GERMANY FROM 1918 TO 1923
The loss of a war frequently means the loss of a throne. When Napoleon
Bonaparte found that his enemies were too strong for him he abdicated
and ingloriously fled, leaving his underlings and his exhausted
country to face the consequences of his military adventures. A hundred
years later Wilhelm Hohenzollern followed the same course and sought
safety in Holland. In both instances the government did not survive
the defection of its chief. In 1870 France became a republic because
Napoleon III failed to fulfil the promise to lead his armies to Berlin.
In 1918 Germany became a republic because Wilhelm II failed to fulfil
the promise to lead his armies to Paris. In all three instances, the
successor government endeavored to throw the blame of the war upon
the defunct government and to use the change of régime as a plea for
moderate peace terms. France got off easily in 1815. She did not do
so well in 1870, owing to the triumph of the military party in the
counsels of victorious Germany. And France, remembering what she had
suffered less than half a century before, was not disposed to allow the
disappearance of the “Imperial German Government” in 1918 to enable the
German people to escape the full consequences of their defeat.
The pre-armistice negotiations had not yet been completed when the
German navy mutinied at Kiel on November 5. Munich revolted on November
7. The revolution spread to Berlin on November 9. The movement was
sponsored by the “Workers’ and Soldiers’ Council,” in which the Social
Democratic party assumed the leadership. A coalition Government was
formed, consisting of three representatives each of the Majority and
Minority Socialists, with Herr Ebert, a member of Prince Max’s cabinet,
as Chancellor. In turning over the reins of government to Herr Ebert,
Prince Max announced the abdication of the Kaiser, who had “retired” to
Holland. But the Kaiser did not formally abdicate until November 28.
The new Government issued a proclamation on the evening of November
9 declaring that it would “arrange for an election of a Constituent
National Assembly, in which all citizens of either sex over twenty
years of age will take part with absolutely equal rights.” The state of
siege and the censorship were abolished; amnesty was granted for all
political punishments; and the promise of the eight-hour day was made,
to take effect not later than January 1. By acquiescing promptly to the
_fait accompli_ at Berlin, Hindenburg not only preserved discipline at
the front but also defeated the hopes of the extremists (Spartacists)
to make Germany Bolshevist.
At the beginning of 1919, before the Peace Conference opened, the
Spartacists issued their defiance to the new Government. Rioting,
incited by Karl Liebknecht and Rosa Luxemburg, broke out in Berlin on
January 5 and continued for a week. The Bolshevist revolution failed
because of the hostility of the people and the loyalty of the army. Its
two leaders were killed by mobs. Freed of this peril, the Government
proceeded to the promised General Election on January 19, in which
the remarkable total of 95 per cent of the electors voted. The Social
Democratic party won 163 out of 421 seats. The National Liberals and
Conservatives suffered severely; but the defeat of the extremists was
more striking still. On the whole, the composition of the National
Assembly was very much the same as that of the last Reichstag. The
strength of the Clericals remained about the same. In Prussia, Bavaria,
Saxony and Würtemburg local elections for constituent assemblies, held
during the same month, resulted in an almost similar majority for the
moderate Socialists and Democrats combined.
The new German Parliament opened its sessions at Weimar on February 6;
and on February 11 Herr Ebert was elected president of Germany. For the
premiership (the term prime minister was substituted for chancellor)
Herr Scheidemann was chosen, and he succeeded in forming a strong and
representative Ministry containing able men of all parties. Serious
troubles arose in Munich and Berlin in March, and elsewhere in Germany
in the early spring. But the people kept their heads, and there was
general hope that the new Government would bring internal peace and
secure a reasonable treaty.
But, as we have seen in an earlier chapter, the Peace Conference had no
intention of letting Germany off easily. Nothing was done from outside
to strengthen the existing Government. Rather than sign the Treaty of
Versailles, Count von Brockdorff-Rantzau, the foreign minister, who had
gone as head of the delegation to Versailles, resigned. The Scheidemann
cabinet fell. A new cabinet, less representative than its predecessor,
was formed. Out of desperation the treaty was signed and was ratified
by the National Assembly on July 9, coupled with a unanimous
declaration that “in passing the Bill [to ratify the peace treaty] the
House was merely submitting to the compulsion of superior force.” Two
considerations primed everything, the lifting of the food blockade and
the release of prisoners of war.
