BAD TRADE “MADE IN GERMANY.”

Manawatu Herald, Volume XLIV, Issue 2473, 29 August 1922, Page 4

BAD TRADE “MADE IN GERMANY.”

TRICKY FINANCE AND ITS EFFECT ON US. (Contributed to the London Sunday Pictorial by Ellis Barker, who explains the apparent miracle oi cheap German production which' is almost ruining British industries.) In his recent tour of Germany, Sir Sidney Low found that unemp oyment was practically unknown and that tne workers were well dressed and happy and had plenty of money. While victorious England suiters tiom unprecedented unemployment, trade is so good in Germany that hundreds ol thousands of immigrant workers have to be employed. , ~ German goods are produced and sold at a far lower price than similar British goods. We often read of German tenders being handed in at halt the cost of the lowest British tender. 11ns is probably the principal cause of unemployment in Great Britain. • How is the two-fold miracle ot work-ing-class prosperity and of production at sometimes half the British pi ice achieved. The usual explanation is that Germany can undersell British goods in all foreign markets, and even in the home market, because of the decline of the German exchange. That explanation may satisfy financiers and political economists/but it is not very enlightening. Let us examine the facts furfcher. .. The cost of manufacturing goods consists principally of wages and of what are called “overhead expenses. These so-called “overhead expenses include, among other running costs, the important items of taxation, interest and rent. Wages and overhead expenses are the big items in any business, and it is on these that Germany has us beaten. In taxation alone Germany has a tremendous advantage. British revotants, of whom about 2,000,000 are unemployed. British taxation is therefore twelve times as heavy as German taxation, and it is about fifteen times as heavy if we allow for the difference of population. Let us err on the safe side and assume our taxes are only ten times as high. What will be the effect of that difference upon industry. _ Compare the position of two works of identical capacity, one in Germany and one in England, producing the identical goods with the identical machinery, and the identical number of workers. If the English concern has to pay £IOO,OOO in taxes while the German establishment need pay only £IO,OOO, British trade ini most seriously handicapped. 'I lie German goods can be sold for £90,000 less than the British, nue during the coming year will, according to Sir Robert Horne’s estimate, come to £956,600,000. Germany’s national revenue during the same period will, according to the official German forecast, come to about £80,000,000 in English money. Germany has 62,000,000 inhabitants who are fully employed, while the United Kingdom has 48,000,(XJ0 inhabiFOURPENGE A WEEK FOR RENT! In Germany, as over here, there is a Rent Restriction Act, but recently permission has been given to raise rents by about 100 per cent. But since the mark lias fallen to about one-sixtieth its sterling value, German manufacturers and shopkeepers pay on their premises only one-thirtieth the-real pre-war rent.

Before the war working men’s rents in England and in Germany were very much alike. A 10s rent here corresponded to a 10 mark rent in Germany. If we assume that the 10 mark rent has been raised to 20 marks, the German worker pays now 4d a week in rent in English 1 money. The result is that the German workers live practically rent free, and that German workers with a wage of £2 10s per week are, on this score alone, as well off as English workers with a wage of £3 a week. There are, however, further disguised subsidies to the German workers. Essential foodstuffs and fuel have been sold far below the cost of production owing to subsidies paid by the State. The railways and the post office and other public services have been run at an enormous loss. In this way the cost of living has been artificially cheapened. Income tax is at least ten times as heavy in this country as in Germany, but British indirect taxes also are far more onerous. Good cigarettes can be bought in Germany at 1 mark each, which is less than id. A cup of tea, a cup of coffee, a small glass of spirits or a glass of beer costs as a rule about 5 marks or Id. We can now understand why the German workers who receive apparently such low money wages throng the places of amusement, and may always be seen drinking or smoking.

Interest on borrowed money is a most important factor in business, it bus a very potent influence upon the cost of production. But in Germany, interest on old loans, such as mortgages, debentures, preference shares, etc., has been reduced to about one-sixth as a result of the deflation of the mark. While rent has fallen to one-thirtieth the pre-war amount and interest to about one-sixtieth, the price of goods in Germany, measured in marks, has risen approximately sixty-fokl, and profits, measured in paper money, have increased at a similar rate. Companies which used to distribute, let us say, 10 per cent, in dividends, often earn 200, 300 or 400 per cent., but they disguise their earnings by watering their capital so much that the dividend distributed comes only to 10 or 20 per 'cent, on the hugely-inflated stock.

So now we see why the German working men are prosperous on wages which, if converted into sterling, seem pitifully low, and why the German industries are fully employed and are rble to sell their production, at prices with which England cannot compete. At first sight it would appear that prosperity and full employment might be created in this country by diluting the currency as Germany has done. That, indeed, has been urged by many short-sighted people. Germany’s prosperity cannot last. Its basis is too artificial. Before long there will be a terrible crash. If the dilution of the currency was a .short cut to prosperity, Poland and Austria and Russia should'be still more flourishing, because the dilution of the currency has proceeded much farther than in Germany. Germany’s leaders proclaim that they cannot pay the reparations demanded by France, and they have refused to place their finances under Allied control as the Reparations Commission has demanded. It is obviously in the interest of England that Germany should compensate France not by means of an international loan, but by raising adequate taxes.

As long as English taxation is at least ton times as heavy as German taxation, and as long as Germany is allowed to squander her resources as she has done hitherto, France will not receive compensation for the damage done in her Eastern provinces, and England will continue to suffer from unemployment.

This country pays at least £800,000,000 per year in taxes more than Germany. That burden is crushing our trade. Ae long as it continues defeated Germany will flourish at England’s expense.