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From International Press Correspondence, Vol. 3 No. 16, 15 February 1923, pp. 126–127.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
The value of this year’s crops amounts to 7½ milliard dollars. To this must be added the profits of cattle raising, or a quarter of a milliard. Roughly estimated: an income of 7¾ milliard dollars. From this sum must be deducted the workers’ wages. These amounted to in 1916 ¾ milliard, and for 1922 may be estimated at one milliard. Outlay for machinery, tools, tractors, and artificial manures may be estimated at IM milliards. There thus remains a total income of 5,5 milliard dollars for 6,500,000 farmers, that is, an average yearly income of $850 per farmer, counting, of course, wife and children.
In 1917 the wage level was about the same as at the present time, and at that time the average annual earnings of the
|
Railwaymen |
= $1072 |
|
Building trade |
= 973 |
|
Craftsmen |
= 945 |
|
Factory workers |
= 1022 |
|
Miners |
= 1025 |
The farmer earns less than the worker. And his earnings are further reduced by the depreciation of the soil. There is no extensive tract of country where a considerable number of the farms – probably the majority – do not deteriorate. More fertility is drawn out of the land than is returned to it
Besides this, the interest on the capital invested, about $10,060 per farm, is to be deducted at 5 per cent, $500 yearly, from the income of the farmer. The farmer’s family is thus left with a wage income of $350.
The rise in price of arable land has been pointed out But this is entirely incorrect. A great part of the land is going down in price, or where the price is maintained, the land cannot be sold. The whole family of the farmer earns less annually than the man alone would earn in the city! This is the chronic evil of the farmers, and has been in every age.
But the farmers of America will not tolerate this. An extensive emigration into the cities is on. The development of the railway and the motor car has so far absorbed the young generation of farmers.
This process will lead to a world-wide famine. The virgin districts have already been conquered, and the consumers multiply mightily. If the disparity between the monopoly prices of industrial goods and the fluctuating prices of farming products, which today, are even 25% lower than in pre-war times, is not removed, the farmers face complete ruin. Measures must be adopted for fixing the prices on farming products,
We have elaborated upon this study, because it treats of a question which will decide Europe’s fate in the next few years. In our opinion the question of whether the United States will adopt a pro-European or an anti-European policy depends on the American farmers. The farmers of the United States – where there is no more virgin land, as in Canada, Argentina, or Siberia – must receive better prices for their products. This will only be possible if the buying capacity of Europe is enhanced. This implies the reconstruction of Central Europe, above all of Germany. Along these lines the interests of the farmers and of the American bourgeoisie coincide. Germany, as an industrial colony of America, supplies cheap labor lor the capitalist, cheap industrial articles for the farmers, and at the same time a better market for farming products. The sufferers would be the American-workers, who would have dear food and lower wages.
The attitude adopted by the farmers will be of great importance in the bitter struggle between capital and labor in the United States. The capitalists seek to incite the farmers against the workers with the argument that the workers earn more than the farmers, and that the high wages are the cause of the high prices of industrial articles. They propose that the tanners form an alliance against the workers! The cheap labor of Germany is one point against the workers in this fight
The conflict between the pro-European and anti-European tendencies in American politics continued during the last quarter of 1922. But though the struggle is not yet at an end, it seems as if the pro-European policy gains in strength, despite the acceptance of the high protective duties. The demand of the Chamber of commerce, that the United States send representatives to the Reparations Commission; the demand that the Senate should agree to a settlement of the English debt on some other basis than that of payment of 4½% interest and principal; America’s offer to send a commission to ascertain Germany’s paying capacity; all this proves that the American bourgeoisie is preparing to interfere decisively, on the side of England, in European affairs, and to incorporate Germany in its imperialist world system. America is only waiting until France has suffered economic shipwreck in the attempt to subjugate Germany by force.
Germany’s economic position during the last quarter of 1922 can be characterized by the following main points:
The depreciation of the mark and the attempts at stabilization.
