It is uncertain yet whether the London Agreement embodying the Dawes
Report will actually be fulfilled by Germany. In my belief it will
not be fulfilled. It is impossible for me to believe that Germany is
capable of paying a hundred and twenty-five million pounds sterling
and more in a rising scale for an indefinite number of years. England
could not do so, and England is richer than Germany. The American
debt, which is being paid off at the rate of £35,000,000 a year, is
a burden which makes Great Britain breathe hard. That is hardly more
than one quarter of what the German people are expected to pay, and I
do not think they can do so for more than a few years. They can only
do so, as I have pointed out, in one way: by creating a trade balance
in their favour which would enable them to transfer that sum to their
creditors after paying for the essential services of their own nation.
If they are able to get such a trade balance it will mean that they
are overwhelming the world markets with German goods. Who is going to
let them do so? The United States would surely put up barriers against
their manufactured articles. Great Britain will not admit them in such
an overpowering quantity, whatever her theoretical allegiance to Free
Trade. In other markets these cheap German goods will oust British and
American competitors. The factories of Great Britain will be producing
articles at a price which other nations will refuse to pay when
Germany is canvassing for contracts. Germany will default again, I am
certain, unless by a miracle of industry her people, on slave wages,
capture the world’s trade, which would be worse than default to British
manufacturers and in a less degree to those in America.
Whatever happens it is a serious outlook, because default would mean
a new political crisis in Europe—all the old wounds open again—and
success would ruin those who have imposed the Agreement. The horns of
that dilemma were seen years ago by M. Loucheur, the greatest expert
of economics in France. Speaking before the Senate he said: “Germany
cannot pay these indemnities. If she were able to pay it would make her
master of the world’s trade. Let us therefore insist on security rather
than on reparations.”
The revival of Germany, limited by these enormous reparations, will
undoubtedly increase the general prosperity of all European nations.
The restoration of German purchasing power by a loan of £40,000,000
from Great Britain and the United States, stabilising her monetary
system, will help world trade everywhere to the extent that Germany
buys raw material for her industries and additional luxuries and
comforts in foreign countries. Australia and Canada will benefit
by purchases of wool and meat. They will buy more from the Mother
Country in consequence. Holland, Denmark, Sweden, Italy and France
will exchange more products. The wheel of world trade will turn more
rapidly. Great Britain and the United States will find Germany a
better customer. But Great Britain will also find Germany a stronger
competitor, and the advantages which may come to the British people
by the recovery of prosperity in Europe may be outweighed by that
competition owing to the difference between dear labour and cheap
labour. Already, ten years after the beginning of the war, Germany
is able to offer steel to Middlesbrough at thirty shillings a ton
less than it costs to manufacture steel in Middlesbrough itself! I
have the greatest sympathy with organised labour in England which
is endeavouring to maintain its standard of life and wages and even
to improve them. But the Socialists who are legislating for shorter
hours, more pay, larger doles for unemployed, national subsidies in the
building trade, and national money for providing work, are up against
the industry of German labour which is working nine and ten hours a
day, instead of the eight hours in England, at less than half the rate
of pay. In great industrial cities like Sheffield something like a
third of the working population is living on charity or the official
dole. It is impossible for a nation to maintain its economic life on
such a tragic basis. It must be put upon sounder foundations or come
down with a crash.