, any excess in this
being set off against the fact that no separate allowance is made for
vessels damaged or molested, but not sunk. This figure is the highest
for which any sort of plausible argument could be adduced, rather than
a judicial estimate. I adhere to the estimate which I gave in _The
Economic Consequences of the Peace_.
I forbear to examine the claims of the other Allies. The details, so
far as they have been published, are given in Appendix No. 3.
The observations made above relate to the claims for material damage
and do not bear on those for pensions and allowances, which are,
nevertheless, a very large item. These latter are to be calculated,
according to the Treaty, in the case of pensions “as being the
capitalized cost at the date of coming into force of the Treaty, on the
basis of the scales in force in France at such date,” and in the case
of allowances made during hostilities to the dependents of mobilized
persons “on the basis of the average scale for such payments in force
in France” during each year. That is to say, the French Army scale is
to be applied all round; and the result, given the numbers affected,
should be a calculable figure, in which there should be little room
for serious error. The actual claims were as follows in milliard gold
marks:[75]
Milliard marks
(gold).
France 33
British Empire 37
Italy 17
Belgium 1
Japan 1
Roumania 4
──
93
This does not include Serbia, for which a separate figure is not
available, or the United States. The total would work out, therefore,
at about 100 milliard gold marks.[76]
What does the aggregate of the claims work out at under all heads,
and what relation does this total bear to the final assessment of
the Reparation Commission? As the claims are stated in a variety of
national currencies, it is not quite a simple matter to reach a total.
In the following table French francs are converted into gold marks at
2.20 (the rate adopted by the Commission as explained above), sterling
approximately at par (on the analogy of the rate for francs), Belgian
francs at the same rate as French francs, Italian lire at twice this
rate, Serbian dinars at four times this rate, and Japanese yen at par.
Milliard marks
(gold).
France 99
British Empire 54
Italy 27
Belgium 16½
Japan 1½
Jugo–Slavia 9½
Roumania 14
Greece 2
────
223½
There are omitted from this table Poland and Czecho–Slovakia, of
which the claims are probably inadmissible, the United States, which
submitted no claim, and certain minor claimants shown in Appendix No. 3.
In round figures, therefore, we may put the claims as lodged before the
Reparations Commission at about 225 milliard gold marks, of which 95
milliards was in respect of pensions and allowances, and 130 milliards
for claims under other heads.
The Reparation Commission in announcing its decision did not
particularize as between different claimants or as between different
heads of claim, and merely stated a lump sum figure. Their figure was
132 milliards; that is to say, about 58 per cent of the sums claimed.
This decision was in no way concerned with Germany’s capacity to pay,
and was simply an assessment, intended to be judicial, as to the sum
justly due under the heads of claim established by the Treaty of
Versailles.
The decision was unanimous, but only in face of sharp differences of
opinion. It is not suitable or in accordance with decency to set up a
body of interested representatives to give a judicial decision in their
own case. This arrangement was an offspring of the assumption which
runs through the Treaty that the Allies are incapable of doing wrong,
or even of partiality.
Nothing has been published in England about the discussions which led
up to this conclusion. But M. Poincaré, at one time President of the
Reparation Commission and presumably well–informed about its affairs,
has lifted a corner of the veil in an article published in the _Revue
des Deux Mondes_ for May 15, 1921. He there divulges the fact that
the final result was a compromise between the French and the British
representatives, the latter of whom endeavored to fix the figure at
104 milliards, and defended this adjudication with skilful and even
passionate advocacy.[77]
When the decision of the Reparation Commission was first announced,
and was found to abate so largely the claims lodged with it, I hailed
it, led away a little perhaps by its very close agreement with my own
predictions, as a great triumph for justice in international affairs.
So, in a measure, I still think it. The Reparation Commission went a
considerable way in disavowing the veracity of the claims of the Allied
Governments. Indeed, their reduction of the claims for items other than
pensions and allowances must have been very great since the claims for
pensions, being capable of more or less exact calculation,[78] can
hardly have been subject to an initial error of anything approaching
42 per cent. If, for example, they reduced the claim for pensions and
allowances from 95 to 80 milliards, they must have reduced the other
claims from 130 milliards to 52 milliards, that is to say, by 60 per
cent. Yet even so, on the data now available, I do not believe that
their adjudication could be maintained before an impartial tribunal.