During the period of this report, the depreciation of the mark has become catastrophic. Within 3 months, the mark, compared with the dollar, has fallen to about a quarter of its value. The Berlin quotations for a dollar were:
4 Oct. 2,100 M.; 3 Nov. 6,000 M.; 8 Nov. over 9,000 M.; 16 Dec. 6,400 M.;
4 Jan. 1923 8,000 M.; 10 Jan. 1923 over 10,000 M. [1]
As this continuous depreciation of the now lasting over 1½ years, and assuming ever acuter dimensions, ruins Germany’s economics with proportionate rapidity, it is natural that fresh plans for the stabilization of the mark are continually being made. It is not our task to occupy ourselves with all these suggestions and plans. We shall only make mention of those having political significance. Of these there are three:
The Socialization Commission confirmed in principle its standpoint of last spring, according to which a final stabilization of the mark is only possible if the reparations demands are cut down to Germany’s paying capacity and the finances of the Reich consolidated. The Socialization Commission deviated from its original standpoint only in its opinion that immediate steps are necessary to prevent foreign securities being hoarded as safe in-vestments, and that the required securities should be secured for actual economic purposes.
“The sole means available at the present time for this purpose, is the utilization of the gold reserves of the Reichsbank, These reserves are dead at the moment. It is imperative to render them effective, and to induce the Reichsbank to fulfil its fundamental duty as prescribed by the Reichsbank statutes, which is, to regulate the circulation of gold in the whole Reich. The utilization of the gold reserves of the Reichsbank can be carried out without necessarily spending the gold itself. It would suffice if reserves of securities were obtained by banking negotiations, to an extent enabling the Reichsbank to obtain a powerful influence on the regulation of the rate of exchange of securities. A stabilization of this character would be the first step towards rendering effective the political economic, and financial-political measures which are intended to balance the budget, and by which alone the effect of any relief action can be made permanent.” (Quoted from Berliner Tageblattt, 18.10.22.)
This train of thought met with the support of Adolf Braun, Hilferding, Kautsky, Lederer, Umbreit, etc., and it was intended to issue gold treasury bonds in the middle of November.
The opinion of the Socialization Commission was most emphatically represented to the public by the financial expert of the United Social Democratic Party of Germany, Hilferding. In his speech to the Berlin functionaries of the party, on October 16, he made the following calculation:
“It we assume that the deficit .... (of the foreign trade balance) amounts to half a milliard gold marks, we then require 125 million gold marks quarterly. The sum of 250–300 gold millions is required to cover our import requirements. Now, we have a gold milliard in the Reichsbank.
“Why is this gold milliard not utilized?
“We are told that it is being kept in reserve against a famine. But does the economy of Germany not lose more through the continued depreciation of the mark than through the utilization of 200–300 gold millions for the relief of the mark?”
Hie actually succeeded in convincing his party, and in getting a resolution passed which provides for an action in aid of the mark, to be effected with the help of the gold reserve of the Reichsbank and by the floating of an inner loan based on permanent values.
Precisely the same train of thought recurs in the memorandum submitted by the trade unions to the chancellor at the end of October. But here the utilization of the gold reserves of the Reichsbank is no longer categorically demanded.
The memorial is signed by the German Trade Union Federation and the trade union organization affiliated with it.
The reason why the petition of the trade union commission no longer demands that the mark be supported by the use of the Reichsbank’s gold reserve, is that Hilferding’s plan had been definitely rejected by all sensible political economists. The severest criticism was expressed by the president of the Reichsbank board of directors, Havenstein, on October 23:
“Until these premises ... (moratorium, bearable solution of the reparations problem, increase of output, reduced expenditures, balance of the budget, improvement of trade balance, etc. ...) have become actual fact, the utilization of the gold reserves of the Reichsbank would be absolutely futile ... As long as such a state of affairs obtains, the use of the gold reserve would simply effect a brief temporary improvement, followed by a more rapid fall than heretofore, and bought at the price of a permanent loss of the gold reserve or of a part of it.
