Art. 7.-GERMANY'S CAPACITY TO PAY.

BEFORE the war, German statesmen and publicists endeavoured to show that their country was by far the wealthiest in Europe. Germans, of every class, are now proclaiming that their country has been utterly ruined by the war and is unable to pay adequate reparations. The solution of the Reparation problem is of the utmost importance to this country and the peace of the world. By destroying the value of the mark, Germany has wiped out not only her national debt but also the private indebtedness of her industries. German competition was serious before the war. It will be infinitely more dangerous to us if British industry is shackled and weighed down with an onerous war burden, while Germany is free of her war debt and her peace debts as well. Besides, France is determined that Germany shall make good the damage she has done; that if a nation is to be ruined by the war, it shall not be France. England is obviously interested in Germany paying for reparations to the limit of her capacity. What, then, is German capacity in that respect? Is it true that she has been ruined by the Treaty of Versailles and the reparation payments made hitherto?

In 1914 Germany had become the richest country in Europe owing to her favourable geographical position and her great physical and human resources. These have been reduced only to a slight extent by the peace. She occupies the centre of the Continent. She is the natural mart and exchange of the countries around her. The greater part of Germany consists of an exceedingly fertile plain, opened up by a number of deep, gently flowing, and easily navigable streams, which form a system unique in the world. Her great rivers are navigable almost throughout the year by ships and barges carrying 1000 tons of goods and more, and are easily connected by lateral canals. The harbours of the Eastern Baltic are closed during many months of the year by ice, while the countries to the south and west of Germany lack easy access to the sea. Hence, a large portion of the trade of Western Russia, of the Scandinavian countries, of the Danubian lands, of Switzerland, Northern Italy and Western France, is carried via Germany. The most

important harbour of Austria-Hungary was Hamburg, not Trieste. The commercial importance of Germany is bound to increase with the improvement of her river and canal system. Deep new waterways connecting the Rhine with the Elbe, the Danube, and other rivers have been planned.

Agricultural Germany is highly productive. Before the war, she produced ten times as much breadcorn as this country, six times as much potatoes, twice as much meat, and, in addition to comparable items, produced twice as much sugar as she required, huge quantities of tobacco, and an abundance of timber and firewood. She has lost only a relatively unimportant proportion of her agricultural soil. The recent advance of agricultural science and of chemistry has caused leading German experts to proclaim that she will be able to raise within her borders all the food she requires, although her population is almost as dense as that of this country.

The bulk of Germany's pre-war wealth was created by her manufacturing industries. Her industrial advance was due to the possession of an abundance of the most important raw materials, to cheap transport, to an excellent geographical position, and to the industry and energy of a numerous and rapidly increasing population. The bulk of these assets has remained to Germany. The most important industrial raw material is coal. It is true that Germany has lost a large part of her coal-bearing lands. She remains, however, the richest in that commodity among the nations of Europe. According to German official publications, the present coal wealth of the principal European nations is as follows:

Germany has far more coal than Great Britain and France combined, and in addition has gigantic lignite deposits. At present she produces more than 10,000,000

tons of lignite per month. Her coal is of excellent quality and occurs in thick and easily accessible seams, and every few weeks one hears of new discoveries of coal and lignite. The rivers in the south can provide millions of hydro-electrical horse-power. As regards the possession of cheap and abundant power, the most important factor in industrial success, Germany remains foremost in Europe.