The figure of 104 milliards, attributed by M. Poincaré to Sir John
Bradbury, is probably the nearest we shall get to a strictly impartial
assessment.
To complete our summary of the facts two particulars must be added.
(1) The total, as assessed by the Reparation Commission, comprehends
the total claim against Germany _and her Allies_. It includes, that
is to say, the damage done by the armies of Austria–Hungary, Turkey,
and Bulgaria, as well as by those of Germany. Payments, if any, made
by Germany’s Allies must, presumably, be deducted from the sum due.
But Annex I. of the Reparation Chapter of the Treaty of Versailles
is so drafted as to render Germany liable for the whole amount. (2)
This total is exclusive of the sum due under the Treaty for the
reimbursement of sums lent to Belgium by her Allies during the war. At
the date of the London Agreement (May 1921) Germany’s liability under
this head was provisionally estimated at 3 milliard gold marks. But it
had not then been decided at what rate these loans, which were made in
terms of dollars, sterling, and francs, should be converted into gold
marks. The question was referred for arbitration to Mr. Boyden, the
United States Delegate on the Reparation Commission, and at the end of
September 1921 he announced his decision to the effect that the rate of
conversion should be based on the rate of exchange prevailing at the
date of the Armistice. Including interest at 5 per cent, as provided by
the Treaty, I estimate that this liability amounts at the end of 1921
to about 6 milliard gold marks, of which slightly more than a third is
due to Great Britain and slightly less than a third each to France and
the United States respectively.
I take, therefore, as my final conclusion that the best available
estimate of the sum due from Germany, under the strict letter of
the Treaty of Versailles, is 110 milliard gold marks, which may be
divided between the main categories of claim in the proportions—74
milliards for pensions and allowances, 30 milliards for direct damage
to the property and persons of civilians, and 6 milliards for war debt
incurred by Belgium.
This total is more than Germany can pay. But the claim exclusive of
pensions and allowances should be within her capacity. The inclusion of
a demand for pensions and allowances was the subject of a long struggle
and a bitter controversy in Paris. I have argued that those were right
who maintained that this demand was inconsistent with the terms on
which Germany surrendered at the Armistice. I return to this subject in
the next chapter.
EXCURSUS V
RECEIPTS AND EXPENSES PRIOR TO MAY 1, 1921
The provision in the Treaty of Versailles that Germany, subject to
certain deductions, was to pay $5000 millions (gold) before May
1, 1921, was so remarkably wide of facts and possibilities, that
for some time past no one has said much about this offspring of the
unimaginative imaginations of Paris. As it was totally abandoned by the
London Agreement of May 5, 1921, there is no need to return to what is
an obsolete controversy. But it is interesting to record what payments
Germany did actually effect during the transitional period.
The following details are from a statement published by the British
Treasury in August 1921:
APPROXIMATE STATEMENT BY THE REPARATION COMMISSION OF DELIVERIES MADE
BY GERMANY FROM NOVEMBER 11, 1918, TO APRIL 30, 1921
Gold Marks.
Receipts in cash 99,334,000
Deliveries in kind:
Ships 270,331,000
Coal 437,160,000
Dyestuffs 36,823,000
Other deliveries 937,040,000
──────────────
1,780,688,000
Immovable property and assets not yet encashed 2,754,104,000
──────────────
4,534,792,000
say $1,130,000,000
The immovable property consists chiefly of the Saar coalfields
surrendered to France, State property in Schleswig surrendered to
Denmark, and State property (with certain exceptions) in the territory
transferred to Poland.
The whole of the cash, two–thirds of the ships, and a quarter of
the dyestuffs accrued to Great Britain. A share of the ships and
dyestuffs, the Saar coalfields, the bulk of the coal and of the “other
deliveries,” including valuable materials left behind by the German
Army, accrued to France. Some ships, a proportion of the coal and other
deliveries, and the compensation, payable by Denmark in respect of
Schleswig, fell to Belgium. Italy obtained a portion of the coal and
ships and some other trifles. The value of German State property in
Poland could not be transferred to any one but Poland.