The new constitution for the German Republic was passed by the National
Assembly on July 31. It contained a provision giving the right to
representatives of Austria to sit in the Reichstag, but not to vote
“until after the union of Austria with the rest of Germany.” The
Entente Powers declared that this was a violation of Article LXXX of
the Treaty of Versailles and ordered it stricken out. The Germans
answered that self-determination had been definitely promised as a
basis for the durable world peace, and that this article was intended
only to provide for what would inevitably happen, when the European
situation should become stabilized. But the Entente Powers, refusing
discussion, issued an ultimatum; once more Germany had to bow to force.
Disastrous and humiliating as the experiences of the eight months after
Germany laid down her arms had proved, the defeat had brought distinct
advantages, through the revolution, to the German people. There is no
cloud without its silver lining. The deposition of the Hohenzollerns
had been followed by that of the other kings, princes, grand dukes,
and princelings of the German Empire. It was a great step forward in
the unification of Germany, begun by Napoleon in 1803, and continued by
the Prussians between 1849 and 1866. It took a violent cataclysm to get
rid of artificial divisions that had hindered the development of German
national life.
Given the antipathy of the stolid, law-abiding German for engaging in
Bolshevist adventures, even for the sake of avoiding the humiliation
and disadvantages of a Carthaginian peace, the situation would not
have been hopeless had the victors adopted a different attitude toward
Germany. The Government might have been strengthened by sympathy and
understanding of its great and varied problems. The people might have
been assured that if they bent their shoulder to the wheel and paid
for the damages they had wrought, they would be given a chance of
rehabilitation. The hatchet might have been buried, and a chastened
Germany welcomed back into the family of nations.
This was the policy advocated by Premier Nitti of Italy; by Lord
d’Abernon, British ambassador to Berlin; and by a host of Allied
officials, familiar with conditions in Germany, whom I have met on the
Rhine, in Berlin, Munich, and elsewhere, since the treaty was signed.
The policy is aptly expressed by Dr. Nicholas Murray Butler, who said
to the Commercial Club of Cincinnati on April 21, 1917:
Never chant a hymn of hate against those who, for the time being,
are worshiping a false god. A hymn of hate is just as displeasing
in English as it is in German. We are concerned here in a conflict
too solemn and too frightful to leave place for hatred; for if the
issue is such as we wish it to be, we shall lift yet another nation
up to the sublime plane of our own principles, a nation that is
to-day powerfully armed against us.
Instead of helping the German Republic to a new life, the policy of
punishment and fear was adopted, a policy outlined by Professor Andler
of the Sorbonne on March 4, 1917. Said M. Andler:
Politics may have the right to continue the work of war against
a preying nation, even into the time of peace.... Germany must
know that this continuation of war into peace is possible if she
refuses to give the reparations and pledges which the law demands.
There are economic methods of breaking the arrogance of the German
agrarians. There are economic methods of breaking even the new
prosperity of the German peasants. There is a way of checking for
ever the forward impulse of German industry and of curbing the
great industrial capitalism, in coalition with the junkers and, at
the same time, the German working-people who have demanded their
share in the casting of the net attempted by big industries. There
are certain forms of the industrial and agricultural boycott, under
which the German people, surrounded by hostility equivalent to the
worst kind of blockade, would no longer be able to continue the
proud prosperity of its life before the war. The rich classes would
be ruined; the people could no longer bring up their superfluity of
children, formerly so easily absorbed by a flourishing industry;
the peasants and laborers of the decimated population would be
reduced to emigration. But they would go, these German immigrants,
to countries forewarned, countries that would no longer permit any
organized espionage, nor any sly infiltration into their affairs,
nor any masquerade of false naturalization under the Delbrück Law.
Then, perhaps, enlightened at last by the disapproval which would
cause to weigh heavily on them the political system against which
they had never known how to revolt and which they had tolerated in
order to benefit by its military successes, they would again become
the modest Germans of 1848.