Germany has lost the bulk of her iron ore in Alsace Lorraine and the bulk of her tin ore in Upper Silesia. Also, she has lost to France a considerable quantity of her potash deposits. Her wealth, however, in potash and other salts is absolutely unfathomable. It appears that the greater part of Germany stands on a bed of potash and other salts, which in some districts is thousands of feet thick. The loss of the Lorraine iron ores is not so serious. Before the war, Germany relied to an ever-increasing extent on imported iron ores richer in metallic iron than her native ores. In 1913 she imported, on balance, 11,400,000 tons of high-grade iron ore from Sweden, Spain, France, Algeria, Newfoundland, and elsewhere. Foreign iron ore can be carried by water to the great coal-fields where it is smelted and worked-up. There is also no difficulty in obtaining zinc ore from abroad. Inland transport was very cheap in Germany to the great advantage of her industries, partly because of the possession of the excellent waterways previously described, partly because railway construction and transport were cheap in a country which is generally level ground. Between Cologne and the eastern frontier of Germany, there is not a single tunnel or important railway cutting or embankment. Inland transport is likely to be cheapened further by the improvement of waterways and railways, now being energetically promoted, by electrification, etc.

Before the war, Germany produced twice as much iron and steel as this country, and consumed far more copper. She was well ahead of Great Britain in industrial production, except in the textile industries and shipbuilding. By linking up her great coal and iron combines with the shipyards, Germany hopes to double and treble her pre-war output of ships, and she has vastly increased her industrial outfit, for during and after the Vol. 240.-No. 476.

H

war the bulk of the profits made in commerce and industry was applied to extending and improving her plant; while in this country the bulk of the profits has been claimed by the tax collector. German factories are therefore in efficiency far ahead of the British. They have been modernised, mainly since the Armistice; while British factories are partly ill-planned and are full of antiquated labour-wasting machinery.

Germany possesses not only the most favourable geographical position and the most valuable physical resources among the nations of Europe, but has, in addition, a large, intelligent, industrious, progressive, and rapidly increasing population. The Germans have shown in the past their high ability for carrying on commerce, shipping, banking, agriculture, and the manufacturing industries, particularly in those branches that yield the largest profits. In consequence, Germany has advanced in the past more rapidly than other nations. A few decades ago, the country was poor and the people lived mainly by agriculture. Before the war, Germany had become the leading nation in Europe in many industries, and the leading nation in the world in certain highly important and most profitable industries, such as the chemical industry and the electrical industry. France and other countries have seen their valuable territories devastated by the war; while England has suffered from almost unbearable taxation. Germany has neither endured invasion nor suffered from ruinously high taxes during or after the war. She has preserved the bulk of her wealth-creating resources and has vastly enlarged and improved her wealth-creating machinery. Why, then, has she been reduced to poverty? Why is she not only unable to pay reparations but unable even to raise sufficient taxes for her current needs?

Her poverty is rather apparent than real. It is due to a variety of causes, among which inflation, perhaps, stands foremost. The progress of inflation will be seen from the following table of Reichsbank notes in circulation:

It will be noticed that the printing of notes has progressed with ever-growing rapidity. During the war the quantity in circulation was increased about eightfold. Since the Armistice the notes in circulation have increased several hundredfold. We cannot wonder that the mark, worth a shilling before the war and about sixpence at the time of the Armistice, has fallen to an extremely small fraction of a penny.

The wealth of nations is habitually estimated in terms of money. Hence many people are under the illusion that money is wealth. Taking advantage of this misconception, many Germans endeavour to prove that their country is ruined by comparing the present value of the mark with its pre-war value. The wealth of nations does not consist of money, which is merely a simulacrum of wealth. It consists exclusively of real values, such as land, houses, machinery, railways, and so forth. While Germany has lost part of her real wealth by territorial cessions, and the portion ceded was relatively unimportant, the machinery of production and of commerce within present-day Germany has improved vastly since 1914.

The collapse of the mark has not impoverished Germany as a nation. It has ruined certain classes and greatly enriched others. A farmer who passed sleepless nights because there was a mortgage of M.50,000 on his farm which was worth 2,500l., can now repay that mortgage by selling a couple of fowls. His indebtedness has been practically wiped out. What the mortgagor has lost the farmer has won. A manufacturer of clothing can repay a pre-war loan of a million marks by selling a few yards of cloth or an inferior sewing-machine or some other trifle. The holders of mortgages on land and houses, of Government stock, of debentures, pre