REPATRIATION.

Taranaki Daily News, 10 March 1922, Page 8

REPATRIATION.

SOME ECONOMIC FEATURES OF THE SUBJECT. A DIFFICULT PROBLEM. (By Professor D. B. Copland in the Lyttelton Times.) At last adequate recognition is to be given to the economic troubles of Europe. Political considerations have hitherto been paramount in the peace settlement, and many grave errors have been made by politicians through their ignorance or disregard of the economic situation. But the convention of a world economic conference at Genoa shows that the nations are prepared at last to discuss frankly the material ills of post-war Europe. Now, this conference opens up an entirely new phase of the problem, for Britain and Italy will enter the negotiations with troubled minds regarding the economic features of the Versailles settlement, whilst Germany and Russia will be present to state for the first time their own particular views. Moreover,* the probable participation of the United States in the conference increases the possibility of a liberal settlement. Of all the economic problems facing Europe at the present moment, the reparation question, though perhaps not the most fundamental, has certainly the greatest disturbing influence on the political situation. This is only natural, for the peoples of the world have been misled by “electioneering politicians, grave financiers and august members of the judiciary who have been speaking nonsensical froth about extracting twenty thousand millions from Germany.” Such were the recent remarks of Mr. Churchill, himself one of the “electioneering politicians,” when expressing his delight “at the steady, remorseless march of the statesmen of all countries during the last few months towards financial sanity.” This development is particularly marked in England and Italy, and this is doubtless due to the importance of international trade in these countries. GERMANY IMPOVERISHED. But while the logic of events has been steadily promoting a healthy outlook in the reparation problem, econo- : mists have for, the past three years warned Governments of the impossibility of carrying out their original indemnity proposals. After a careful study of the Franco-German indemnity of 1870-1, one authority lays down three conditions for a successful indemnity—a short war, great wealth in the defeated nation, and an overwhelmino victory. In these circumstances a victorious nation could levy considerable indemnity witliout injury to itself. But the conditions were not present in 1919. There the victory was complete, but the war was long and exhausting for all European belligerents, and Germany, along with other nations, was impoverished. Further, the peace, settlements and post war national animosities imposed obstacles upon international trade, so that the development of industry and commerce by which alone reparations could be paid, was seriously retarded. It is impossible here to discuss fully the various ways in which the Versailles Treaty sought to control German trade /and industry in favor of allied counI tries. Coal and iron deposits were

ceded to neighboring States, shipping services taken, colonial rights abrogated and some important materials, such as dye-stuffs, were to be handed over from year to year. As Mr. Keynes put it —“the economic clauses of the treaty are comprehensive and little has been overlooked which might impoverish Germany now or in future.” I The justice of many of these measures may be easily established, but when placed alongside the reparation demands they constitute an impossible obligation. The ability of Germany to

pay is dependent upon (1) her immediate transferable wealth, (2) the value of property in the territory and (3) the excess of exports over imports constituting an annual payment. Under (1) the total available from her gold supply, shipping and foreign securities is not more than £200,000,000, and from the second source the amount is estimated at only £<100,000,000. We are therefore thrown back on the third source. Germany’s ability here to make aji annual payment is dependent upon turning an “adverse” trade balance of nearly £75,000,000 before the war into a “favorable” balance—that is, promoting an excess of exports over imports equal to the annual payment required. This gives rise to the question of increasing exports. What particular exports can Germany increase? In 1913 her largest exports were in iron goods, machinery, chemicals and dyes and fuel. Now on the lowest estimate the present reparation obligations amount to £225,000,000 per annum and it is difficult to see how Germany can increase her exports of the above mentioned goods by this amount. Authorities are agreed that it is impossible, though there is some disagreement as to the actual amount which Germany can pay. It is variously estimated at between 50 and 100 millions per annum. This differs very much from the original terms, which required a payment of 450 millions ultimately. But these terms have been steadily watered down, despite the opposition of the French, and they must be further reduced. TWO COURSES OPEN. But now imagine the trade situation resulting from these payments. There are two courses open to Germany —she may export raw materials directly to the Allies or she may send manufactured goods, mainly machinery, to Russia, the Argentine or other undeveloped areas. In the former case, Allied trade may suffer, and especially true of English trade. Germany’s staple export industries coincide very closely with British, and there would be some serious disturbances to British industry. In the latter case, German interests in undeveloped areas would steadily develop and compete seriously with Allied interests. 'Added to this would be the steadily growing stream of rural produce reaching European markets as a result of this expansion. What would be the position of agriculture in these circumstances ?

These simple economic truths must be kept in mind in viewing. European developments during the next few months. Their repetition here will but serve to remind people that the business of reparation is very different from the payment of an internal debt, and that political decisions must bear some relation to their economic basis. It is quite possible and desirable to impose reparation obligations upon Germany. By judicious measures, such as the Wiesbaden agreement, payments in kind can be exacted with a minimum disturbance to industry, but a continuance of present policy must eventually bring serious financial troubles in Germany and elsewhere. In revising the economic basis of reparation, everyone should wish the Genoa Conference well.