The controlling idea of French policy toward Germany was simply this,
that a strong, united, prosperous Germany would never be a changed
Germany. The proof demanded of a change of heart on the part of the
German people would be their willingness to become again “the modest
Germans of 1848.” The political unity of Germany must at all costs
be destroyed. This was a _sine qua non_ of security for France, as
we have explained elsewhere, and the execution of the treaty had as
its principal object to prevent the economic rehabilitation and the
political unity of the German peoples in Europe. In reviewing events
in Germany since 1918 we must keep this fact in mind. No Government,
whatever it accomplished, would be considered as showing works meet for
repentance. The Reparations Commission, backed by a strong army, could
ask whatever it wanted to ask--no limits were set either of time or
amount--and thus prevent the economic and political rehabilitation of
Germany.
Herr Bauer, who succeeded Herr Scheidemann just before the signing of
the Treaty of Versailles, formed a cabinet that lasted month after
month only because the German people were morally and politically
dazed. The extreme Left, demanding Bolshevism, and the extreme Right,
demanding a repudiation of the Treaty of Versailles, offered hopeless
anarchy. Consequently the Center parties combined against a common
danger. The Government could have been stabilized and could have
established its authority only by securing support from the conquerors
of Germany. Hope of a reasonable settlement of the reparations issue
held together the Bauer Government and enabled it to put down the
reactionary Kapp _coup d’état_ in Berlin in March, 1920. But it was
immediately followed by a Spartacist insurrection in the Ruhr and
elsewhere, with which Herr Bauer could not cope. For the Ruhr was in
the neutral zone, and the French refused to permit Germany to use force
there.
The new cabinet, headed by Herr Müller, could not get permission from
the Allies, owing to the intransigeance of the French, to put down the
Communist uprising, which threatened to make all Germany Bolshevist.
In desperation, the Germans went into the Ruhr without waiting for
permission and succeeded in a few days in subduing the Communists.
Invoking an infraction of the treaty, and acting independently of their
allies, the French seized Frankfort. Some of the occupying troops were
blacks, and a machine-gun was turned on a crowd in the streets of
Frankfort.
It is impossible to overestimate the effect in Germany of these events.
Public opinion was convinced that France was seeking, not reparations,
but the destruction of Germany. How else explain her unwillingness to
allow the German Government to put down the Ruhr insurrection, whose
success would have rendered any payments on the reparations account
impossible? How else explain the refusal of France, a fortnight later,
to accept the suggestion of Premiers Lloyd George and Nitti that the
German Government be invited to confer with the Allied Governments on
reparations and disarmament at San Remo? We have seen elsewhere how
the British and Italians at San Remo agreed to stiffen their attitude
toward Germany in return for concessions to Great Britain in the Near
East and to Italy in the Adriatic.
The Weimar Assembly had outlived its usefulness. A new General Election
was held on June 6 to choose the first Reichstag under the new
constitution. While the Center parties still had a majority, it was
greatly reduced, both the Right and Left gaining. The moderates were
drifting to the two extremes. The Nationalist vote increased by three
millions and the Minority Socialist vote by two and a half millions.
This made more unstable than ever the authority of the Government,
especially as the Allies at the Spa conference in July insisted upon
the reduction of the German army to the treaty figure of one hundred
thousand by January 1, 1921. In vain did the Germans plead that an
army of one hundred thousand would make impossible the maintenance
of authority and the insistence upon strict fulfilment of the treaty
obligations. The Government pointed out that the only way to secure
the arrest and trial of the “war criminals”--lists of whom, well up
in the thousands, contained the most prominent names in the army and
navy--would be for the Entente Powers to occupy militarily the whole
of Germany and to take over the running of the country. For no German
Government would have the means to obey this behest.
During the three weeks following the Spa Conference a tremendous effort
was made to fulfil the disarmament clauses of the treaty, which it had
been clearly shown at Spa had thus far been evaded. More than four
thousand heavy guns and field-guns were destroyed, and a systematic
effort was begun to disarm the civilian population. The deliveries
of live stock to France and Belgium were made, and Germany began to
attempt to meet the new schedule of coal deliveries, amounting to two
million tons a month. The Supreme Court at Leipzig was entrusted with
the trial of a few of the minor officers charged by the victors with
violation of the laws of war. Some of these received prison sentences.