But the sums thus received were not available for Reparation. There had
to be deducted from them (1) the sums returned to Germany under the Spa
Agreement, namely 360,000,000 gold marks,[79] and (2) the costs of the
Armies of Occupation.
In September 1921 the Reparation Commission published an approximate
estimate, as follows, of the cost of occupation of German territory by
the Allied Armies from the Armistice until May 1, 1921:
───────────────┬─────────────────────┬───────────────
│ │ Cost per man
│ Total cost. │ per day.
───────────────┼─────────────────────┼───────────────
United States │ $278,067,610 │ $4.50
Great Britain │ £52,881,298 │ 14s.
France │ Frs. 2,304,850,470 │ Frs. 15.25
Belgium │ Frs. 378,731,390 │ Frs. 16.50
Italy │ Frs. 15,207,717 │ Frs. 22
───────────────┴─────────────────────┴───────────────
The conversion of these sums into gold marks raises the usual
controversy as to the rates at which conversion is to be effected.
The total was estimated, however, at three milliard gold marks,[80]
of which one milliard was owed to the United States, one milliard to
France, 900 millions to Great Britain, 175 millions to Belgium, and 5
millions to Italy. On May 1, 1921, France had about 70,000 soldiers on
the Rhine, Great Britain about 18,000, and the United States a trifling
number.
The net result of the transitional period was, therefore, as follows:
(1) Putting on one side State property transferred to Poland, the whole
of the transferable wealth obtained from Germany in the two and a
half years following the Armistice under all the rigors of the Treaty,
designed as they were to extract every available liquid asset, just
about covered the costs of collection, that is to say, the expenses of
the Armies of Occupation, and left _nothing_ over for Reparation.
(2) But as the United States has not yet been paid the milliard owing
to her for her Army, the other Allies have received between them on
balance a surplus of about one milliard. This surplus was not divided
amongst them equally. Great Britain had received 450–500 million gold
marks _less_ than her expenses, Belgium 300–350 million _more_ than her
expenses, and France 1000–1200 millions _more_ than her expenses.[81]
Under the strict letter of the Treaty those Allies who had received
less than their share might have claimed to be paid the difference in
cash by those who had received more. This situation and the allocation
of the milliard paid by Germany between May and August 1921 were the
subject of the Financial Agreement provisionally signed at Paris on
August 13, 1921. This Agreement chiefly consisted of concessions
to France, partly by Belgium, who agreed in effect to a partial
postponement of her priority charge on two milliards out of the
first sums received from Germany for Reparation, and partly by Great
Britain, who accepted for the purposes of internal accounting amongst
the Allies themselves a lower value for the coal delivered by Germany
than the value fixed by the Treaty.[82] In view of these concessions
about future payment, the _first_ milliard in cash, received _after_
May 1, 1921, was divided between Great Britain and Belgium, the former
receiving 450 million gold marks in discharge of the balance still due
to her in respect of the costs of occupation, and the balance falling
to the latter as a further instalment of her agreed priority charge.
This Agreement was represented in the French press as laying new
burdens upon France, or at least as withdrawing existing rights from
her. But this was not the case. The Agreement was directed throughout
to moderating the harshness with which the letter of the Treaty and the
arrangements of Spa would have operated against France.[83]
The actual value of these deliveries is a striking example of how
far the value of deliverable articles falls below the estimates which
used to be current. The Reparation Commission have stated that the
credit which Germany will receive in respect of her Mercantile Marine
will amount to about 755 million gold marks. This figure is low,
partly because many of the ships were disposed of after the slump in
tonnage.[84] Nevertheless, this was one of the tangible assets of great
value, which it was customary at one time to invoke in answer to those
who disputed Germany’s capacity to make vast payments. What does it
amount to in relation to the bill against her? The bill is 138 milliard
gold marks, on which interest at 6 per cent for one year is 8280
million gold marks. That is to say, Germany’s Mercantile Marine in its
entirety, of which the surrender humbled so much pride and engulfed so
vast an effort, would about meet a month’s charges.