“During the summer of this year the Reichsbank acceded to the urgent request of the government, and intervened in the security market with permanent values (a round sum of 230 million gold marks). This did not by any means stop the depreciation of the mark, but merely slowed down its speed for a few weeks.” (Vorwärts, Jan. 11)
That such a plan could be thought out and accepted by German social democracy demonstrates the complete decay of theoretical understanding in Hilferding personally and in his party in general. It is obvious that the depreciation of the mark is not the cause of Germany’s bad economic condition, but that the reverse is the case: the economic decay has caused the collapse of the mark. The increasing impoverishment of Germany is reflected in the mark. This impoverishment of Germany is not occasioned by the reparations, payments alone, but is caused by the consequences of the world war on German economics, by the “peace” treaty, and by the chaotic condition of the capitalist economics of the world. A central bank can regulate the rate of exchange by buying and selling securities, without losing its gold reserve, but on one condition only: the economic balance of the country must be active, that is, there must be more produced than consumed. The activity of the economic balance is automatically followed by the equilibration of the payment balance in relation to foreign countries. It is only tinder such circumstances that it is possible to regulate the rate of exchange by a bank policy. (The Austro-Hungarian Bank kept the Austrian crown constantly at par, before the war, with a very small fraction of its gold reserve.) But as the economic balance of Germany, especially when the reparations payments are calculated, is passive to a very high degree, the idea of stopping the depreciation of the mark by the aid of a trifling amount of gold is simply-ridiculous. This is sufficiently proved by the experience of the Reichsbank last summer, when such an attempt was made. At the present time conditions are much less favorable for such an attempt The fact that the depreciation of the mark is such that the gold value of all the notes in circulation does not amount to a whole gold milliard, does not make the slightest difference; It seems at first glance as if the whole circulation could be put on a gold basis at once by utilizing the Reichsbank’s reserves. But when judgment is pronounced on such a question, the sphere of circulation should never be taken statistically into consideration, but only the sphere of production. And there is no doubt whatever that if the attempt were made to utilize the Gold reserves of the Reichsbank, the gold would vanish in no time, without effecting any permanent stabilization of the mark. That the United Social Democratic Party of Germany could officially lay claim to such a plan is a proof that it has not only completely forgotten the class war theory, but even Marx’s economic theories.
The foreign experts gave two different awards. The first is signed by Brand, Cassel, Jenks, and Keynes. Its essential contents are as follows:
The stabilization of the mark is necessary, but under the present circumstances impossible. The first premise is that “Germany be freed for a time from the payments demanded by the Versailles treaty.” Without this, every attempt at stabilizing the mark is bound to fail, and will only waste Germany’s last reserves ... The most essential point is that payments should not be resumed until they can be made from a real surplus, and not from fresh inflation. We are of the opinion that the present postponement should be for at least two years. The moratorium should include payments in cash and in kind alike.
In this opinion it is pointed out that the success of a stabilization plan does not depend on an inner loan, but on the state of production and of the state economics in Germany, and on the most rapid possible final settlement of the reparations problem. We shall not go info the details of the reparations plan to be executed after the above premises have been fulfilled.
The second award, signed by Vissering, Dubois, and Kamenko, considers – so far as can be seen from the extremely scanty extract which has been published – a stabilization action to be possible, if the banks in countries with higher rates of exchange would participate. It proposes the founding of a foreign syndicate, with a capital of at least 500 million gold marks. A further 500 million gold marks are to be furnished by the Reichsbank for the same purpose.
A comparison of the two opinions shows that while the first of these, rightly from the point of view of political economy, lays the most stress on placing Germany’s economic structure on a sound basis, the second one regards the problem from the financial technical standpoint.
In accordance with the latter expert opinion, the German government addressed, on the 4 December, a communication to the Reparations Commission, asking that the amount of reparations to be paid by Germany be finally settled, in accordance with Germany’s paying capacity, within the shortest possible time, and proposing that an international syndicate be formed, granting Germany a gold credit of 500 million gold marks.
Up to now all these plans have led to no definite result, with the sole exception, pernaps, that both the English and the French reparations plans recognize the necessity of stabilizing the mark.
In the meanwhile the German mark is making catastrophic downward plunges.
1. At the end of January 1923, the dollar was quoted on the Berlin Bourse at 50,000 M.
Last updated on 9 July 2021