The British representatives at the trials reported that they had been
fairly conducted. The French, on the other hand, declared that the
trials were a farce. Exasperated and despairing as they were over
the failure to secure any modification of the Treaty of Versailles,
the German people supported the Government in the efforts it made to
comply with the orders of the Entente Powers. Food and raw materials
the German people simply had to have to continue to exist. So a deaf
ear was turned to the extreme Nationalists. The Germans were equally
adverse to Bolshevism, whose horrors in Russia were described minutely
in the press.
The year 1921, while not so perilous for the new Government from
within, was marked by successive steps on the part of the Entente
Powers that rendered still more difficult than before the return of
Germany to economic health and political stability. On the last day
of 1920 the French Government notified the German Government that the
disarmament stipulation of the treaty had not been fulfilled, the
principal complaint being that the Civic Guards (_Einwohnerwehr_) had
not been disbanded in East Prussia and Bavaria. A few weeks later the
Allies issued an ultimatum, fixing eight dates for the fulfilment of
all disarmament demands, using the occupation of the Ruhr as a threat.
The Disarmament Commission reported on June 30 that its work was over.
But the French Government declared that the surrender of existing war
material and the disbanding of irregular organizations were only a
part of the disarmament problem.[19] Measures had to be taken, by
continuing the control, to prevent future infractions of the treaty,
and it was also essential to supervise and limit the manufacture
of anything in Germany that might conceivably be used for warlike
purposes, such as chemicals, Diesel motors, and a host of other things.
It was maintained that all factories should be dismantled that might be
easily converted into war production. This, of course, was a question
that never could be settled. If carried out to its logical conclusion,
it would mean the stoppage of all large-scale industrial activities in
Germany, and entail the emigration of from ten to twenty-five million
Germans. At the same time that disarmament was introduced as a factor
in industrial control, Germany was hit by two new and crushing blows:
the loss of the industrial portion of Upper Silesia; and the fixing of
the total indemnity at an amount which unbiased experts of all nations
declared meant inevitable default, followed immediately by the collapse
of the economic life of Central Europe.
During all the reparations discussion, Germany had always maintained
that the retention of Upper Silesia was indispensible to the fulfilment
of reparations obligations. But the plebiscite, as provided for
in the treaty, was held on March 20, 1921. The result was an
overwhelming victory for Germany, who received 717,122 votes against
483,514 for Poland. All the towns in the plebiscite territory and
most of the villages gave German majorities. All the urban districts
of the central industrial region--Beuthen, Hindenburg, Kattowitz,
and Königshütte--returned German majorities. This was a tremendous
surprise to the Poles, who with the aid of General Le Rond, head of the
Interallied Commission, and the French army of occupation (my authority
for this statement is the British commissioner and British and Italian
officers), rose in insurrection under Korfanty. The Germans tried to
defend themselves and began to introduce volunteers in arms from the
outside, as the Poles were doing. But the French Government demanded at
Berlin the immediate prohibition of recruiting for the defense of Upper
Silesia. No similar demand was made at Warsaw.
The Allies could come to no agreement in regard to the disposition of
Upper Silesia. The question was turned over to the League of Nations,
which awarded the most valuable industrial part of the territory to
Poland.[20] This was the most severe blow Germany had received since
signing the fateful armistice that ended the World War. It marked the
end of the hope of Germany getting on her feet and resuming her place
in the family of nations by the payment of adequate reparations. But
the blow to Germany was not as great as that to Upper Silesia, which
was artificially divided, leaving large industrial German towns in
the inexperienced hands of Poland, against whom they had voted. A new
irredentist question was born.
The German cabinet resigned, but Herr Wirth consented to head a
new ministry. He made clear, however, his attitude and that of his
colleagues in regard to Upper Silesia in the following declaration:
The German Government sees in the territorial and economic dictates
of the Entente not only an injustice which the German people has
no power to oppose, but also an infringement of the Treaty of
Versailles, an upsetting of the decision arrived at in Geneva and
accepted by the chief Allied Powers. Against this injustice with
the situation which it creates the German Government makes the
solemn protest in the name of international law, the shield of the
oppressed. It is only on account of the threats expressed in the
note, and the desire to avoid as far as possible the misery which
would otherwise light upon the Upper Silesian industrial district
that the German Government consents to nominate the delegates [for
arranging the partition with the Poles] as required by the dictate
of the Powers, without thereby abandoning its previous standpoint.