EXCURSUS VI
THE DIVISION OF RECEIPTS AMONGST THE ALLIES
The Allied Governments took advantage of the Spa meeting (July 1920)
to settle amongst themselves a Reparation question which had given
much trouble in Paris and had been left unsolved[85]—namely, the
proportions in which the Reparation receipts are to be divided between
the various Allied claimants.[86] The Treaty provides that the receipts
from Germany will be divided by the Allies “in proportions which _have_
been determined upon by them in advance, on a basis of general equity
and of the rights of each.” The failure, described by M. Tardieu, to
reach an agreement in Paris, rendered the tense of this provision
inaccurate, but at Spa it was settled as follows:
France 52 per cent.
British Empire[87] 22 ”
Italy 10 ”
Belgium 8 ”
Japan and Portugal ¾ of 1 per cent each;
the remaining 6½ per cent being reserved for the Serbo–Croat–Slovene
State and for Greece, Rumania, and other Powers not signatories of the
Spa Agreement.[88]
This settlement represented some concession on the part of Great
Britain, whose proportionate claim was greatly increased by the
inclusion of pensions beyond what it would have been on the basis of
Reparation proper; and the proportion claimed by Mr. Lloyd George in
Paris was probably nearer the truth (namely that the French and British
shares should be in the proportion 5 to 3). I estimate that France
45 per cent, British Empire 33 per cent, Italy 10 per cent, Belgium
6 per cent, and the rest 6 per cent would have been more exactly in
accordance with the claims of each under the Treaty. In view of all the
facts, however, the Spa division may be held to have done substantial
justice on the whole.
At the same time the priority to Belgium to the extent of $500,000,000
was confirmed; and it was agreed that the loans made to Belgium
during the war by the other Allies, for which Germany is liable under
Article 232[89] of the Treaty, should be dealt with out of the moneys
next received. These loans, including interest, will amount by the end
of 1921 to something in the neighborhood of $1,500,000,000, of which
$550,000,000 will be due to Great Britain, $500,000,000 to France, and
$450,000,000 to the United States.
Under the Spa Agreement, therefore, sums received from Germany in cash,
and credits in respect of deliveries in kind were to be applied to the
discharge of her obligations in the following order:
1. The cost of the Armies of Occupation, estimated at $750,000,000 up
to May 1, 1921.
2. Advances to Germany for food purchases under the Spa Agreement, say
$90,000,000.
3. Belgian priority of $500,000,000.
4. Repayment of Allied advances to Belgium, say $1,500,000,000.
This amounts to about $2,850,000,000 altogether, of which I estimate
that about $750,000,000 is due to France, $850,000,000 to Great
Britain, $550,000,000 to Belgium, and $700,000,000 to the United
States.
Very few people, I think, have appreciated how large a sum is due to
the United States under the strict letter of the Agreement. Since
France has already received almost two–thirds of her share as above,
whilst Belgium has had about one–third, Great Britain less than
one–third, and the United States nothing, it follows that, even on
the most favorable hypothesis as to Germany’s impending payments,
comparatively small sums are strictly due to France in the near future.
The Financial Agreement of August 13, 1921, was aimed at modifying the
harshness of these priority provisions towards France.[90] The details
of this Agreement have not yet been published, but it is said to make
a somewhat different provision from that contemplated at Spa for the
repayment of Allied war advances to Belgium.
The reception of this Agreement by the French public was a good
illustration of the effect of keeping people in the dark. The effect of
the Spa Agreement had never been understood in France, with the result
that the August Financial Agreement, which much improved France’s
position, was believed to interfere seriously with her existing rights.
M. Doumer never had the pluck to tell his public the truth, although,
if he had, it would have been clear that, in signing the Agreement
provisionally, he was acting in the interests of his country.
