GERMAN ECONOMICS

Evening Star, Issue 22458, 1 October 1936, Page 3

GERMAN ECONOMICS

STRAIN BEING FELT A MOBILISED POPULATION Germany is rather a breath-taking experience for her visitors this summer (writes a special correspondent from Berlin to the San Francisco ‘Chronicle’). They arc overwhelmed by the magnificence of the Olympic carnival and the spectacle of an entire nation drilled to show its guests a good time. But a studious observer is even more impressed by the opulence of the German scene. The hustle and bustle of the masses, belching factory smokestacks, fine new automobiles, cleaned and renovated house facades, crowded restaurants and cafes, and finally the roaring “boils” that greet Chancellor Hitler and other high Nazi functionaries wherever they appear, all blend into a picture of a happy nation enjoying obvious prosperity. By comparison the rest of Europe, Paris especially, appears to bo pathetically down in the dumps. Recalling that only a few years ago Germany was practically bankrupt and having read about the barsh_ methods of the present dictatorial regime, visitors are both puzzled and astonished, and some of the more impressionable ones are likely to overflow with admiration. It is admitted that other countries are climbing oat of the depression without dictatorships, but Germany seems to be leading the procession, and the questions every visitor is asking are: How does she do it ? Has Hitler worked a miracle, and if so, how? BEHIND THE PICTURE. Now, the brightness of the present picture is due in part to the Olympic show itself, with its outburst of the masses, bands, and flags, which has released for the general consumption goods and food stored up for it so that the poor resident is able to eat well for the moment at least. But it also is obvious that the Olympic carnival is froth, merely the high light of a more substantial display of genuine high pressure economic activity which put everybody to work until there is developing a genine shortage of skilled labour in many industries. And that is what is puzzling the observant visitor. The explanation is less complicated than it seems. Hitler has worked a miracle. That miracle is that he has enlisted the overwhelming part of the German people in a national mobilisation which has every semblance to the mobilisation of other countries on the outbreak of war. . What the purpose of this mobilisation is only the future can reveal; the important point for the present is that such a mobilisation is under way. It has pulled Germany out of a disintegrating economic depression, making her strong, vigorous, and active. But every mobilisation costs money. Considering that Hitler inherited empty Government coffers, the question is “How is he financing it?” The answer to this question is more complicated. LARGE BORROWINGS. First and foremost, he financed it like all mobilisations and wars are financed— namely, on borrowed money The Government is virtually conscripting capital and labour. the latter at low wages the former to take up Government 1.0.U.s with which the country s credit structure is jammed. Beyond that, however. Dr Schacht, Alinister of Economics, has invented numerous new financial devices, too numerous to describe, which are likely to become classic. The most important of these is a device to make the conntry’s foreign, debt work for it. By defaulting on debt charges and repaying loans at a few pennies in the pound, he is able to subsidise German exports and release for domestic credit resources otherwise pledged for foreign debts. How high the public indebtedness Js nobody knows, perhaps not even Dr Schacht himself, because there are too many public and semi-public agencies collecting and spending money besides the Finance Ministry, and because the mark itself is a variable monetary unit, the domestic value of which is fixed by Government fiat, but which sells abroad at a discount between 35 and 75 per cent. The best estimates put the German public debt at upwards of 50,000,000,000 marks. This in itself is not too high compared with the much higher public indebtedness of nations like France and Britain, not to speakof the United States, especially in view of Germany’s reduction of her foreign indebtedness. But the Nationalist Socialist regime is being pinched financially none the less for two reasons. One is that the public debt is obviously beginning to strain the domestic structure. The other is that Germany is unable to get foreign credits, even to buy raw materials which she desperately needs, but ivhich cannot he exchanged for exports because these are insufficient despite subsidies. UNTAPPED RESOURCES. This does not mean that the National Socialist regime is face to face with a crash. Far from it. Germany still has various financial reservoirs she can tap. One is a more complete moratorium on foreign debt service payments. Another is forced domestic loans. Finally there is the resource already employed by many nations—namely, devaluation of the currency. Which one of these Dr Schacht will employ and when depends on exigencies of the situation. Unless the Gcr-nian-American trade conflict is straightened out, the recently-restored part payment of interest on the American Dawes and Young bonds is likely to be stopped. Unless the foreign trade situation improves devaluation is merely a question of time. It would reduce the gold value of the public debt and open to Germany new world markets. It has been figured out that with present German trading methods, which force Germany to sell cheap and buy dear, a 40 per cent, devaluation would increase the purchase price of her raw materials only 10 per cent. For tliis reason sentiment for devaluation is growing steadily. It would not surprise anybody if international stabilisation is seized upon as a welcome opportunity to bring the mark in line with the dollar and the pound again. In the end, however, even dictatorships are unable to suspend economic laws, although they may change the time-table of their operation. Germany worked economic miracles during the "war, and again during the years 1924-1929, but in each case she paid a terrible price for it later. It is still to be demonstrated that the National Socialist regime has found the way to escape the economic consequences of living beyond one’s means.