The “economic dictates” were no less disastrous than the territorial
ones of 1921. At the end of January a conference at Paris formulated a
plan by which Germany was to pay 226 billion gold marks in forty-two
fixed annuities from May 1, 1921, to May 1, 1963, and in addition
forty-two varying annuities each equal to 12 per cent of German
exports. This demand was communicated to Germany, with the threat
that non-acceptance would involve the occupation of the Ruhr. The
foreign minister, Herr Simons, told the Reichstag that these demands
were impossible of fulfilment, infringed the Treaty of Versailles,
foreshadowed the dismemberment of Germany, and meant the economic
enslavement of the German people. Germany refused to entertain them.
Seeing that economists the world over, in France as well as in other
countries, regarded the proposal as absurd, the German refusal was not
answered by military steps, but a new conference was called in London,
at which the Germans were to be allowed to submit counter-proposals.
These were unsatisfactory, and the occupation of Duisburg, Ruhrort,
and Düsseldorf by French, British, and Belgian troops followed. Germany
protested to the League of Nations, but without effect.
Appeals were made for intervention at Washington and the Vatican,
but they were received coldly. The American Government pointed out
that Germany should “at once make directly to the Allied Governments
clear, definite, and adequate proposals which would in all respects
meet its just obligations.” There is no doubt that Germany at this
juncture ought to have recognized the inevitability of making supreme
sacrifices in order to live up to her obligations. Whether the effort
to do this was possible under existing conditions was another matter.
The cabinet evidently thought that there was nothing to be done, and
presented to President Ebert its resignation. In the meantime the
Reparations Commission had fixed the indemnity at 132 billion gold
marks, this sum coming due, as provided for in the treaty, on May 1,
1921; and a further sum of twelve billion gold marks was demanded for
the reconstruction of demolished industrial works. As a guarantee, the
German Government was to send immediately into occupied territory the
gold reserve of the Reichsbank and other banking-houses.
The Entente Powers issued an ultimatum giving Germany until May 12,
under threat of occupation of the Ruhr Valley, to accept unreservedly
all the demands of the Reparations Commission and to obey its orders
without delay. Allied armies were massed on the Rhine with headquarters
at Düsseldorf.
After many efforts a new cabinet was formed on May 10 under Herr Wirth,
a man of great ability, who gathered good men around him. It was just
in time to accept the ultimatum and prevent the further invasion of
Germany.
But the payment of the first billion marks in gold caused the mark to
depreciate one third in value. The Wirth Government seemed unable to
raise more money. An attempt to borrow money abroad failed. In December
the Government told the Reparations Commission that it could not pay
the January and February instalments. The burden under which Germany
was resting was the payment of two billion gold marks annually plus
an amount equal to 26 per cent of her exports. In addition she had to
face deliveries in kind, of which the most important was twenty million
tons of coal per annum. She had to find the money to pay for this
coal, and to buy coal abroad to make up her deficiency resulting from
this loss plus her loss from the alienation of Upper Silesia. How the
reparations crisis developed to the breaking-point, as a result of the
developments of 1922, is related in another chapter.
It is difficult, almost impossible, one must confess, to make a
categorical statement or pass a definitive judgment upon the financial
policy of successive German cabinets since the World War. In every
discussion the assertion of what Germany might have done is based upon
the assumption that there existed ability but not the will to do it.
Just as on the Allied side reparations demands have never been based
on an impartial expert estimate of German capacity to pay, and the
Reparations Commission has been political and not judicial in all its
decisions, on the German side the budget has not taken into account
treaty obligations, and enormous sums seem to have been spent on
railroads and other public work and on shipping. The industrial life
of Germany was not harmed by the war. Her plants and mines remained
intact. She was ready to resume business; and her industrialists
succeeded, despite all the moral and political confusion related in
this chapter, in keeping things going. There has been virtually no
unemployment, no shutting down of factories and mines, no suspension
of transportation service, in a word, no outward sign to indicate
that the country was hard up and unable to pay reparations. On the
other hand, one noted in Germany in 1922 an orgy of spending, a
feverish industrial activity, and the incredible return to bustling
prosperity of ports like Hamburg.[21] Export and import trade seemed
to be thriving. In a dozen cities the Government and private concerns,
principally banks, were undertaking extensive new building.