The mention of the United States invites attention to the anomalous
position of that country under the Peace Treaty. Her failure to ratify
the Treaty forfeits none of her rights under it, either in respect of
her share of the costs of the Army of Occupation (which, however, is
offset to a small extent by the German ships she has retained), or
in respect of the repayment of her war advances to Belgium.[91] It
follows that the United States is entitled, on the strict letter, to a
considerable part of the cash receipts from Germany in the near future.
There is, however, a possible offset to these claims which has been
mentioned already (p. 78) but must not be overlooked here. Under the
Treaty, private German property in an Allied country is, in the case
of countries adopting the Clearing House Scheme, applied in the first
instance to debts owing from German nationals to the nationals of the
Allied country in question, and the balance, if any, is retained for
Reparation. What is to happen in the case of similar German assets
in the United States is still undetermined. The surplus assets, the
value of which may be about $300,000,000,[92] will be retained, until
Congress determines otherwise, by the Enemy Property Custodian. There
have been negotiations from time to time for a loan in favor of Germany
on the security of these assets, but the legal position has rendered
progress impossible. At any rate this important German asset is still
under American control.
FOOTNOTES:
[60] A fairly adequate account of this controversy during the Peace
Conference can be pieced together from the following passages: Baruch,
_Making of Reparation and Economic Sections of the Treaty_, pp. 45–55;
Lamont, _What really happened at Paris_, pp. 262–265; Tardieu, _The
Truth about the Treaty_, pp. 294–309.
[61] For these figures see Tardieu, _op. cit._, p. 305.
[62] It is of these passages that M. Clemenceau wrote as follows in his
preface to M. Tardieu’s book: “Fort en thème d’économiste, M. Keynes
(qui ne fut pas seul, dans la Conférence, à professer cette opinion)
combat, sans aucun ménagement, ‘l’abus des exigences des Alliés’
(lisez: ‘de la France’) et de ses négociateurs.... Ces reproches et
tant d’autres d’une violence brutale, dont je n’aurais rien dit, si
l’auteur, à tous risques, n’eût cru servir sa cause en les livrant à
la publicité, font assez clairement voir jusqu’où certains esprits
s’étaient montés.” (In the English edition, M. Tardieu has caused the
words _fort en thème d’économiste_ to be translated by the words “with
some knowledge of economics but neither imagination nor character”—which
seems rather a free rendering.)
[63] At about the same date, the German Indemnity Commission
(_Reichsentschädigungskommission_) estimated the cost at 7228 million
gold marks, also on the basis of pre–war prices; that is to say, at
about one–seventh of M. Dubois’ estimate.
[64] The details of this claim, so far as they have been published,
are given in Appendix No. 3. The above figure comprises the items
for Industrial Damages, Damage to Houses, Furniture and Fittings,
Unbuilt–on Land, State Property, and Public Works.
[65] See M. Loucheur’s speech in the French Chamber, May 20, 1921.
[66] For this rate to be justified the exchange value of the franc in
New York must rise to about 11 cents.
[67] M. Loucheur’s statement to the French Chamber implied that the
rate of conversion was applicable to material damage as well as to
pensions, and I have assumed this in what follows; but precise official
information is lacking.
[68] The figures of damage done, given by M. Briand, are generally
speaking rather lower than those given ten months earlier (in June
1920) in a report by M. Tardieu in his capacity as President of the
Comité des Régions Dévastées. But the difference is not very material.
For purposes of comparison, I give M. Tardieu’s figures below together
with those of the amount of reconstruction completed at that earlier
date:
Destroyed. Repaired.
Houses totally destroyed 319,269 2,000
Houses partially destroyed 313,675 182,000
Railway lines 5,534 kilos. 4,042 kilos.
Canals 1,596 ” 784 ”
Roads 39,000 ” 7,548 ”
Bridges, embankments, etc. 4,785 ” 3,424 ”
Destroyed. Cleared from Leveled. Plowed.
shells.
Arable land
(hectares) 3,200,000 2,900,000 1,700,000 1,150,000
Destroyed. Reconstructed Under
and working. reconstruction.
Factories and works 11,500 3,540 3,812
A much earlier estimate is that made by M. Dubois for the Budget
Commission of the French Chamber and published as Parliamentary Paper
No. 5432 of the Session of 1918.
[69] A more recent estimate (namely, for July 1, 1921) has been given,
presumably from official sources, by M. Fournier–Sarlovèze, Deputy for
the Oise. The following are some of his figures:
INHABITED HOUSES
At the Armistice: Totally destroyed 289,147
Badly injured 164,317
Partially injured 258,419
By July 1921: Entirely rebuilt 118,863
Temporarily repaired 182,694
PUBLIC BUILDINGS
─────────────┬─────────┬───────────┬────────┬────────┬───────────
│ │ Municipal │ │ Post │
│Churches.│ Buildings.│Schools.│Offices.│Hospitals.
─────────────┼─────────┼───────────┼────────┼────────┼───────────
Destroyed │ 1,407 │ 1,415 │ 2,243 │ 171 │ 30
Damaged │ 2,079 │ 2,154 │ 3,153 │ 271 │ 197
Restored │ 1,214 │ 322 │ 720 │ 53 │ 28
Temporarily │ │ │ │ │
patched up │ 1,097 │ 931 │ 2,093 │ 196 │ 128
─────────────┴─────────┴───────────┴────────┴────────┴───────────
CULTIVATED LAND
Acres.
At the Armistice: Totally destroyed 4,653,516
By July 1921: Leveled 4,067,408
Plowed 3,528,950
LIVE STOCK
─────────────────────────────┬────────────┬─────────────┬────────────
│ 1914. │ Nov. 1918. │ July 1921.
─────────────────────────────┼────────────┼─────────────┼────────────
Cattle │ 890,084 │ 57,500 │ 478,000
Horses, donkeys, and mules │ 412,730 │ 32,600 │ 235,400
Sheep and goats │ 958,308 │ 69,100 │ 276,700
Pigs │ 357,003 │ 25,000 │ 169,000
─────────────────────────────┴────────────┴─────────────┴────────────
[70] Even if we assumed that every house which had been injured at all
was totally destroyed, the figure would work out at about $7,000.
[71] M. Brenier, who has spent much time criticizing me, quotes
with approval (_The Times_, January 24, 1921) a French architect as
estimating the cost of reconstruction at an average of $2,500 per
house, and quotes also, without dissent, a German estimate that the
pre–war average was $1,200. He also states, in the same article, that
the number of houses destroyed was 304,191 and the number damaged
290,425, or 594,616 in all. Having pointed out the importance of not
overlooking sentiment in these questions, he then multiplies $2,500,
not by the number of houses but by the number of the _population_,
and arrives at an answer of $3,750,000,000. What is one to reply to
sentimental multiplication? What is the courteous retort to controversy
on these lines? (His other figures are clearly such a mass of
misprints, muddled arithmetic, confusion between hectares and acres
and the like, that, whilst an attack could easily make a devastated
area of them, it would be unfair to base any serious criticism on this
well–intentioned farrago. As a writer on these topics, M. Brenier is
about of the caliber of M. Raphaël–Georges Lévy.)
[72] M. Tardieu states that, on account of the subsequent rise in
prices, M. Loucheur’s estimate has proved, in terms of paper francs,
to be inadequate. But this is allowed for by my having converted paper
francs into dollars at the par of exchange.
[73] The Lens coal mines, which were the object of most complete
destruction, comprised 29 pits, and had, in 1913, 16,000 workmen with
an output of 4 million tons.
[74] I take these figures from M. Tardieu, who argues, most
illuminatingly, in alternate chapters, according to his thesis for the
time being, that reconstruction has hardly begun, and that it is nearly
finished.
[75] Francs are here converted at 2.20 to the gold mark and the £
sterling at the ratio of 1:20.
[76] This is exactly the figure of the estimate which I gave in _The
Economic Consequences of the Peace_ (p. 160). But I there added: “I
feel much more confidence in the approximate accuracy of the total
figure than its division between the different claimants.” This proviso
was necessary, as I had over–estimated the claims of France and
under–estimated those of the British Empire and of Italy.