One was tempted to ask last summer, “Why does not Germany pay?”
Mutilated and buffeted about as she has been since 1918, her people
certainly seem to have kept their spirit, and very largely to have
recovered from the starvation days following the World War. And yet,
as is very clearly shown by the figures, her finances have become
more and more involved until the Government faces bankruptcy. The
first billion gold marks paid under the arrangement of 1921 caused a
violent downward movement in German exchange. Each successive payment
accentuated this movement until the paper mark became virtually
worthless. Before the end of 1922 economists were of the opinion that
Germany would never be able to pay the sums her own experts suggested
in their counter-proposals at Versailles in 1919.
As an economic problem, the reparations issue boils itself down to
three questions: How much is Germany’s surplus per annum? How much
of that surplus can be taken for reparations? How can the amount
taken be transferred abroad? This is the practical side of the
reparations question. To find the answers it was necessary to take into
consideration basic economic laws and internal conditions in Germany.
Only a healthy goose lays golden eggs. Only a strong government can tax
adequately a nation that has representative institutions.
Here the moral factors enter in. The people must have the willingness
to make sacrifices, and must consent to the measures adopted by the
Government. In the matter of reparations, for instance, nothing could
be accomplished unless the German people had impressed upon them that
their moral rehabilitation and the return of Germany to the family
of nations on terms of equality depended upon making the tremendous
sacrifices necessitated by adopting the policy of paying the piper for
what they had done in the World War. But we all know that “the people”
have to be shown the path of duty and honor and interest. Nations are
run by men of large means, with the help of the bourgeois class. Public
opinion is created by the press, pulpit, and platform.
In Germany, ever since the armistice, and much more so during the last
two years, the governing class has had a desperate fight on its hands
simply to prevent the German people from embracing one or the other
of the mad alternatives of despair, extreme Nationalism and extreme
Socialism. The governing class has been successful in appealing to the
instincts of order and conservation of property. But the policy of
the Allies has given the capitalists no incentive or encouragement to
make tremendous sacrifices. Good faith has been lacking on the side
of the victors. Could it be expected on the side of the vanquished?
The bourgeois class was morally sick and physically exhausted. The
insistence of the Allies in calling for gold payments has ruined the
salaried and investing classes throughout Germany. Until the invasion
of the Ruhr reawakened national spirit, the screws put down on the
Germans at French insistence had brought the country to the verge of
social paralysis.
There has been loose talk of rich German industrialists evading
taxation, and when the French and Belgians went into the Ruhr it was
confidently expected that these industrialists would pay up rather
than see their sources of wealth ruined. Public opinion in the United
States, wrongly informed, thought the rich Germans had been “welching”
and would now pay up promptly. Events have proved this belief wrong.
But a study of the fiscal measures of the German Government would have
demonstrated the absurdity of the assumption that the men who had a
stake in the Ruhr had not been paying their taxes and that if they did
so they would furnish ample means for the German Government to pay
whatever the French demanded.
The German tax on fixed incomes--salaries, wages, and
pensions--includes directors of companies in the Ruhr and all their
high-salaried staff, officers in the army, and ministers of state.
Laborers pay only 10 per cent, but the tax goes up to 60 per cent.
As it is paid at the source, evasion is impossible. As for the
capitalists, besides the income tax, they have been subjected to so
many different levies that it would have been impossible for them to
escape heavy taxation during the last four years. On top of the war
profits tax came the emergency law of 1921, which put the Government
in possession of 65 per cent of the largest fortunes. The forced loan
law of 1922 took 10 per cent of all fortunes above a million marks, on
which no interest was to be paid for three years. The legacy duty goes
as high as 70 per cent and cannot be evaded by presents made by the
living, which are taxed up to 60 per cent. Increment-values pay 30 per
cent, and public companies are subjected to a foundation capital tax
of 7½ per cent. Then, there are dividend and corporation profit taxes.
The figures would seem to show that the propertied classes in Germany
are paying 90 per cent of the taxes, and could not, if they would, give
more to meet reparations demands.[22]
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.