[77] “Elle avait été le résultat d’un compromis assez pénible entre la
délégué français, l’honorable M. Dubois, et le représentant anglais,
Sir John Bradbury, depuis lors démissionnaire, qui voulait s’en tenir
au chiffre de cent quatre milliards et qui avait défendu la thèse du
gouvernement britannique avec une habileté passionnée.”
[78] The chief question of legitimate controversy in this connection
was that of the rate of exchange for converting paper francs into gold
marks.
[79] Made up of about £5,500,000 advanced by Great Britain, 772,000,000
francs by France, 96,000,000 francs by Belgium, 147,000,000 lire by
Italy, and 56,000,000 francs by Luxembourg.
[80] The German authorities have published a somewhat higher figure.
According to a memorandum submitted to the Reichstag in September
1921 by their Finance Minister, the costs of the Armies of Occupation
and the Rhine Provinces Commission up to the end of March 1921 were
mks. 3,936,954,542 (gold), in respect of expenditure met in the first
instance by the occupying Powers, and subsequently recoverable from
Germany, _plus_ mks. 7,313,911,829 (paper), in respect of expenditure
directly met by the German authorities.
[81] I do not vouch for the accuracy of these figures, which are rough
estimates of my own on the basis of incomplete published information.
[82] On the other hand Great Britain’s view was adopted as to the
valuation of shipping.
[83] In view of the political difficulties in which this Agreement
involved M. Briand’s Cabinet, the matter was apparently adjusted by
Great Britain and Belgium receiving their quotas as above, “subject to
adjustment of the final settlement” of the questions dealt with in the
Agreement. The net result on September 30, 1921, was that, including
the above sum, Great Britain had been repaid £5,445,000 in respect
of the Spa coal advances, and had also received, or was in course of
collecting, about £43,000,000 towards the expenses of the Army of
Occupation (approximately £50,000,000). Thus, as the result of three
years’ Reparations, Great Britain’s costs of collection had been about
£7,000,000 more than her receipts.
[84] To value these ships at what they fetched during the slump, yet to
value Germany’s liability for submarine destruction at what the ships
cost to replace during the boom, appears to be unjust. My estimate (in
_The Economic Consequences of the Peace_, p. 174) of the value of the
ships to be delivered was $600,000,000.
[85] M. Tardieu (_The Truth about the Treaty_, pp. 346–348) has given
an account of the abortive discussion of this question at the Peace
Conference. The French obtained at Spa a ratio very slightly _more_
favorable to themselves than that which they had claimed and Mr. Lloyd
George had rejected at Paris.
[86] For a summary of the text of this Agreement see Appendix No. 1.
[87] At the conference of Dominion Prime Ministers in July 1921 this
share was further divided as follows between the constituent portions
of the Empire:
United Kingdom 86.85 │ New Zealand 1.75
Minor colonies .80 │ South Africa .60
Canada 4.35 │ Newfoundland .10
Australia 4.35 │ India 1.20
[88] The Spa Agreement also made provision that half the receipts from
Bulgaria and from the constituent parts of the former Austro–Hungarian
Empire should be divided in the above proportions, and that, of the
other half, 40 per cent should go to Italy and 60 per cent to Greece,
Rumania, and Jugoslavia.
[89] “Germany undertakes ... to make reimbursement of all sums which
Belgium has borrowed from the Allies and Associated Governments up to
November 11, 1918, together with interest at the rate of 5 per cent per
annum on such sums.” The priority for this repayment arranged at Spa is
a little different from the procedure contemplated in the Treaty, which
provided for repayment not later than May 1, 1926.
[90] See above, p. 135.
[91] Article 1 of the Treaty of Peace between Germany and the United
States, signed on August 25, 1921, and since ratified, expressly
stipulates that Germany undertakes to accord to the United States
all the rights, privileges, indemnities, reparations, and advantages
specified in the joint resolution of Congress of July 2, 1921,
“Including all the rights and advantages stipulated for the benefit
of the United States under the Treaty of Versailles which the United
States shall enjoy notwithstanding the fact that such Treaty has not
been ratified by the United States.”
[92] According to a statement published in Washington in August
1921 the Custodian had in his hands German property to the value of
$314,179,463.